1
Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment. The non-public information has been filed with the
Commission.
Exhibit 10.2
RESTATED
DEMETER-MYCOGEN
LICENSE AND ROYALTY AGREEMENT
Demeter BioTechnologies, Ltd., a Colorado corporation having a
principal place of business at 905 West Main Street, Suite 20B Brightleaf
Square, Durham, North Carolina 27701 ("DEMETER") and Mycogen Corporation
("LICENSEE"), having a place of business at 5501 Oberlin Drive, San Diego,
California 92121, enter into the following Agreement effective September 23,
1997 (the "EFFECTIVE DATE").
WHEREAS the Board of Supervisors of Louisiana State University and
Agricultural and Mechanical College, a public constitutional corporation,
organized and existing under the laws of the State of Louisiana ("LSU") owns
certain patent rights in certain countries regarding certain technology
involving disease resistance in plants;
WHEREAS Demeter is in the business of producing, licensing, and
sublicensing disease resistant plants and genetic constructs useful in producing
disease resistant plants or treating plants and has developed technology and
know-how and has obtained or filed patents of its own;
WHEREAS Demeter has obtained from LSU, effective May 1, 1997, a license
("LSU LICENSE") under each of the components of "LSU LICENSED PATENTS" and
"SUPPLEMENTAL PATENT RIGHTS" defined in Article I, Paragraphs (A) and (B) below,
respectively;
WHEREAS Licensee desires to obtain a license from Demeter of Demeter
Technology or a sublicense from Demeter of rights under Licensed Patents and
Supplemental Patent Rights, all for certain fields of use;
WHEREAS Demeter and Licensee have agreed to the following terms and
conditions, and desire to enter this License and Royalty Agreement (the
"AGREEMENT");
THEREFORE, in consideration of the mutual obligations set forth in this
Agreement, Demeter and Licensee agree as follows:
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ARTICLE I. DEFINITIONS
A. "LSU LICENSED PATENTS" means: (1) Jaynes and Derrick, "Method for
Introduction of Disease and Pest Resistance into Plants and Novel Genes
Incorporated into Plants which Code Therefor," United States patent number
5,597,946, issued January 28, 1997; (2) Jaynes and Derrick, "Plants Genetically
Enhanced for Disease Resistance," United States patent number 5,597,945, issued
January 28, 1997; (3) Jaynes and Derrick, European patent application
93113536.2; (4) Jaynes and Derrick, European patent application 89900103.6; (5)
Jaynes and Derrick, Japanese patent application SHO 62-504491; (6) Jaynes and
Derrick, "Method for Introduction of Disease and Pest Resistance into Plants and
Novel Genes Incorporated into Plants which Code Therefor," European patent 0 330
655, issued June 7, 1995, nationalized in United Kingdom, France, Germany, and
Italy; (7) Jaynes and Derrick, "Plants Genetically Enhanced for Disease
Resistance," Canadian patent number 1,321,157, issued August 10, 1993; (8)
Jaynes and Derrick, "Method for Introduction of Disease and Pest Resistance into
Plants and Novel Genes Incorporated into Plants which Code Therefor," Australian
patent number 611,859, sealed November 5, 1991; and (9) any United States or
non-United States patent, reissue patent, or reexamination certificate resulting
from the applications and patents of parts (1) through (8) of this Paragraph,
including any renewals or extensions of the term of any such patent.
B. "SUPPLEMENTAL PATENT RIGHTS" means, subject to the limitations set forth in
this Paragraph, any United States divisional or continuation application (but
not a continuation-in-part application) either of United States patent
application serial number 08/444,762, filed May 19, 1995, or of United States
patent application serial number 08/453,436, filed May 30, 1995; and any United
States patent, reissue patent, or reexamination certificate resulting from such
a divisional or continuation application. "SUPPLEMENTAL PATENT RIGHTS" shall not
include any patent rights outside the United States. Furthermore,
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"SUPPLEMENTAL PATENT RIGHTS" shall not include any patent rights concerning any
invention or activity whose unlicensed practice would infringe any of the
following claims: (1) any claim of United States patent number 5,597,945 or
5,597,946, or (2) any claim in any reissue patent or reexamination certificate
resulting from United States patent number 5,597,945 or 5,597,946. The
"SUPPLEMENTAL PATENT RIGHTS" will be treated as Licensed Patents for all
purposes under this Agreement.
C. "DEMETER PATENTS" means the U.S. patents and patent applications listed in
Sections A-1 and A-2 of Schedule A hereto, and all patents issuing from such
applications, together with all foreign counterparts of such patents and
applications, and all continuations, continuations-in-part, divisionals, and
reissues thereof.
D. "DEMETER TECHNOLOGY" means technology, know-how and materials, whether or not
patentable, (including the materials listed on Schedule B hereto and the
technology rights resulting from the current Demeter Agricultural Agreements
listed in Schedule C) covered by Demeter Patents, and/or related to the
development, manufacture or use of Biocontrol Peptides currently owned by or
available to Demeter or developed by Demeter during the term of this Agreement,
excluding Joint Technology.
E. "LICENSED TECHNOLOGY" means all Demeter Technology and Joint Technology.
F. "LICENSED PATENTS" means LSU Licensed Patents, Supplemental Patents, Demeter
Patents and Joint Patents.
G. "FIELD OF USE" means the use of Biocontrol Peptides for disease and/or pest
resistance purposes in transgenic plants of all plant species but not including
the use of plants as a production mechanism for producing Biocontrol Peptides
which are to be used for purposes not permitted under this Agreement.
H. "DOLLARS" means U.S. dollars.
I. "CROP" means a plant species designated by its formal binomal nomenclature
(e.g. Lycopersicon esculentum for tomato; Zea mays for corn, etc.).
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J. "LICENSED PLANT PRODUCT(S)" means transgenic plant(s) containing a Biocontrol
Peptide the use of which either (i) involves the use of Demeter Technology
and/or Joint Technology licensed to Licensee under this Agreement; or (ii) would
otherwise infringe a valid claim of any applicable Licensed Patent absent the
licenses granted under this Agreement.
K. "LICENSED FORMULATED PRODUCT(S)" means any product, regardless of how
formulated, for application externally to a plant, or to any plant surface or
the growing media of any plant, containing one or more Biocontrol Peptides the
use of which either (i) involves the use of Demeter Technology or Joint
Technology licensed to Licensee under this Agreement; or (ii) would otherwise
infringe a valid claim of any applicable Licensed Patents absent the licenses
granted under this Agreement.
L. "NUTRITION PATENTS AND TECHNOLOGY" means all technology, materials and
patents or patent applications which relate to Demeter research on proteins with
improved nutritional quality including but not limited to the following patent
applications and applications in preparation listed in Section A3 of Schedule A
attached hereto, their foreign counterparts, and all continuations,
continuations-in-part, divisionals and reissues thereof.
M. "NET SALES" means all revenue received or accrued during the term of the
Agreement by Licensee, Licensee's Affiliates or their sublicensees,
respectively, arising out of or related to the use, transfer, lease, or sale of
any Licensed Product(s) at the actual amounts charged by Licensee or by any
Affiliate or their Sublicensee, excluding any Trait Marketing Revenue. "Net
Sales" also includes consideration received, at any time, by Licensee for a
Licensed Product that is made during the term of a Licensed Patent, but that is
used, sold, or otherwise transferred after that term. "Net Sales" shall not
include the following amounts: (i) revenue attributable to Licensed Products
that are actually returned to Licensee for refund; (ii) transportation charges
or allowances, if any, added to the price; and (iii) sales tariffs, duties, or
taxes for Licensed Products that
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5
Licensee is required to collect and remit to a government as a matter of law;
but in no circumstances shall any deduction or exclusion from Net Sales receipts
be taken for any franchise tax or income tax. No other deductions of any kind
shall be made, whether for agents' commissions or otherwise. Where all or part
of the consideration received by Licensee, or an Affiliate of Licensee as
otherwise set forth in this Paragraph M for the use or transfer of any Licensed
Product is not cash, or where the final use of a Licensed Product is by Licensee
or an Affiliate of Licensee, then the "Net Sales" for that Licensed Product for
purposes of computing royalties or other amounts due under the Agreement shall
be deemed to be the fair market value for such Licensed Product. In determining
fair market value, appropriate weight shall be given to any arms-length
transaction by Licensee, an Affiliate of Licensee, or a sublicensee involving
the same or a similar Licensed Product. For Licensed Products which are Licensed
Plant Products, Net Sales will be determined in accordance with the above solely
on the basis of the revenue or value of such Licensed Plant Products as planting
materials (such as seeds, rootstocks, cutting and/or other plant parts) for
purposes of the production of a commercial crop and not on their end-use revenue
or value. The time when "Net Sales" for any Licensed Product are deemed received
for purposes of computing royalties or other amounts due under the Agreement
shall be (1) the date when a purchaser is billed by Licensee, (2) the date when
the purchaser actually uses or receives that Licensed Product, (3) the date when
Licensee bills for the use of that Licensed Product, or (4) the date when
Licensee receives payment for that Licensed Product, whichever date is earliest;
provided that Licensee must actually receive payment for that Licensed Product
before Licensee is obligated to pay royalties or other amounts to Demeter for
that Licensed Product. Where the consideration to Licensee for the right to use
or receive any Licensed Product is not cash, the date "Net Sales" shall be
deemed to be received shall be the date that Licensed Product is first used or
received. "Net Sales" will exclude any revenue
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received or accrued by Licensee during the term of this Agreement from
sublicensing and Trait Marketing Revenue.
N. "TRAIT MARKETING REVENUE" means the net revenue received by Licensee or its
Affiliates, respectively from licenses to customers for the commercial use of
the pest or disease control traits in Licensed Plant Products to the extent
separately invoiced from the sale of Licensed Plant Products. Such fees would
include those based upon usage including, but not limited to, per acre charges,
box charges, or unit (e.g. volume or weight) charges. However, Trait Marketing
Revenue will not include any payments which are up-front license issuance fees,
technology milestone payments (e.g., for the achievement of sales thresholds),
or payments in the nature of license maintenance fees payable on a periodic
basis for continuation of a license.
O. "BIOCONTROL PEPTIDE(S)" means natural or synthetically derived peptide
compound(s) which express activity to control plant pests or plant diseases.
P. "GROSS VALUE ADDED" means the average difference between the sales price
charged customers for a Licensed Plant Product from the sales price charged
customers under substantially similar circumstances (including, but not limited
to, substantially similar quantities) for a plant product substantially
identical in every meaningful way to the Licensed Plant Product save for the
addition to the Licensed Plant Product of the technology subject to Licensed
Patents or Licensed Technology
Q. "LICENSED PRODUCT(S)" means Licensed Plant Product(s) or Licensed Formulated
Product(s), or both.
R. "FIRST COMMERCIAL SALE" means the receipt among the group consisting of
Licensee, Affiliate, and any sublicensee of the cumulative amount of fifty
thousand Dollars ($50,000) from the sale of Licensed Plant Products.
S. "CONFIDENTIAL INFORMATION" means any and all proprietary information
(including, without limitation, information related to technical, business and
intellectual property matters), know-how, data, trade secrets and biological and
other physical
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materials owned and held by either party to this Agreement which such party
maintains as confidential.
T. "AFFILIATE" means any entity controlled by, controlling or under common
control with a party. For purposes of this definition, control will mean
ownership of fifty percent (50%) or more of the equity or voting control of such
party or entity.
U. "JOINT PATENTS" means patents and patent applications to the extent they
cover technology jointly invented by Demeter (or Demeter's agents) and Licensee
(or Licensee's agents) under the joint development program set forth in Article
VII of this Agreement.
V. "JOINT TECHNOLOGY" means technology, know-how and materials jointly developed
by Demeter (or Demeter's agents) and Licensee (or Licensee's agents) under the
joint development program set forth in Article VII of this Agreement, which are
not subject to Demeter Patents.
W. "JOINT INVENTIONS" means any invention, technology, know-how and materials
conceived jointly under the joint development program set forth in Article VII
of this Agreement by Demeter (or Demeter agents) on the one hand, and Mycogen
(or Mycogen agents) on the other hand, whether or not patentable, including any
Joint Patents and Joint Technology.
ARTICLE II. LICENSE GRANT
A. SCOPE OF LICENSE.
1. LICENSED PLANT PRODUCTS. Subject to the terms and conditions of this
Agreement, Demeter grants to Licensee, and Licensee accepts from
Demeter, an exclusive world-wide license to Licensed Technology and
Licensed Patents to make, have made, use, offer to sell, sell for use
and sublicense Licensed Plant Products in the Field of Use, subject to
the rights granted to Sanford Scientific Inc., Treetech Management,
Inc. d/b/a Dry Creek Laboratories, Rhone-Poulenc and Clause, S.A.
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2. LICENSED FORMULATED PRODUCTS Subject to the terms and conditions of
this Agreement, Demeter grants to Licensee, and Licensee accepts from
Demeter, an exclusive world-wide license of Licensed Technology and
Licensed Patents to make, have made, use, offer to sell, sell for use
and sublicense Licensed Formulated Products, again subject to the
rights, if any, granted to Sanford Scientific Inc., Treetech
Management, Inc. d/b/a Dry Creek Laboratories, Rhone-Poulenc and
Clause, S.A.
3. SUBLICENSING RIGHTS AND RESTRICTIONS. Licensee will have the right to
sublicense any of the rights granted to Licensee hereunder, except that
Licensee will not have the right to assign, transfer or sublicense any
rights under the LSU Licensed Patents or the Supplemental Patent Rights
without the express prior approval of LSU, such approval not to be
unreasonably withheld. Notwithstanding the foregoing, no prior approval
from LSU will be required: (i) to sell Licensed Products to arms-length
purchasers (e.g. distributors or farmers), even where such a sale is
accompanied by an express or implied sublicense under one of more of
the LSU Licensed Patents or Supplemental Patent Rights regarding the
commercial use of such Licensed Product for non-developmental purposes
(ii) to sublicense an Affiliate of Licensee in accordance with
Paragraph 7 of this Article II; or (iii) to license a third party under
one or more LSU-approved standard-form sublicenses (the "Standard-Form
Sublicenses"). Attached as Schedule D is a Standard-Form Sublicense
which has been approved by LSU.
4. STANDARD-FORM SUBLICENSE. At any time during the term of this
Agreement, Licensee may request that LSU and Licensee negotiate in good
faith to develop one or more additional Standard-Form Sublicenses.
Licensee shall prepare the first draft of each proposed Standard-Form
Sublicense, and thereafter the parties shall discuss and negotiate
modifications to the initial draft in good
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9
faith. Each party's obligation in this respect is limited to an
obligation to negotiate in good faith; neither party is obligated to
approve a proposed Standard-Form Sublicense if mutually agreeable terms
cannot be found.
By way of illustration and not limitation, the factors that LSU
considers important in reviewing proposed sublicenses include the
following: adequate liability insurance; adequate indemnity in favor of
LSU; prohibitions against further assignment, sub-sublicensing, or
transfer; prohibitions against the use of LSU's name; prohibitions
against patent misuse; the right to audit; marking of Licensed Products
with appropriate patent numbers; and, if a particular sublicense is
intended to survive a possible termination of the present Agreement
before the expiration of all pertinent Licensed Patents, a clear and
acceptable demarcation of the respective rights and obligations of LSU
and the sublicensee in those circumstances. Once LSU and Licensee have
approved the form and substance of a particular Standard-Form
Sublicense, Licensee may thereafter enter into one or more sublicenses
with third parties using that approved Standard-Form Sublicense,
without further approval from LSU, provided that: (1) no modifications
are made to the approved Standard-Form Sublicense that would diminish
in any respect the protections afforded to LSU by the approved
Standard-Form Sublicense (other modifications being permissible if they
do not diminish the protections afforded to LSU in any manner); and (2)
a complete copy of the fully-executed Standard-Form Sublicense is
delivered to LSU within thirty days of execution. A proposed sublicense
that does not satisfy these criteria may be submitted for LSU's review
and approval under Paragraph 3 above.
LSU may at any time, acting in good faith, withdraw its
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approval of a particular Standard-Form Sublicense upon notice to
Licensee. Such a withdrawal of approval shall not affect the validity
of any sublicense using that Standard-Form Sublicense that was fully
executed by all parties prior to LSU's withdrawal of approval. Where
reasonably feasible, LSU shall inform Licensee of the reason for LSU's
withdrawal of a previous approval, and shall propose modifications to
the Standard-Form Sublicense that would make it once against acceptable
to LSU.
5. U.S. GOVERNMENT RIGHTS. The licenses granted to Licensee under
paragraphs 1 and 2 above are subject to any rights that the United
States Government may have in Licensed Patents pursuant to 35 U.S.C.
Sections 200-212.
6. ASSIGNMENT OF CERTAIN CONTRACTS. In connection with the grant of the
above licenses, if Licensee requests in writing within one year of the
Effective Date, Demeter hereby agrees to assign to Licensee (to the
extent permitted under the applicable contract), under and subject to
all of the terms of this Agreement, including but not limited to the
royalty and payment obligations of Articles III and IV, technology
subject to Article II, of this Agreement developed under any university
or government contract (other than the LSU License) to which Demeter is
a party to the extent that such contract relates to the development,
manufacture, use or sale of Licensed Plant Products or Licensed
Formulated Products for Crop disease and/or pest control; provided that
Licensee agrees to assume the obligations of Demeter under such
contract. Demeter further agrees to execute any and all documents
necessary or desirable to implement these rights.
7. AFFILIATES. Licensee will have the right to extend the license rights
granted under this Agreement to Affiliates of Licensee, provided that
such Affiliates agree in
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writing to be bound by all of the provisions of this Agreement.
8. ADDITIONAL LIMITATIONS. No right or license is granted by Demeter to
use or sell Biocontrol Peptides for human or animal health care
applications or to use plants to produce Biocontrol Peptides for such
or for other non-licensed uses, which human and animal healthcare
applications and production use of plants is retained by Demeter.
B.TERM. The term of this Agreement will be from the Effective Date until the
later of (i) expiration of the last to expire of any patent within Licensed
Patents; or (ii) the cessation of the sale or use of any Licensed Products by
Licensee or its Affiliates, or any of their sublicensee, unless earlier
terminated in accordance with applicable provisions of this Agreement. Should
the LSU License be terminated or converted into a non-exclusive license by LSU,
LSU has agreed that Licensee's rights under this Agreement regarding LSU
Licensed Patents and Supplemental Patent Rights will not be diminished for the
term of the LSU License, provided that; (i)Licensee pays to LSU, or to such
other person or entity which holds the rights granted by LSU to Demeter which
are sublicensed to Licensee under this Agreement, the royalties otherwise
payable under this Agreement; (ii) Licensee is not in breach of any other
material term of this Agreement; and (iii) in connection with the continuation
of this License following the termination of the LSU License, LSU will not incur
any obligation which it did not already have to Demeter under the LSU License,
or to Licensee under the terms of this Agreement. The parties acknowledge that
the term of the LSU License only extends until the last to expire of any patents
included within the definition of "Licensed Patents" as defined in said License
Agreement.
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ARTICLE III. ROYALTIES AND FEES
A. LICENSE ISSUE FEES. Upon execution of this Agreement, and as a condition
precedent to this Agreement, Licensee shall pay Demeter the following three
amounts: (a) seven hundred thousand Dollars ($700,000) for the rights to
Licensed Patents and Demeter Technology for use in Licensed Plant Products in
the Field of Activity; (b) two hundred thousand Dollars ($200,000) for the
rights to Demeter Patents and Demeter Technology for use in Formulated Licensed
Products; and (c) an additional fifty thousand Dollars ($50,000) for a right of
first refusal through October 1, 1998 to obtain an exclusive license to Demeter
Nutrition Patents and Technology for applications involving nutrition in plants
in accordance with the provisions of Article VI.
(The information marked by *** has been omitted by a request for confidential
treatment. The omitted portions will be separately filed with the Commission.)
B. MINIMUM ANNUAL ROYALTIES. Licensee shall pay Demeter a minimum royalty of
five hundred thousand dollars ($500,000) per year for the licenses granted
pursuant to this Agreement (the "Minimum Annual Royalty"), such Minimum Annual
Royalty will be first payable on January 1, 2003 and on January 1 of each
subsequent year to and including January 1, 2014, which amount will be increased
for each year after January 1, 2003 by an amount equal to five percent of the
amount payable in the prior year. The amount of Minimum Annual Royalty paid by
Licensee in excess of actual earned royalties in any year will be treated as a
prepayment of future earned royalties. Such excess will be accrued, and will
then be creditable against fifty percent (50%) of any future earned royalties
which are in excess of Minimum Annual Royalty in subsequent years until fully
utilized.
C. EARNED ROYALTY ON SALES BY LICENSEE.
1. On a quarterly basis, Licensee shall pay to Demeter an earned royalty
for Licensed Plant Products in an amount equal to the greater of the
following two amounts [(a) or (b)] for each Licensed Plant Product that
is made, used, sold, or imported by Licensee: (a) the sum of *** of Net
Sales, if any, and *** of Trait Marketing
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Revenue, if any; or (b) the sum of *** of Gross Value Added, if any,
and *** of Trait Marketing Revenue, if any. Examples of the application
of the provisions of this paragraph are presented below:
EXAMPLE 1: Licensee sells a unit of a particular Licensed Plant Product
in exchange for Net Sales Revenue of $125 per unit. The Gross Value
Added with respect to such unit is $25.00. The earned royalty payable
to Demeter on the sale of such Licensed Plant Product on a per unit
basis is the greater of (a) ***% of $125 = $***, or (b) ***% of $25.00
= $***. Licensee pays $*** per unit in royalties to Demeter for such
Licensed Plant Product.
EXAMPLE 2: Licensee sells a unit of a particular Licensed Plant Product
in exchange for Net Sales Revenue of $100 per unit. The Gross Value
Added with respect to such unit is $0. (That is, there is no premium
charged for the Licensed Plant Product over substantially similar plant
products which do not have the traits licensed under this Agreement.)
In addition, Licensee also receives $25.00 in Trait Marketing Revenue
in connection with the sale of each such unit. (For example, in the
form of a per acre license fee for the use of the trait incorporated
into said unit.) The earned royalty payable to Demeter for the combined
sale and trait license on a per unit basis is the greater of (a) ***%
of $100 + ***% of $25 = $***, or (b) ***% of $25 = $***. Licensee pays
$*** per unit in royalties to Demeter for such Licensed Plant Product.
EXAMPLE 3: Licensee sells a unit of a particular Licensed Plant Product
in exchange for Net Sales Revenue of $110. The Gross Value Added with
respect to such unit is $10. In addition, Licensee receives $15.00 in
Trait Marketing Revenue in connection with the sale of each such unit
from a per acre license fee. The earned
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royalty payable to Demeter for the combined sale and trait license on a
per unit basis is the greater of (a) ***% of $110 + ***% of $15 = $***,
or (b) ***% of ($10 + $15) = $***. Licensee pays $3.75 per unit in
royalties to Demeter for such Licensed Plant Product.
(Note: In connection with Examples 2 and 3 above, the per acre license
fee has been converted into an equivalent per unit Trait Marketing
Revenue for purposes of the royalty calculation. Thus, in Example 2, if
each unit of the Licensed Plant Product was utilized to produce two
acres of a Crop, then the purchaser of the seed would have paid a per
acre trait license fee of $12.50 per acre, which equates to the $25.00
in per unit Trait Marketing Revenue indicated in Example 2. Under the
same circumstances, the trait license fee in Example 3 would have been
$7.50 per acre.)
2. On a quarterly basis, Licensee shall pay to Demeter an earned royalty
for Licensed Formulated Products which are made, used, sold or imported
by Licensee in an amount equal to four percent (4%) of Net Sales.
3. Earned royalties on sales will be paid quarterly, by March 15, June 15,
September 15, and December 15 based on Net Sales receipts received by
Licensee during the prior three-month calendar quarter. The royalty
calculation for each calendar quarter will be determined independently,
without carrying forward or carrying backward amounts attributable to
any other calendar quarter. Furthermore, the royalty for each Licensed
Plant Product will be determined separately -- so that it is possible,
for example, that the royalty for a first such Licensed Plant Product
could be two percent (2%) of Net Sales, while the royalty for a second
Licensed Plant Product during the same calendar quarter could be
fifteen percent (15%) of Gross Value Added.
4. In the event that no plant product exists which is the suitable
standard of comparison for use in the
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determination of Gross Value Added for a Licensed Plant Product,
Licensee and Demeter will meet, discuss and attempt to mutually agree
upon an appropriate standard plant product to be used for the purposes
of calculating the Gross Value Added. In the event the parties are
unable to agree upon this standard, the matter will be referred to
arbitration in accordance with Paragraph J of Article XVIII.
5. No royalty will be due on the sale, use, importation or transfer of any
Licensed Plant Product which is used for the production of additional
planting stock of such Licensed Plant Product under a contract for the
repurchase of such production by Licensee or its Affiliates. No royalty
will be due on the resale of planting stock of Licensed Plant products
purchased from a sublicensee in the case of crop failure, or on the use
of a crop of Licensed Plant Products purchased from a customer of such
planting stock (e.g., a grain crop used to produce oil), to the extent
that Demeter has already received royalties to which it was entitled
with respect to the planting stock of such Licensed Plant Products
under the terms of this Agreement calculated on the basis of a
bona-fide arms-length transaction at royalty rates offered to
purchasers not having the relationship of seller to or producer for
Licensee.
D. EARNED ROYALTIES FROM SUBLICENSEES. For payments received from sublicensees
for the use of the technology licensed to Licensee under this Agreement (other
than payments made for the purchase or use by a sublicensee of a Licensed
Product manufactured by Licensee or its Affiliates, which payments are subject
to the provisions of Paragraph C above), Licensee shall pay to Demeter earned
royalties on a quarterly basis in accordance with the provisions set forth
below:
1. For payments from sublicensees which are license issue fees, license
maintenance fees, or technology milestone payments, an amount equal to
*** of such
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payments received by Licensee for all Crops with the exception of
peanut, potato, tomato, tobacco and grapes, for which an amount equal
to *** of such payments received by Licensee shall apply. Specifically
excluded from such payments are payments to Licensee attributed for
bona fide services rendered by Licensee to sublicensees for regulatory
support, product registration, and research and development funding,
and Trait Marketing Revenue.
2. For payments from sublicensees which are running royalties calculated
as a percentage of sublicensee's Net Sales, an amount equal to *** of
the first *** of such payments received by Licensee on a Licensed
Product-by-Licensed Product basis and *** of the amount in excess of
the first *** for each such Licensed Product.
3. For payments from sublicensees of Trait Marketing Revenue which are not
covered by the provisions of Paragraph C, an amount equal to *** of
such payments received by Licensee.
4. Earned royalties on payments received from sublicensees which are
covered by this Paragraph D will be paid quarterly, by March 15, July
15, September 15, and December 15 based on all such payments received
by Licensee during the prior calendar quarter.
E. QUARTERLY REPORTS. Licensee shall forward to Demeter quarterly reports on or
before March 15, July 15, September 15, and December 15 of each year, for the
preceding calendar quarter, containing the data, information, and documentation
necessary to determine fully the amounts owed by Licensee to Demeter under this
Agreement. The quarterly reports will also provide information on the status of
Licensee's marketing and/or sublicensing of Licensed Products. Such a report
shall be made for each quarter beginning after commercialization of the first
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Licensed Product, whether or not any payment is due for that quarter.
F. PATENT COSTS. Without affecting Demeter's obligation to LSU for patent
prosecution under the License Agreement, Licensee will pay all reasonable
out-of-pocket costs, fees and attorneys' fees and expenses of maintenance and/or
further prosecution of (i) the LSU Licensed Patents, (ii) the Supplemental
Patent Rights and (iii) the Licensed Patents listed under Section A1 of Appendix
A, before the United States Patent and Trademark Office and before any other
office or entity concerning patents (related to Licensed Patents) in those
nations other than the United States of America which have been selected by
Licensee for foreign patent protection on a patent-by-patent basis. Licensee
will have a right to review any such patent applications and advise on the
coverage of protection sought to the extent within the scope of the license
rights granted under this Agreement. Demeter may elect to seek patent protection
for Licensed Patents in countries not selected by Licensee at Demeter's expense;
however, in such event, Licensee will forfeit its rights with respect to
affected patents in such countries. Licensee will be entitled to a credit of
fifty percent (50%) of the cumulative costs and fees paid by Licensee pursuant
to this Paragraph against any royalty or other payments that may be due to
Demeter under this Agreement. No credit may be taken prior to the third
anniversary of the effective date. Thereafter, no more than 50% of the amount
due Demeter under this Agreement in any given year may be offset by such credit.
Licensee will have no obligation to pay any costs or fees in connection with the
prosecution and/or maintenance of the Licensed Patents listed under Section A2
or A3 of Appendix A under this Agreement, except to the extent that Licensee
elects to make such payments with respect to the Section A3 patents as set forth
in Article VI.
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ARTICLE IV - BENCHMARK PAYMENTS
(The information marked by *** has been omitted by a request for confidential
treatment. The omitted portions will be separately filed with the Commission.)
A. REGULATORY APPROVAL OR FIRST SALE OF ANY TYPE. A payment of *** shall be made
by Licensee to Demeter upon the earlier of (i) receipt of the first regulatory
approval for sale of a Licensed Plant Product in the United States; or (ii) if
no approval described in part (i) hereof is obtained prior thereto, the First
Commercial Sale of any Licensed Plant Product. Only one such payment will be
made. The payment made under this Paragraph A shall not discharge any of
Licensee's obligations to make payments under paragraphs B or C of this Article
or under the provisions of any other Article of this Agreement.
B. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF CERTAIN CROP(S). In addition
to the payment provided under subparagraph A hereof, payments of *** each shall
be made by Licensee to Demeter on the First Commercial Sale of Licensed Plant
Products within a ***, *** or ***, up to a total of *** if there is a First
Commercial Sale in each of said three crops.
C. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF ANY OTHER CROP WITHIN THE
FIELD OF ACTIVITY Licensee shall make a payment to Demeter upon the First
Commercial Sale of any Licensed Plant Products for any crop other than ***, ***
and *** an amount equal to *** for each Crop up to a maximum total of *** (***).
D. INFLATION AND ADJUSTMENT. To the extent that any of the specific dollar
amounts set forth in paragraph A, B, and C of this Article have not been paid by
January 1, 2006 such remaining amounts will be adjusted upward annually by any
increases in the United States Consumer Price Index For All Urban Consumers, All
Items U.S. City Average (the "Index") from its value in January,
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1998, less one percent (1%) per year. No downward adjustments will be made. The
dollar figures shall first be adjusted beginning in January 2006.
ARTICLE V - AUDITING AND PAYMENT PROCEDURES
A. LATE PAYMENTS. If any payment is made more than thirty days after the date
due under the Agreement, then Licensee shall also pay interest at the prime rate
of interest announced from time to time by Citibank (New York), plus one percent
(1%) per annum, until paid. If this amount is higher than allowed by applicable
law, then the highest amount allowed by law shall apply.
B. PAYMENT PROCEDURE. All payments due under this agreement shall be payable to
"DEMETER BIOTECHNOLOGIES, LTD.," and shall be made at the appropriate address
given for notices in the Agreement. All payments due shall be made without any
deduction for taxes, assessments, or other charges that may be imposed on
Licensee by any government or by any political subdivision of any government.
Any such taxes, assessments or other charges shall be assumed solely by
Licensee.
C. LICENSEE'S RECORDS. Licensee (and any sublicensee exercising rights under the
Agreement) shall make and keep full and accurate books and records in accordance
with Generally Accepted Accounting Principles showing the sublicensing,
manufacture, use, distribution, importation, lease, and sale of any Licensed
Product by Licensee. Licensee agrees that Demeter, LSU, or the Louisiana
Legislative Auditor may require that the books and records of Licensee
pertaining to Licensed Products be inspected by a designee reasonably acceptable
to Licensee during regular business hours, on reasonable written notice, to the
extent necessary to verify the payments due under the Agreement; provided that
the inspection is conducted in a manner to (i) insure the confidentiality of
Licensee's books and records; and (ii) prevent any misuse of the information
contained therein. Any such audit shall be at the expense of Demeter, LSU, or
LSU's
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designee, or of the Louisiana Legislative Auditor, as applicable; except that
should such an audit indicate an underpayment of ten percent (10%) or more for
any calendar quarter, then Licensee shall pay the cost of the audit within
thirty days of its completion.
D. TERM OF AUDIT RIGHTS. The right of Demeter and/or LSU to inspect the books
and records of Licensee shall continue past the term or termination of the
Agreement, until the later of the date on which all payments due under the
Agreement have been made, or until two years after the expiration of the
Agreement.
ARTICLE VI- AGREEMENT NOT TO LICENSE CONCERNING PLANT NUTRITIONAL APPLICATIONS
In order to provide Licensee with the opportunity to negotiate an
exclusive license for said applications, Demeter will not license, prior to
October 1, 1998, absent Licensee's consent, rights under the Nutrition Patents
and Technology to any third party for plant nutritional applications. In the
event Demeter and Licensee are unable to reach agreement on the terms of any
such license, and obtain LSU's consent thereto, to the extent that LSU Licensed
Patents or Supplemental Patent Rights are involved, on or before October 1,
1998, Demeter will thereafter be free to license said applications to others.
However, should Demeter offer a license to a third party on terms more favorable
than those offered to Licensee within one year from said date, Licensee will
have a right of first refusal to obtain such license on the terms so offered.
During the term of the option, and prior to Licensee's exercise of the option,
Licensee will have the right, but not the obligation, to designate and pay for
patent prosecution and maintenance of patents for plant nutritional
applications.
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ARTICLE VII - JOINT DEVELOPMENT PROGRAM REGARDING PEPTIDES FOR
DISEASE RESISTANCE IN PLANTS
Licensee and Demeter, without restricting any activities they may
desire to participate in with third parties, will engage in a joint development
program over a period of three years from the effective date of this Agreement
to screen and produce peptides for use in disease resistance in plants. Demeter
will provide the services of Dr. Jessie Jaynes, on a part-time basis, to design,
plan the synthesis of and interpret testing results regarding such peptides.
Licensee shall use diligent efforts to screen between one hundred fifty (150)
and three hundred (300) Biocontrol Peptides during said period, against a
battery of relevant plant diseases, and will make the results thereof available
to Demeter for Demeter's own business purposes. Biocontrol Peptides or other
technology invented solely by Demeter employees, consultants or other agents
shall be owned by Demeter and not jointly owned. Biocontrol Peptides or other
technology invented solely by Licensee's employees, consultants or other agent
shall be owned by Licensee and not jointly owned but in the event such
Biocontrol Peptides or other technology are subject to Licensed Patents or were
developed from or by use of Licensed Technology then they will be subject to the
terms of this Agreement, including but not limited to the royalty provisions set
forth in Article III and applicable payments in Article IV. Joint Inventions
will be jointly owned by Licensee and Demeter. Subject to the terms of this
Agreement, including but not limited to the royalty provisions set forth in
Article III and applicable payments in Article IV, Licensee will be granted a
world-wide, perpetual, exclusive license in Joint Inventions, with a right to
sublicense, for all applications in disease and pest control for plants.
Licensee hereby grants to Demeter a world-wide, royalty free, perpetual,
exclusive license, in Joint Inventions, with a right to sublicense, for all
applications other than applications for use in disease and pest control for
plants.
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ARTICLE VIII - DEMETER SUPPORT SERVICES
Upon execution of this Agreement, and as a condition precedent to this
Agreement, Licensee shall pay Demeter a total of three hundred thousand Dollars
($300,000) for technical assistance and support concerning Demeter Technology
and the joint development program of Article VII for a period of three years
from the Effective Date. In the event that Dr. Jaynes leaves the employ of
Demeter, Demeter will retain Dr. Jaynes as a consultant, if reasonably
practicable, to provide the same level of services to Demeter, under this joint
development program as provided prior to Dr. Jayne's departure.
ARTICLE IX- RETURN OF RIGHTS
If Licensee fails to begin to develop specific plans for applications
for particular Crops, uses or territories subject to this Agreement within three
years of the Effective Date of this Agreement, Demeter may propose a specific
plan for such and bring to Licensee a suitable party ready, willing and able to
implement such plan. If Licensee does not reach an agreement with such party for
the particular Crop(s) involved, or develop and initiate a suitable alternative
plan for development internally or with another party, then Demeter may request
that Licensee's rights to Licensed Patents and Demeter Technology in said
area(s) be returned to Demeter so as to permit Demeter to pursue said plan.
Licensee shall not unreasonably refuse to return said rights to Demeter,
provided, however, that Licensee will retain a non exclusive license to Licensed
Patents and Licensed Technology in said area(s) unless the parties negotiate
otherwise. As long as Licensee is not in breach of any material term of this
agreement, it will not be compelled under this Article IX to turn over to
Demeter any of Licensee's rights in Joint Inventions without compensation. If
the parties are unable to agree on the application of this provision with
respect to a particular Crop
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application, or the terms of a license for such application, then the matter
will be submitted to arbitration in accordance with the provisions of Paragraph
J of Article XVIII.
ARTICLE X - DEVELOPMENT AND COMMERCIALIZATION
A. RESEARCH COMMITTEE. Licensee and Demeter will establish a research committee
consisting of four (4) members, two (2) of which will be appointed by each
party. The function of this research committee will be to recommend research
goals and activities and evaluate progress toward those goals. The research
committee will meet four (4) times per year.
B. MARKETING OBLIGATIONS. Licensee, at Licensee's sole expense, shall: (1) act
with commercially reasonable judgment and diligence to develop commercially
marketable Licensed Products, and to develop competitive markets for those
Licensed Products; (2) actively seek sublicensees or partners for Licensed
Products, uses of Licensed Products or in geographic areas Licensee is not
actively pursuing on its own; and (3) from time to time, at the request of a
party, but no less than semi-annually, Licensee and Demeter will meet to discuss
Licensee's marketing activities as set forth above.
C. REGULATORY APPROVAL. Licensee, at Licensee's expense, will undertake all
reasonable efforts required to file by the end of the year 2002 and subsequently
to obtain any state, federal, or other governmental license or regulatory
clearance necessary for the use of Licensed Products. Any research necessary or
desirable for the commercialization or marketing of Licensed Products by
Licensee shall be the sole responsibility of Licensee. Licensee, at Licensee's
sole expense, will prepare and deliver all necessary and appropriate documents,
and take all reasonably necessary and appropriate actions, to seek to obtain any
such license or regulatory clearance. All such registrations or clearances will
be held in Licensee's name and will be owned exclusively by Licensee.
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ARTICLE XI - REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS
A. AUTHORITY. Each party represents and warrants to the other party that it has
the power and authority to enter into this Agreement and to perform its
obligations hereunder.
B. DEMETER WARRANTIES. Demeter further warrants that LSU has consented to this
Agreement under Paragraph 2.2 of the Supplemental Licensing Terms and Conditions
of the LSU License, and that as of the date of execution of this Agreement
Demeter has no knowledge of any intellectual property rights of third parties
other than those disclosed in this Agreement, to which the use of the technology
as licensed to Licensee under this Agreement would be subject.
C. EXCLUSIONS. Demeter and LSU make no warranty or representation whatsoever as
to the usefulness of Licensed Patents, Demeter Technology or Licensed Products,
or their fitness for the purpose for which they are intended or for any other
purpose. Demeter and LSU make no representations, and extend no warranties of
any kind, either express or implied, except as expressly provided in this
Agreement.
D. ADDITIONAL DISCLAIMERS. Nothing in this Agreement shall be construed as:
1. A warranty or representation by Demeter or LSU as to the
validity, enforceability, scope, or inventorship of any
patent; or
2. A warranty or representation by Demeter or LSU that anything
licensed, sublicensed, made, used, sold, imported, or
otherwise disposed of under any license granted in or
sublicense permitted by this Agreement is or will be free from
infringement of patents of third parties or other rights of
third parties; or
3. An obligation that Demeter or LSU bring or litigate actions
against third parties for infringement, except to the extent
and in the circumstances stated in Article XIV of this
Agreement ; or
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4. A requirement that Demeter or LSU file or prosecute any patent
application, secure the issuance of any patent, or maintain
any patent; or
5. An establishment of a partnership, joint venture, agency, or
employer-employee relationship between the parties; and
neither party shall represent the contrary to anyone else.
E. DISCLAIMER OF RESPONSIBILITY. Neither Demeter nor LSU assume any
responsibilities whatever for any damages caused to Licensee, any Affiliate, any
vendees, other transferees, or sublicensees of Licensee or its Affiliates, or by
any product or process incorporating or made by the Licensed Patents or Licensed
Technology, or incorporating or made by the use of any information furnished
under this Agreement.
ARTICLE XII - CONFIDENTIALITY
For a period of five (5) years from the termination of this Agreement, each
party will keep confidential any and all Confidential Information (not otherwise
excluded from the confidentiality and non-use obligation of this Article XII as
set forth below) received from the other party in connection with the
performance of this Agreement and will not disclose it to third parties or use
it for any purpose other than pursuant to this Agreement, without the prior
written consent of the disclosing party.
The confidentiality and non-use obligation of this Article XII will not apply to
information and other items listed under the definition of Confidential
Information: (a) which is public knowledge at the time of disclosure, or which
after disclosure becomes public knowledge in any way except through the wrongful
act of the party so disclosing it;(b) which the receiving party is able to prove
was in its possession at the time of disclosure by the disclosing party and
which had not been obtained from the latter, either directly or indirectly; (c)
whose disclosure is
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26
compelled by administrative or judicial order; or (d) which either party
received from a third party having the legal right to disclose such information.
The provisions of this Article XII will survive any termination of this
Agreement.
In the event that Licensee determines that Confidential Information received
from Demeter or any Demeter Affiliate needs to be disclosed to regulatory
authorities for the sale or use of any Licensed Plant Product or Licensed
Formulated Product or to a third party in connection with the grant of a
sublicense to such third party, then disclosure may be made to such third party
only upon Demeter's prior written consent, which may not be unreasonably
withheld, and only if such third party agrees to be bound by terms of
confidentiality equivalent to those specified with this Article XII.
ARTICLE XIII. NON-USE OF NAMES
Licensee and Demeter will make no use whatsoever of the other party's
name, marks, insignia or logos or the name of any then-current employee of the
other in news releases, advertisements, promotional materials, or otherwise,
without the prior written consent of the other party for each such use. Licensee
will make no use whatsoever of LSU's name, marks, insignia, or logos; or of the
name of any LSU campus, department, center, or institute; or the name of any
then-current LSU employee; in news releases, advertisements, promotional
materials, or otherwise, without the prior written consent of LSU for each such
use. However, the foregoing provision will not restrict either party from using
the other's name or LSU's name to the extent required under securities laws,
regulations or rules, or as required by law or the rules of any securities
exchange listing either party's securities.
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ARTICLE XIV - PATENT ENFORCEMENT
A. INFRINGEMENT OF LICENSED PATENTS. Licensee will investigate and report any
infringements or possible infringements of Licensed Patents to Demeter. Demeter
will have the right to enforce Licensed Patents at Demeter's expense. Licensee
will provide reasonable cooperation to Demeter or LSU in the conduct of such
suits. Such participation by Licensee will be at the expense of Demeter or LSU,
whichever entity has requested Licensee's participation. However, Licensee, at
Licensee's sole option and expense, may request to join in the enforcement of
Licensed Patents when the infringing activity is within the scope of any
licenses granted to Licensee under this Agreement. In the event neither Demeter
nor LSU brings suit to enforce Licensed Patents within ninety (90) days of
notification of a potential infringement, then Licensee will have the right to
request to enforce Licensed Patents on behalf of Demeter and LSU, at Licensee's
expense. If Demeter and LSU do not enforce Licensed Patents and do not permit
Licensee to enforce Licensed Patents regarding infringing activity occurring
within the scope of any license granted to Licensee under this Agreement on
their respective behalf where appropriate, then Licensee's royalty and other
payment obligations under this Agreement will be suspended until such
enforcement is instituted. Any damages recovered in connection with the
enforcement of Licensed Patents by Licensee will be retained by Licensee. Any
such recovery in excess of the expenses incurred by Licensee in pursuing said
enforcement will be subject to the royalty and other payment obligations of this
Agreement but only to the extent that it is attributable to sources of income
concerning which Licensee is obligated to make royalty or other payments under
this Agreement.
B. LITIGATION DOES NOT AFFECT ROYALTIES. For so long as Demeter and/or LSU
enforce or permit Licensee to enforce Licensed Patents, the pendency of a
lawsuit for infringement of Licensed Patents, or other action concerning the
validity or
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enforceability of Licensed Patents, will not affect Licensee's obligations to
pay royalties or other amounts under this Agreement.
C. INDEMNIFICATION BY LICENSEE. If Licensee or any Affiliate or any entity
acting in its capacity as a sublicensee under the Agreement takes any action
under the Agreement or otherwise (other than a proceeding by Licensee or such
Affiliate against LSU or Demeter on the validity or invalidity of the LSU
Licensed Patents or Demeter Patents) that leads to or results in litigation or
other legal proceedings (in any country) concerning or related to Licensed
Patents or the Agreement, including but not limited to a suit for declaratory
judgment or claim or counterclaim for infringement, non-infringement, validity,
invalidity, enforceability, unenforceability, ownership, or inventorship of
Licensed Patents, then Licensee will assume the responsibility for such legal
proceedings (at both trial and appellate levels) at Licensee's sole expense. If
Demeter or LSU so requests, Licensee's legal counsel shall represent Demeter
and/or LSU, at Licensee's expense, in any such legal proceedings at both trial
and appellate levels. If Licensee's legal counsel is unable to represent Demeter
and/or LSU because of a conflict of interest or other bona fide reason, Demeter
and/or LSU may engage other competent legal counsel, whose reasonable fees and
expenses will be promptly paid or reimbursed by Licensee, to represent Demeter
and/or LSU in any such suit or legal proceeding. If Demeter and/or LSU does not
wish to be represented by Licensee's legal counsel, Demeter and/or LSU may
engage competent legal counsel of Demeter's and/or LSU's choosing to represent
Demeter and/or LSU at Demeter's and/or LSU's own expense (except in the case of
a conflict of interest or other bona fide reason as described in the preceding
sentence, in which case reasonable expenses for such representation will be
borne by Licensee). Licensee will indemnify Demeter and/or LSU and hold Demeter
and/or LSU harmless from any and all claims, damages, or other obligations
arising out of or resulting from any such claim
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29
or legal proceedings; provided that Demeter and/or LSU will not settle any such
claim without Licensee's prior written consent, such consent not to be
unreasonably withheld. Any sublicense, transfer, or assignment of any of
Licensee's rights under the Agreement shall expressly impose the obligations of
this Paragraph on any sublicensee, transferee, or assignee.
D. FRAUDULENT OR WILLFUL MISCONDUCT. Notwithstanding Paragraph C above, Licensee
will have no contractual obligation under this Agreement to indemnify either:
(i) Demeter to the extent that damages may be attributable to Demeter's
fraudulent or willful misconduct; or (ii) LSU to the extent that damages may be
attributable to LSU's fraudulent or willful misconduct. In the event that a
claim is brought against any or all of Demeter, LSU and Licensee that is
otherwise within Licensee's indemnification obligations under Article XIV C
above, except that allegations of fraudulent or willful misconduct are made
against Demeter or LSU, or both, then the provisions of this Paragraph will
apply. Demeter or LSU or both, as the case may be, will defend both itself
(themselves) and Licensee, at Demeter's or LSU's expense (or both, as the case
may be) from and against any claim that is based on an allegation or claim of
fraudulent or willful misconduct by Demeter or LSU, respectively, or both if
both are allegedly culpable for such misconduct. If the final judgment or
verdict respecting the fraudulent or willful misconduct claim -- after all
applicable appeals and appeal delays have expired -- is other than a finding
that Demeter or LSU or both committed fraudulent or willful misconduct, then
Licensee shall promptly indemnify Demeter or LSU, or both (as the case may be)
as otherwise provided in Article XIV C above, and Licensee will also promptly
reimburse the reasonable legal and other out-of-pocket expenses incurred by
Demeter or LSU (or both, as the case may be) in defending the claim at both
trial and appellate levels; provided that neither Demeter nor LSU will be
entitled to settle any such claim without Licensee's prior, written consent,
such consent not to be
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unreasonably withheld. If the final resolution of the fraudulent or willful
misconduct claim -- after all applicable appeals and appeal delays have expired
- -- is a finding that Demeter or LSU, or both committed fraudulent or willful
misconduct, then Demeter or LSU, respectively (or both if both parties are
culpable) will indemnify Licensee against that judgment or award, and Licensee
will have no obligation to indemnify Demeter or LSU, respectively, (or both, as
the case may be) with respect to that claim under Article XIV C above. If the
fraudulent or willful misconduct claim is settled prior to a final judgment or
verdict (including all applicable appeals and appeal delays), then Demeter, LSU
and Licensee will make good faith efforts to resolve their respective
obligations under Article XIV C and D, and if unable to reach agreement, will
have recourse to the dispute resolution mechanism of Paragraph J Article XVIII.
As otherwise provided in Article XIV C above, Licensee will defend, indemnify,
and hold Demeter and LSU harmless against any claim that may be made against
Demeter and/or LSU in the same proceedings to the extent that it is not based on
an allegation or claim of fraudulent or willful misconduct by such party; and in
such a case Demeter, LSU and Licensee shall cooperate in allocating those costs
that are common to the defense of both sets of claims (i.e., those alleging
fraudulent or willful misconduct against Demeter and LSU and those not so
alleging), subject to Demeter and LSU's contingent rights to later
indemnification and reimbursement after final resolution, as otherwise provided
in this Paragraph.
Because a finding of "inequitable conduct" in the Patent and Trademark Office
can be based on a lesser showing than that required for "fraudulent or willful
misconduct," it is understood that a finding of "inequitable conduct" in the
Patent and Trademark Office would not necessarily constitute "fraudulent or
willful misconduct" within the contemplation of this Paragraph depending on the
specific circumstances. Notwithstanding any provision of this Agreement to the
contrary, LSU shall have no obligation to defend or indemnify Licensee against
any claim,
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judgment or award that is based on allegations of fraudulent or willful
misconduct by Dr. Jesse Jaynes.
ARTICLE XV. INDEMNIFICATION
A. GENERAL. Except as otherwise set forth below, Licensee will defend,
indemnify, and hold harmless Demeter, LSU and their respective agents, officers,
board members, employees, and anyone for whom Demeter and/or LSU may be liable
(collectively, "INDEMNITEES") from and against any and all claims, damages,
losses, and expenses, in any country, including reasonable attorney's fees at
both trial and appellate levels to or for attorneys of Demeter's and /or LSU's
choosing, for claims for damages to property, injury to persons, or death of
persons, or for any other damage arising out of or in any way relating to
Licensee's or its Affiliates' sublicensing, manufacture, use, distribution,
marketing, importation, lease, sale or other conduct relating to Licensed
Products, Licensed Patents or Licensed Technology by Licensee or Licensee's
Affiliates and sublicensees and/or those manufacturing, marketing, selling, or
otherwise acting on behalf of Licensee and/or Licensee's Affiliates or
sublicensees. Licensee agrees to defend any Indemnitee against any such lawsuit,
administrative or arbitration proceeding at Licensee's expense, and to pay any
judgment rendered against any Indemnitee in any such lawsuit, administrative or
arbitration proceeding, together with all costs and reasonable attorney's fees
at both trial and appellate levels to or for attorneys of Demeter's and/or LSU's
choosing incurred in preparing for or defending any such lawsuit, administrative
or arbitration proceeding. Demeter and/or LSU will not settle any such claim
without Licensee's prior written consent, such consent not to be unreasonably
withheld. However, Licensee will not be required to indemnify Demeter for any
injury to persons or property arising solely from Demeter's employees'
activities causing injury to persons or property on premises where a Demeter
employee is physically located or solely from Demeter's improper
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32
shipment of materials in connection with the conduct of joint development
programs set forth under Article VII. Any sublicense, transfer or assignment of
any of Licensee's rights under this Agreement shall expressly impose the
obligations of this Paragraph on any sublicensee, transferee, or assignee.
B. FRAUDULENT OR WILLFUL MISCONDUCT. Notwithstanding Paragraph A above, Licensee
will have no contractual obligation under this Agreement to indemnify either (i)
Demeter to the extent that damages may be attributable to Demeter's or LSU's
fraudulent or willful misconduct, or (ii) LSU to the extent that damages may be
attributable to LSU's fraudulent or willful misconduct. In the event that a
claim is brought against any or all of Demeter, LSU or Licensee that is
otherwise within Licensee's indemnification obligations under Paragraph A above,
except that allegations of negligence are made against Demeter or allegations of
fraudulent or willful misconduct are made against Demeter or LSU, or both, then
the provisions of this Paragraph will apply. Demeter or LSU or both, as the case
may be, will defend both itself (themselves) and Licensee, at Demeter's or LSU's
expense, (or both, as the case may be) from and against any claim that is based
on an allegation or claim of fraudulent or willful misconduct by Demeter or LSU,
respectively, or both if both are allegedly culpable for such misconduct. If the
final judgment or verdict respecting the fraudulent or willful misconduct claim
- -- after all applicable appeals and appeal delays have expired -- is other than
a finding that Demeter or LSU or both committed fraudulent or willful
misconduct, then Licensee will promptly indemnify Demeter or LSU or both (as the
case may be) as otherwise provided in Paragraph A above, and Licensee will also
promptly reimburse the reasonable legal and other out-of-pocket expenses
incurred by Demeter or LUS (or both, as the case may be) in defending the claim
at both trial and appellate levels; provided that neither Demeter nor LSU, will
be entitled to settle any such claim without Licensee's prior, written consent,
such consent not to be unreasonably withheld.
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If the final resolution of the fraudulent or willful misconduct claim -- after
all applicable appeals and appeal delays have expired -- is a finding that
Demeter or LSU or both committed fraudulent or willful misconduct, then Demeter
or LSU, respectively (or both if both parties are culpable) will indemnify
Licensee against that judgment or award, and Licensee will have no obligation to
indemnify Demeter or LSU, respectively, (or both, as the case may be) with
respect to that claim under Paragraph A above. If the fraudulent or willful
misconduct claim is settled prior to a final judgment or verdict (including all
applicable appeals and appeal delays), then Demeter, LSU and Licensee will make
good faith efforts to resolve their respective obligations under this Article
XV, and if unable to reach agreement, shall have recourse to the dispute
resolution mechanism of Paragraph J, Article XVIII. As otherwise provided in
Paragraph A above, Licensee will defend, indemnify, and hold Demeter or LSU
harmless against any claim that may be made against Demeter or LSU in the same
proceedings, to the extent that it is not based on an allegation or claim of
fraudulent or willful misconduct by such party, or an allegation of negligence
by Demeter and in such a case Demeter, LSU and Licensee shall cooperate in
allocating those costs that are common to the defense of both sets of claims
(i.e., those alleging fraudulent or willful misconduct against Demeter and/or
LSU and/or negligence against Demeter and those not so alleging), subject to
Demeter's and/or LSU's contingent right to later indemnification and
reimbursement after final resolution, as otherwise provided in this Paragraph B.
Because a finding of "inequitable conduct" in the Patent and Trademark Office
can be based on a lesser showing than that required for "fraudulent or willful
misconduct," it is understood that a finding of "inequitable conduct" in the
Patent and Trademark Office would not necessarily constitute "fraudulent or
willful misconduct" within the contemplation of this Paragraph B., depending on
the specific circumstances. Notwithstanding any
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34
provision of this Agreement to the contrary, LSU shall have no obligation to
defend or indemnify Licensee against any claim, judgment or award that is based
on allegations of fraudulent or willful misconduct by Dr. Jesse Jaynes.
C. PRIOR LICENSE. The LSU Licensed Patents and Supplemental Patent Rights were
previously licensed to Helix Phytonetix, Inc., a Louisiana corporation
("Phytonetix") under a February 1, 1993 License Agreement (the "Prior License")
between LSU and Phytonetix. The Prior License was executed pursuant to a
February 1, 1993 Agreement in Settlement, Compromise, and Release (the "Helix
Settlement") among LSU, Phytonetix, and the following private corporations:
Helix International Corporation (a Louisiana corporation), Helix BioMedix, Inc.
(a Colorado corporation), Helix BioMedix, Inc. (a Louisiana corporation), and
University Research and Marketing, Inc. (a Louisiana Corporation). (Phytonetix,
each of the other private corporations named in the preceding sentence, and each
of their respective affiliates, officers, directors, shareholders, assignees,
and other persons or entities claiming any right through any of the above may be
referred to individually or collectively as a "Prior Party" or the "Prior
Parties"). LSU has represented that other than the May 1, 1997 LSU License to
Demeter, LSU has neither granted nor authorized any licenses under the LSU
Licensed Patents and Supplemental Patents to any party other than: (1) to
Phytonetix under the Prior License on and after February 1, 1993; and (2) to one
or more of the Prior Parties before February 1, 1993. (The license rights in LSU
Licensed Patents and Supplemental Patents held by Prior Parties other than
Phytonetix were extinguished under the terms of the Helix Settlement).
When Phytonetix failed to pay a minimum royalty timely under the Prior License,
LSU notified Phytonetix that the Prior License was terminated as of April 10,
1996. LSU has previously provided Demeter and Demeter has provided Licensee with
copies of the
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35
Prior License, the Helix Settlement (with all Exhibits), and the correspondence
by which LSU notified Phytonetix that the Prior License was terminated as of
April 10, 1996. Although Demeter and LSU believe that the Prior License was
properly terminated as of April 10, 1996, Demeter and LSU can make no
representations or warranties that the Prior License was properly terminated.
Licensee assumes the risk that a Prior Party may challenge the April 10, 1996
termination of the Prior License, whether by litigation, arbitration, or
otherwise. Demeter shall Defend Licensee against any such claims.
D. PRIOR PARTY CLAIMS. Licensee will have no obligation to indemnify LSU or
Demeter against any claims by Helix Phytonetix Inc., Helix International
Corporation, Helix Biomedix Inc., or University Research and Marketing, Inc.
regarding any claim relating to their rights to LSU Licensed Patents under any
license to them by LSU. Demeter shall defend itself and Licensee against any
claim by Helix Phytonetix, Inc.; Helix International Corporation; Helix
BioMedix, Inc.; or University Research and Marketing, Inc. regarding any license
to them by LSU and will indemnify Licensee from any claims demands, damages or
liability arising therefrom.
ARTICLE XVI. INSURANCE
A. Prior to the first sale of any Licensed Product, Licensee shall maintain a
program of self-insurance reasonably acceptable to Demeter and LSU or shall
obtain liability insurance coverage on an "occurrence" basis for any and all
liability arising out of the sublicensing, manufacture, use, distribution,
marketing, importation, or sale of any Licensed Product, by Licensee, its
Affiliates, and their customers, in all countries. Demeter and LSU shall be
additional insureds in any such liability insurance. This liability insurance
must be issued by a company having a current A. M. Best rating of A+ 8 or
better. The limits of this insurance coverage shall be not less than three
million Dollars
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36
($3,000,000) per occurrence, with aggregate limits not less than five million
Dollars ($5,000,000) per year. The amount of liability insurance coverage
required by this Paragraph A is subject to the inflation adjustment set forth in
Paragraph C, below. The maximum deductible may not exceed fifty thousand Dollars
($50,000) or such other amount as may be reasonably acceptable to Demeter and
LSU. This liability insurance shall include contractual liability coverage and
products/completed operations coverage in at least the minimum amounts required
by this Article. If applicable, Licensee shall forward written evidence of such
liability insurance coverage, including the declarations page(s) describing the
coverage provided by the policy, and including the endorsement naming Demeter
and LSU as additional insureds, to Demeter and LSU at least sixty days prior to
the first use or sale of any Licensed Product. The insurer shall be required to
give at least thirty days' notice of cancellation or modification of coverage to
Demeter and LSU. The obligation to provide Demeter and LSU the liability
insurance required by this Article and written evidence thereof shall continue
until the earliest of the following two events: (a) the expiration or
termination of this Agreement in accordance with its terms; or (b) the time when
Licensee permanently ceases to make, use, import, sell, or offer to sell
Licensed Products, or to sublicense any rights under this Agreement. In
addition, Licensee shall thereafter obtain and maintain a "tail" insurance
policy otherwise satisfying the requirements of this Paragraph, and insuring the
same persons against the same risks until the expiration of any remaining
pertinent statute of limitations period. At any time when Licensee obtains,
renews, or replaces a liability insurance policy, the aggregate limits for the
liability insurance coverage shall be at least equal to the sum of Net Sales,
Trait Marketing Revenue and gross payments to Licensee from sublicensees for the
most recently completed Licensee fiscal year. The alternative amount of
liability insurance provided by the preceding sentence is not subject to the
inflation adjustment otherwise required by this Article XVI,
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37
and only applies if this alternative amount is greater than the amount of
insurance otherwise required by this Paragraph A.
B. Obligation of Sublicensees. Each sublicensee, assignee, or transferee of any
of Licensee's rights under this Agreement shall obtain the type and amount of
liability insurance required by Paragraph A of this Article XVII, except that in
calculating the alternative amount provided by the last two sentences of
Paragraph A. of this Article XVII, that sublicensee's, assignee's or
transferee's Net Sales and Trait Marketing Revenue shall be used in place of the
sum of Licensee's Net Sales, Trait Marketing Revenue and gross payments from
sublicensees, substituting for "Licensee" that sublicensee, assignee, or
transferee in the definitions of Net Sales and Trait Marketing Revenue found in
Article I, Paragraphs M and N. A sublicensee's obligation to obtain liability
insurance may, if mutually agreeable to Licensee and the sublicensee, be
satisfied by a single insurance policy for both Licensee and the sublicensee;
provided that such a single policy satisfies all other requirements of
Paragraphs A and B of this Article XVII; and further provided that the amount of
liability insurance provided by such a single policy is at least equal to the
sum of the amounts required by Paragraph A and B of this Article XVII. A
self-insured sublicensee may request that Demeter and LSU accept the
sublicensee's self-insurance as satisfying the requirements of this Paragraph;
Demeter and LSU shall not act unreasonably in deciding whether to approve such a
request, provided that the self-insurance is adequately capitalized and
otherwise satisfies the requirements of this Article XVII.
C. INFLATION ADJUSTMENT. The dollar amounts of insurance coverage stated in
Paragraph (A) above will be subject to inflation adjustment as follows: The
"Multiplier" on any given date is defined to be the ratio of (a) the Consumer
Price Index for All Urban Consumers, All Items, U.S. City Average (the "Index")
most recently issued by the United States Government as of that date to (b) the
Index on the effective date of this Agreement. At any time when the Multiplier
is at least 1.10
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38
times the value of the Multiplier on the date of the most recent adjustment
under this Paragraph (or is at least 1.10 if there has been no previous
adjustment under this Paragraph), then Demeter or LSU may give Licensee written
notice that each of the dollar amounts defined in Paragraph A is adjusted to the
original amount of insurance required under this Agreement as specified above,
multiplied by the Multiplier. The adjustment notice under this Paragraph is
effective as of the time when Licensee (or a sublicensee) next renews or
replaces its then-current liability insurance policy; and the amount of
liability insurance coverage required shall be the amount specified in this
Article XVI, multiplied by the Multiplier as of the date of issuance, renewal,
or replacement of the policy. The required adjusted coverage shall then remain
constant until another notice of adjustment under this Paragraph is given.
ARTICLE XVII. NOTICES
All written notices, payments, and other correspondence under this
Agreement shall be considered given when deposited in the United States Mail,
first class postage prepaid, to:
DEMETER: LICENSEE:
Mr. Richard D. Ekstrom, President Mr. Andrew C. Barnes
Demeter BioTechnologies, Ltd. Executive Vice President
905 West Main Street Mycogen Corporation
Suite 20B Brightleaf Square 5501 Oberlin Drive
Durham, North Carolina 27701 San Diego, California 92121
LSU: IF LSU, AN ADDITIONAL
COPY TO:
Vice Chancellor for Research & Director Assistant Director
La. Agricultural Experiment Station La. Agricultural
LSU Agricultural Center Experiment Station
104 J. Norman Efferson Hall LSU Agricultural Center
P.O. Box 25055 104 J. Norman Efferson
Baton Rouge, Louisiana 70894-5055 Hall
P. O. Box 25055
Baton Rouge, Louisiana 70894-5055
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39
These names or addresses may be changed by giving notice as provided in this
Paragraph.
ARTICLE XVIII. MISCELLANEOUS
A. ENTIRE UNDERSTANDING. This Agreement constitutes the entire understanding
between Demeter and Licensee, and supersedes any prior agreement or
understanding on the same subject matter. Any modification or amendment to this
Agreement shall not be effective unless and until reduced to writing and signed
on behalf of both Demeter and Licensee and, to the extent that it affects any of
the rights or obligations relating to the LSU Patent Rights or Supplemental
Patent rights, approved in writing by LSU, which approval will not be
unreasonably withheld.
B. CONSTRUCTION. The parties acknowledge that this Agreement followed
negotiations by the parties, and that this Agreement incorporates the negotiated
suggestions of both parties, and that both parties have had the benefit of the
advice of counsel in the conduct of these negotiations. The parties therefore
agree that no presumptions shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement.
C. HEADINGS. The headings or captions appearing at the beginnings of the
Articles and Paragraphs of this Agreement are provided for convenience of
reference only, and do not constitute part of this Agreement.
D. COMPLIANCE WITH LAWS. In fulfilling its obligations under the Agreement,
Licensee shall comply with all applicable licensing, regulatory, and statutory
requirements. Licensee shall be responsible for paying any taxes or other
assessments, and for complying with all applicable laws and regulations of the
United States and other countries, including without limitation all applicable
laws and regulations relating to the environment, to agriculture, and to
foodstuffs.
E. MARKING. Licensee shall mark any article or composition within the claims of
any issued patent within Licensed Patents, or any article or composition
intended for a use within the
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40
claims of any issued patent within Licensed Patents, with the word "Patent,"
"Patents," "For Use Under Patent," or "For Use Under Patents," and the number or
numbers of each such issued patent. When, from the character of the article or
composition, this marking cannot be made, the marking shall instead be placed on
a label attached to any packaging containing any such article or composition.
F. PROHIBITION ON MISUSE. Licensee shall engage in no activity that would
constitute a misuse of any patent or patent application within Licensed Patents.
As used in this Paragraph, "misuse" of a patent or patent application means an
action that, aside from issues of patent validity or infringement, renders a
patent wholly or partially unenforceable, whether temporarily or permanently.
G. LICENSEE TRADEMARKS. Subject to Article XIII of the Agreement, Licensee may
acquire its own trademarks for use in connection with Licensed Products.
H. EFFECT OF AN INVALID PROVISION. If any part of the Agreement is finally
adjudged to be invalid by a court of competent jurisdiction, or by an arbitrator
as provided in Article XVIII.J, the remaining parts of the Agreement shall
remain in full force and effect. Furthermore, in lieu of that invalid part,
there shall be automatically added to the Agreement a provision as similar in
terms to that invalid part as may be possible, legal, valid, and enforceable.
I. GOVERNING LAW. This contract, its terms, and the enforcement of this contract
shall be governed by the substantive law of the State of North Carolina for all
situations except where rights or obligations of LSU are being interpreted in
which instance Louisiana Law applies.
J. DISPUTE RESOLUTION. In the event of a controversy or claim arising out of or
relating to this Agreement, or the breach, validity, or termination of this
Agreement, the parties shall first negotiate in good faith for a period of sixty
days to try to resolve the controversy or claim. If the controversy or claim is
unresolved after this period of good-faith negotiations, the
- 40 -
41
parties shall then make good-faith efforts for a period of sixty days to mediate
the controversy or claim in Durham, North Carolina, before a sole mediator
selected by the Center for Public Resources, Inc. (New York, New York), under
the Center for Public Resources' Model Mediation Procedure for Business Disputes
in effect as of the Effective Date. If the controversy or claim is unresolved
after this period of mediation, on the written demand of either party, any
controversy arising out of or relating to this Agreement or to the breach,
termination, or validity of this Agreement, will be settled by binding
arbitration in Durham, North Carolina unless LSU is a party, in which case the
location will be Baton Rouge, Louisiana. The arbitration will be conducted in
accordance with the Center for Public Resources' Rules for Non-Administered
Arbitration of Patent and Trade Secret Disputes in effect as of the Effective
Date before one neutral arbitrator selected by the parties. If the parties are
unable to agree upon the appointment of a neutral arbitrator within 45 days then
the Center for Public Resources will appoint an arbitrator. The appointed
arbitrator will be neutral, impartial, and independent of the parties and others
having any known interest in the outcome, abide by the ABA and AAA Canons of
Ethics for neutral arbitrators, and have no ex parte communications about the
case with either party in the appointing process or during the pendency of the
arbitration. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. All
applicable statutes of limitation and defenses based upon the passage of time
shall be tolled while the procedures described above in this Paragraph are
pending. Demeter and Licensee will each take such action, if any, required to
effectuate this tolling. Each party is required to continue to perform its
obligations under this Agreement pending final resolution of any dispute arising
out of or relating to this Agreement. Otherwise, any controversy arising under
or relating to this Agreement, or the breach, termination, or validity of
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42
this Agreement, may be adjudicated only in a court, state or federal, having
jurisdiction over the subject matter and including Durham, North Carolina within
its territorial district. Both parties consent to the jurisdiction and venue of
such a court unless LSU is a party in which case the location will be Baton
Rouge, Louisiana. A party's right to demand arbitration of a particular dispute
arising under or related to this Agreement, or the breach, termination, or
validity of this Agreement, shall be waived if that party either: (1) brings a
lawsuit over that controversy or claim against the other party in any state or
federal court; or (2) does not make a written demand for mediation, arbitration,
or both within 60 days of service of process on that party of a summons or
complaint from the other party instituting such a lawsuit in any state or
federal court. Notwithstanding the foregoing, except with respect to LSU, to
whom the following will not apply, either party may avail itself of any
appropriate tribunal to obtain injunctive or other equitable relief to protect
its rights in any technology covered by the terms of this Agreement, or to
prevent the unauthorized disclosure of any Confidential Information disclosed by
one party to the other under this Agreement.
K. NO WAIVER. The failure of either party to insist upon strict performance of
any provision of the Agreement, or to exercise any right under the Agreement
shall not constitute a waiver of that provision or right.
L. NO LICENSE BY ESTOPPEL. Except as the Agreement may expressly and
unambiguously provide otherwise, nothing in the Agreement shall be construed as
granting by implication, estoppel, or otherwise any licenses or rights under any
patents, patent applications, or know how owned in whole or in part by LSU,
other than the express license under LSU Licensed Patents and Supplemental
Patent Rights provided in Paragraph (A) of Article II of the Agreement,
regardless of whether such patents, patent applications, or know-how are
dominant of or subordinate to any patent within Licensed Patents.
- 42 -
43
M. RESERVED LSU RIGHTS. The license granted by the Agreement is subject to a
reserved, non-exclusive, worldwide right in LSU to use LSU Licensed Patents and
Supplemental Patent Rights for non-commercial purposes that are experimental or
educational in nature.
N. LIMITATIONS OF LSU'S OBLIGATION UNDER THIS AGREEMENT. LSU's obligations under
this Agreement will not be greater than LSU's obligations to Demeter under the
LSU License, except as expressly provided in this Agreement with respect to the
following matters (i) LSU's acceptance of the financial and other obligations of
Licensee under this Agreement including but not limited to, the escrow
provisions of Article XX; (ii) LSU's acceptance of the right of Licensee to
grant sublicenses of the LSU Licensed Patents and Supplemental Licensed patents
to Affiliates under Section A, Paragraph 7 of Article II; (iii) LSU's agreement
that this Agreement will survive termination of Demeter's license under the LSU
License, as provided under Section B of Article II of this Agreement; and (iv)
the obligations of confidentiality under Article XII to the extent that such
Article XII may become applicable to LSU (e.g., in the event that Demeter's
license under the LSU License terminates). Without limiting the applicability of
the foregoing, in no event will LSU have any obligation to Licensee with respect
to: any technology or patent rights other than the LSU Licensed Patents and
Supplemental Patent Rights; the conduct of the joint development program under
Article VII; the provision of support services under Article VIII; any
participation in the activities set forth in Article X; any of Demeter's
indemnification obligations to Licensee under Article XV; provided, however, in
the event that (i) Demeter's license under the LSU License has terminated; and
(ii) Licensee is paying royalties and fees under this Agreement to LSU which are
in excess of the amount which Demeter would have been paying to LSU under the
LSU License as a direct result of this Agreement; and (iii) Demeter is unable to
meet its obligations to licensee with respect to claims subject to
indemnification by Demeter under this Agreement; then Licensee will have the
right
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44
to offset any unreimbursed damages suffered as a result of Demeter's inability
to provide said required indemnification against that portion of Licensee's
payment obligation to LSU which is in excess of the amount that LSU would have
received from Demeter under the LSU License as a direct result of this
Agreement.
ARTICLE XIX DEFAULT AND TERMINATION
A. EFFECT OF TERMINATION. Upon termination of the Agreement for any reason, each
of the following provisions shall continue in effect indefinitely, until its
purpose can no longer be fulfilled, or is no longer meaningful: Article I;III;
V; XI; XII; XIII; XIV; XV, XVI; XVII, XVIII, XIX, AND XX. Following the
termination of the Agreement, any provision of the Agreement not referred to in
the preceding list shall cease to have effect. By way of illustration and not
limitation, following the termination of the Agreement, Licensee shall remain
obligated to pay Demeter all licensing fees, royalties, minimum royalties, and
other amounts that were due under Article III or Article IV which were accrued
prior to termination, except for amounts subject to disposition under Article
XX, hereof.
B. Licensee will have the right to terminate this Agreement at any time on six
(6) months written notice to Demeter at any time after the second anniversary of
the Effective Date. In the event of any termination prior to the satisfaction of
all the conditions set forth in Article XX, the balance of the amount being held
in escrow at the time of such notice will be released to Licensee following
termination of the Agreement.
C. If Licensee is in breach or default of any term or condition of the
Agreement, or fails to perform any obligation under the Agreement, Demeter may
give written notice to Licensee, specifying the reason why there is a default or
breach, after which notice Licensee shall have thirty (30) days to cure the
breach. If the breach is not cured, or if efforts reasonably satisfactory to
Demeter are not instituted within that 30 day
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45
period to cure the breach, the Agreement may be terminated at the option of
Demeter, upon written notice of termination to Licensee, and Licensee shall have
no further rights to sublicense Licensed Patents or make, use, import, offer to
sell, or sell Licensed Products. If the breach is cured, or if efforts
reasonably satisfactory to Demeter are instituted within the thirty (30) day
period to cure the breach, the Agreement shall continue as if no breach had
occurred; provided, however, that upon the third default arising out of failure
to pay monies due to Demeter under the Agreement or upon default or rejection
under paragraph E of this Article, no notice or period to cure shall be
necessary, and Demeter may terminate the Agreement at its option without further
notice to Licensee and without allowing Licensee a period to cure, and in such
an event Licensee shall have no further rights under this Agreement. A bona fide
dispute with respect to the amount of any payment required to be made by
Licensee under this Agreement will not constitute a default by Licensee under
this Agreement, if the payment in dispute is paid to an escrow agent, mutually
selected by Demeter and Licensee, for placement into an interest bearing
investment or account jointly approved by Demeter and Licensee.
D. Following termination of the Agreement under either Paragraph B or C,
Licensee shall have one hundred eighty days (180) to sell any Licensed Products
then in stock or then under production, subject to the payment of royalties,
fees, and payments on those Licensed Products as otherwise provided in Articles
III and IV
E. ACCELERATED PROCEDURES. If bankruptcy proceedings under any Chapter of the
Bankruptcy Code, or other insolvency proceedings, voluntary or involuntary, are
filed by or against Licensee, then Licensee or its representative must assume
the Agreement within thirty (30) days of that filing, and Licensee must cure all
defaults existing under the Agreement within that thirty day period, and
Licensee must provide such adequate assurance of future performance of its
obligations under the Agreement as may be required by the Bankruptcy or other
Court, and should Licensee fail to assume the Agreement within thirty (30) days
of that
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46
filing, or should Licensee fail to cure all defaults existing under the
Agreement within that thirty (30) day period, or should Licensee fail to provide
adequate assurance of its future performance of its obligations under the
Agreement, as may be required by the Bankruptcy or other Court, then the
Agreement shall be deemed to be rejected.
ARTICLE XX ESCROW PROVISIONS
A. Upon the execution of the Agreement between Demeter and Licensee, Licensee
will pay the license issue fees set forth in Paragraph A of Article III and the
technical assistance and support amount set forth in Article VIII (totaling
$1,250,000) as follows: (i) the sum of Seventy-five Thousand Dollars ($75,000)
will be paid directly to Demeter (which amount relates to the amounts due under
Article IIIA(c) and a portion of the amount due under Article VIII) and (ii) the
sum of One Million, One Hundred Seventy-five Thousand Dollars ($1,175,000) will
be paid into a mutually agreeable interest bearing escrow account using an
escrow agent mutually acceptable to Demeter and Licensee; which payments will
satisfy Licensee's obligation under the indicated provisions set forth in this
Paragraph A.
B. Promptly upon LSU's signature to this Agreement, Two Hundred and Seventy-five
Thousand Dollars ($275,000) of the amount held in escrow (which amount relates
to the balance of the amount due under Article VIII) will be released to
Demeter. The balance of the amount held in escrow will be released to Demeter
upon the receipt by Demeter or LSU of a letter from Phytonetix releasing any
interest that the Prior Parties may have in the LSU Licensed Patents by virtue
of the Prior License; or, if such release cannot be obtained, such other
documentation as Licensee may, in its sole discretion, accept in lieu of such
release.
C. In the event that the conditions set forth in Paragraph B above cannot be
satisfied within six (6) months from the date of execution of this Agreement,
then the balance of the escrow account will be released to Licensee.
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47
D. In the event Licensee is subsequently able to secure the Prior Parties'
release of any interest in the LSU Licensed Patents and Supplemental Patent
Rights by the Prior Parties, or in the event that the Prior Parties' right to
assert any such interest is barred by statute or adjudicated adversely to the
Prior Parties, then Licensee will pay to Demeter the amount of any funds
remaining from the previously escrowed balance released to Licensee to the
extent that such funds were not utilized by Licensee in obtaining such release ,
or otherwise used in securing Licensee's right to use the LSU Licensed Patents
and Supplemental Patent Rights.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in duplicate counterparts, each of which shall be deemed to
constitute an original, effective as of the date first above written.
The Undersigned verify that they have the power to bind to this
Agreement the party on behalf of which they are executing below.
WITNESSES: MYCOGEN CORPORATION
/s/ Elaine Hartnett BY: /s/ Andrew C. Barnes
- ------------------------------ ---------------------------------
ANDREW C. BARNES
EXECUTIVE VICE PRESIDENT
/s/ Carol Meikey DATE: Dec. 1, 1997
- ------------------------------ -------------------------------
DEMETER BIOTECHNOLOGIES, LTD.
/s/ Jesse M. Jaynes BY: /s/ Richard D. Ekstrom
- ------------------------------ ---------------------------------
RICHARD D. EKSTROM,
PRESIDENT
/s/ D. Thomas Roane DATE: Dec. 4, 1997
- ------------------------------ -------------------------------
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48
ACKNOWLEDGEMENT OF LICENSE AND ROYALTY AGREEMENT BY LSU
Approved and accepted by the Board of Supervisors of Louisiana State University
and Agricultural and Mechanical College pursuant to Paragraph 2.2 of the
Supplemental Terms of the May 1, 1997 License and Royalty Agreement between the
Board of Supervisors of Louisiana State University and Agricultural and
Mechanical College and Demeter Biotechnologies, Ltd.
WITNESSES: THE BOARD OF SUPERVISORS OF
LOUISIANA STATE UNIVERSITY AND
AGRICULTURAL AND MECHANICAL COLLEGE
BY: /s/ Allan A. Copping
- --------------------------- -------------------------------
ALLAN A. COPPING
TITLE: PRESIDENT
- ---------------------------
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49
Schedule A.
Section A1
1. Methylated-lysine-rich lytic peptides and method of making same by
reductive alkylation. United States application number 08/474547 filed June
7, 1995 and all foreign filings such as: EP number 95901738.5; IL number
111516; WO number 9412550.
2. Modified arginine-containing lytic peptides and method of making same by
glyoxation. United States application number 08/148491 filed November 8,
1993 and all foreign filings such as: EP number 95000498.7; IL number
111515; WO number 9412553.
3. Ubiquitin-lytic peptide fusion gene constructs, protein products deriving
therefrom, and methods of making and using same. United States patent
application number 08/801028 filed February 19, 1997 and all foreign
filings such as: EP number 95928127.0; IL number 1146967; WO number
9509339.
4. Methods for the design of amphipathic peptides have enhanced biological
activities. US patent application number 60/027628 filed October 4, 1996
and all associated foreign filings.
5. Ubiquitin-lytic peptide fusion gene constructs, protein products deriving
therefrom, and method of making. United States application number 08/505486
filed July 21, 1995 and associated foreign filings such as: EP number
95928126.2; WO number 9509338.
6. Design of Non-Peptidyl Membrane Interactive Molecules (MIMs) to Enhance
Biological Activity. In Preparation.
7. Modified arginine containing lytic peptides and method of making the
same by glyoxylation. United States application number 08/475328 filed
June 7, 1995 and all associated foreign filings.
8. Methylated lysine-rich lytic peptides and method of making same by
reductive alkylation. United States application number 08/427001 filed
April 24, 1995 and all associated foreign filings.
Section A2
1. Method of treating pulmonary disease states with non-naturally occurring
amphipathic peptides. United States application number 08/457798 filed June
1, 1995 and all foreign filings such as: IL number 109897; KZ number
941795.1; WO number 9406176.
2. Method of combating mammalian neoplasias, and lytic peptides thereof.
United States patent application number 08/457171 filed June 1, 1995 and
all associated foreign filings such as: EP number 95916249.6; IL number
113244; WO number 9504335.
3. Method of enhancing wound healing by stimulating fibroblasts and
keratinocyte growth in vivo, utilizing amphipathic peptides. United States
issued patent number 5561107 allowed October 1, 1996 and all associated
foreign filings such as: CA number 2188391; EP number 95916435.1; IL number
113423; WO number 9504718.
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50
4. Method of enhancing wound and healing by stimulating fibro-blast and
keratinocyte in vivo utilizing amphipathic peptides. United States patent
application number 08/689489 filed August 12, 1996 and all associated
foreign applications.
Section A3
1. Plants Genetically Enhanced for Disease Resistance. United States patent
application number 08/798963 filed January 24, 1997 and all associated
foreign applications. In preparation.
2. Design, Construction, and Expression of Genes Encoding Proteins High in
Essential Amino Acid Content for Food and Feeding for Humans and Animals.
In preparation.
3. Technique to Increase Overall Protein Content in Plants. In preparation.
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51
Schedule C
CURRENT DEMETER AGRICULTURAL AGREEMENTS
(As of August, 1997)
TYPES OF PLANT(S) DEMETER COLLABORATOR TYPE OF AGREEMENT
- ----------------- -------------------- -----------------
1. Apples Cornell University To Be Developed (Post LSU)
2. Peanuts National Peanut Foundation/ Research & Development
North Carolina State University
University of Georgia
3. Tobacco North Carolina State University Research & Development
4. Rice Cornell University Research & Development
5. Cotton USDA/Univ. of S.W.LA CRADA
6. U.S. Potatoes USDA/WRRC CRADA
7. European Potatoes Austrian Research Center Research & Development
8. Sugarcane Texas A&M University Research & Development
9. Sweet potatoes Tuskegee University Research & Development
10. Trees Canadian Forest Service Research & Development
11. Bartlett Pear USDA CRADA
12. Walnuts USDA/Univ. of Calif. Davis CRADA
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SCHEDULE D
STANDARD FORM SUBLICENSE AGREEMENT(1)
Mycogen Corporation ("MYCOGEN"), having a place of business at 5501
Oberlin Drive, San Diego, California 92121, and
________________________________________, ("LICENSEE") enter into the following
Agreement effective __________________, 1997 (the "EFFECTIVE DATE").
WHEREAS Mycogen is the exclusive licensee or sublicensee, for certain
uses, of certain technology and patent rights from the Board of Supervisors of
Louisiana State University and Agricultural and Mechanical College, a public
constitutional corporation, organized and existing under the laws of the State
of Louisiana ("LSU") and Demeter BioTechnologies, Ltd., a Colorado corporation
("DEMETER") relative to disease and pest control for use with plant crop species
of all kinds;
WHEREAS Mycogen has developed or has rights in technology and know-how
useful in producing disease resistant plants or treating plants and has obtained
or filed patents of its own;
WHEREAS Licensee desires to obtain a license from Mycogen of
_______________ and a sublicense of certain rights under Licensed Patents and
Supplemental Patent Rights, all for certain fields of use;
- --------
1 The Standard Form Sublicense Agreement may include such other terms as
are agreed upon between Mycogen and Licensee without requiring separate
approval from LSU, provided that such additional terms, (i) do not
expand the scope of Mycogen's license from LSU; (ii) do not impose any
additional obligations on LSU beyond those set forth in the
Demeter-Mycogen License and Royalty Agreement; and (iii) do not
diminish in any respect the protections afforded to LSU by this
approved Standard Form Sublicense Agreement. In addition, solely with
respect to Demeter, the Standard Form Sublicense Agreement may not
include any provisions that are not in compliance with the provisions
of the Demeter-Mycogen License and Royalty Agreement without Demeter's
written consent.
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WHEREAS Mycogen and Licensee have agreed to the following terms and
conditions, and desire to enter this License and Royalty Agreement (the
"AGREEMENT");
THEREFORE, in consideration of the mutual obligations set forth in this
Agreement, Mycogen and Licensee agree as follows:
ARTICLE I. DEFINITIONS
A. "LSU LICENSED PATENTS" means: (1) Jaynes and Derrick, "Method for
Introduction of Disease and Pest Resistance into Plants and Novel Genes
Incorporated into Plants which Code Therefor," United States patent number
5,597,946, issued January 28, 1997; (2) Jaynes and Derrick, "Plants Genetically
Enhanced for Disease Resistance," United States patent number 5,597,945, issued
January 28, 1997; (3) Jaynes and Derrick, European patent application
93113536.2; (4) Jaynes and Derrick, European patent application 89900103.6; (5)
Jaynes and Derrick, Japanese patent application SHO 62-504491; (6) Jaynes and
Derrick, "Method for Introduction of Disease and Pest Resistance into Plants and
Novel Genes Incorporated into Plants which Code Therefor," European patent 0 330
655, issued June 7, 1995, nationalized in United Kingdom, France, Germany, and
Italy; (7) Jaynes and Derrick, "Plants Genetically Enhanced for Disease
Resistance," Canadian patent number 1,321,157, issued August 10, 1993; (8)
Jaynes and Derrick, "Method for Introduction of Disease and Pest Resistance into
Plants and Novel Genes Incorporated into Plants which Code Therefor," Australian
patent number 611,859, sealed November 5, 1991; and (9) any United States or
non-United States patent, reissue patent, or reexamination certificate resulting
from the applications and patents of parts (1) through (8) of this Paragraph,
including any renewals or extensions of the term of any such patent.
B. "SUPPLEMENTAL PATENT RIGHTS" means, subject to the limitations set forth in
this Paragraph, any United States divisional or continuation application (but
not a continuation-in-part application) either of United States patent
application serial number 08/444,762, filed May 19, 1995, or of United States
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patent application serial number 08/453,436, filed May 30, 1995; and any United
States patent, reissue patent, or reexamination certificate resulting from such
a divisional or continuation application. "SUPPLEMENTAL PATENT RIGHTS" shall not
include any patent rights outside the United States. Furthermore, "SUPPLEMENTAL
PATENT RIGHTS" shall not include any patent rights concerning any invention or
activity whose unlicensed practice would infringe any of the following claims:
(1) any claim of United States patent number 5,597,945 or 5,597,946, or (2) any
claim in any reissue patent or reexamination certificate resulting from United
States patent number 5,597,945 or 5,597,946. The "SUPPLEMENTAL PATENT RIGHTS"
will be treated as Licensed Patents for all purposes under this Agreement.
C. "LICENSED TECHNOLOGY" means _____________________________.
D. "LICENSED PATENTS" means LSU Licensed Patents, Supplemental Patents, and
________________________________.
E. "FIELD OF USE" means the use of Biocontrol Peptides for [disease and/or pest
resistance purposes in transgenic plants of ________________________ but not
including the use of plants as a production mechanism for producing Biocontrol
Peptides which are to be used for purposes not permitted under this Agreement]
or [disease and/or pest control purposes for crops of ____________].
F. "DOLLARS" means U.S. dollars.
G. "BIOCONTROL PEPTIDE(S)" means natural or synthetically derived peptide
compound(s) which express activity to control plant pests or plant diseases.
H. "LICENSED PRODUCT(S)" means product containing a biocontrol peptide the use
of which would (i) infringe a valid claim of any applicable Licensed Patents
absent the license rights granted under this Agreement, or.(ii)
____________________________.
I. "CONFIDENTIAL INFORMATION" means any and all proprietary information
(including, without limitation, information related to technical, business and
intellectual property matters), know-how, data, trade secrets and biological and
other physical
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materials owned and held by either party to this Agreement which such party
maintains as confidential.
J. "AFFILIATE" means any entity controlled by, controlling or under common
control with a party. For purposes of this definition, control will mean
ownership of fifty percent (50%) or more of the equity or voting control of such
party or entity.
ARTICLE II. LICENSE GRANT
A. SCOPE OF LICENSE.
1. LICENSED PRODUCTS. Subject to the terms and conditions of this
Agreement, Mycogen grants to Licensee, and Licensee accepts from
Mycogen, a license under Licensed Technology and Licensed Patents to
make, have made, use, offer to sell and sell for use Licensed Products
in the Field of Use.
2. SUBLICENSING RESTRICTION. Licensee will not have the right to
sublicense any of the rights granted to Licensee hereunder.
Notwithstanding the foregoing, Licensee may sell Licensed Products to
arms-length purchasers (e.g. distributors or farmers), even where such
a sale is accompanied by an express or implied sublicense under one of
more of the LSU Licensed Patents or Supplemental Patent Rights
regarding the commercial use of such Licensed Product for
non-developmental purposes.
3. U.S. GOVERNMENT RIGHTS. The license granted to Licensee under Paragraph
1 above is subject to any rights that the United States Government may
have in Licensed Patents pursuant to 35 USC Sections 200-212.
4. ADDITIONAL LIMITATIONS. No right or license is granted under this
Agreement by Mycogen to use or sell Licensed Products for human or
animal health care applications or to use plants to produce Biocontrol
Peptides for such or for other non-licensed uses.
B. TERM. The term of this Agreement will be from the Effective Date until the
later of (i) expiration of the last to expire of
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any patent within Licensed Patents; or (ii) the cessation of the sale or use of
any Licensed Products by Licensee [and its Affiliates], or any purchasers of
Licensed Products from Licensee [and its Affiliates], unless earlier terminated
in accordance with applicable provisions of this Agreement. Should Mycogen's
rights under Licensed Patents be terminated, Licensee's rights under this
Agreement regarding Licensed Patents will continue, provided that; (i)Licensee
[and its Affiliates] pay to Demeter or to such other person or entity which
holds the Licensed Patents which are sublicensed to Licensee under this
Agreement, the royalties otherwise payable to Mycogen under this Agreement; and
(ii) Licensee [and its Affiliates] are not in breach of any other material term
of this Agreement. The parties acknowledge that the term of the LSU License only
extends until the last to expire of any patents included within the definition
of "Licensed Patents" as defined in said License Agreement.
ARTICLE III. ROYALTIES AND FEES
A. QUARTERLY REPORTS. Licensee shall forward to Mycogen quarterly reports on or
before March 15, July 15, September 15, and December 15 of each year, for the
preceding calendar quarter, containing the data, information, and documentation
necessary to determine fully the amounts owed by Licensee to Demeter under this
Agreement. The quarterly reports will also provide information on the status of
Licensee's marketing of Licensed Products. Such a report shall be made for each
quarter beginning after commercialization of the first Licensed Product, whether
or not any payment is due for that quarter.
ARTICLE IV - AUDITING AND PAYMENT PROCEDURES
A. LATE PAYMENTS. If any payment is made more than thirty days after the date
due under the Agreement, then Licensee shall also pay interest at the prime rate
of interest announced from time to time by Citibank (New York), plus one percent
(1%) per
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annum, until paid. If this amount is higher than allowed by applicable law, then
the highest amount allowed by law shall apply.
B. PAYMENT PROCEDURE. All payments due under this agreement shall be payable to
Mycogen and shall be made at the appropriate address given for notices in the
Agreement. All payments due shall be made without any deduction for taxes,
assessments, or other charges that may be imposed on Licensee by any government
or by any political subdivision of any government. Any such taxes, assessments
or other charges shall be assumed solely by Licensee.
C. LICENSEE'S RECORDS. Licensee shall make and keep full and accurate books and
records in accordance with Generally Accepted Accounting Principles showing the
manufacture, use, distribution, importation, lease, and sale of any Licensed
Product by Licensee. Licensee agrees that Mycogen, LSU or the Louisiana
Legislative Auditor may require that the books and records of Licensee
pertaining to Licensed Products be inspected by a designee reasonably acceptable
to Licensee during regular business hours, on reasonable written notice, to the
extent necessary to verify the payments due under the Agreement; provided that
the inspection is conducted in a manner to (i) insure the confidentiality of
Licensee's books and records; and (ii) prevent any misuse of the information
contained therein. Any such audit shall be at the expense of the designee;
except that should such an audit indicate an underpayment of ten percent (10%)
or more for any calendar quarter, then Licensee shall pay the cost of the audit
within thirty days of its completion.
D. TERM OF AUDIT RIGHTS. The right of Mycogen or LSU to inspect the books and
records of Licensee shall continue past the term or termination of the
Agreement, until the later of the date on which all payments due under the
Agreement have been made, or until two years after the expiration of the
Agreement.
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ARTICLE V - REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS
A. AUTHORITY. Each party represents and warrants to the other party that it has
the power and authority to enter into this Agreement and to perform its
obligations hereunder.
B. MYCOGEN WARRANTIES. Mycogen further warrants that LSU has consented to the
form of this Agreement and that, as of the date of execution of this Agreement,
Mycogen has no knowledge of any intellectual property rights of third parties
other than those disclosed in this Agreement, to which the use of the technology
as licensed to Licensee under this Agreement would be subject.
C. DISCLAIMER OF RESPONSIBILITY. None of Mycogen, Demeter or LSU assume any
responsibilities whatever for any damages caused to Licensee, any Affiliate, any
vendees, or other transferees of Licensee or its Affiliates, or by any product
or process incorporating or made by the Licensed Patents or Licensed Technology,
or incorporating or made by the use of any information furnished under this
Agreement.
ARTICLE VI - CONFIDENTIALITY
For a period of five (5) years from the termination of this Agreement, each
party will keep confidential any and all Confidential Information (not otherwise
excluded from the confidentiality and non-use obligation of this Article VI as
set forth below) received from the other party in connection with the
performance of this Agreement and will not disclose it to third parties or use
it for any purpose other than pursuant to this Agreement, without the prior
written consent of the disclosing party.
The confidentiality and non-use obligation of this Article VI will not apply to
information and other items listed under the definition of Confidential
Information: (a) which is public knowledge at the time of disclosure, or which
after disclosure becomes public knowledge in any way except through the wrongful
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act of the party so disclosing it; (b) which the receiving party is able to
prove was in its possession at the time of disclosure by the disclosing party
and which had not been obtained from the latter, either directly or indirectly;
(c) whose disclosure is compelled by administrative or judicial order; or (d)
which either party received from a third party having the legal right to
disclose such information.
The provisions of this Article XI will survive any termination of this
Agreement.
In the event that Licensee determines that Confidential Information received
from Mycogen or any Mycogen Affiliate needs to be disclosed to regulatory
authorities for the sale or use of any Licensed Product or to a third party in
connection with a sale of a Licensed Product to such third party, then
disclosure may be made to such third party only upon Mycogen's prior written
consent, which may not be unreasonably withheld, and only if such third party
agrees to be bound by terms of confidentiality equivalent to those specified
with this Article VI.
ARTICLE VII. NON-USE OF NAMES
Licensee and Mycogen will make no use whatsoever of the other party's name,
marks, insignia or logos or the name of any then-current employee of the other
in news releases, advertisements, promotional materials, or otherwise, without
the prior written consent of the other party for each such use. Licensee will
make no use whatsoever of Demeter or LSU's name, marks, insignia, or logos; or
of the name of any LSU campus, department, center, or institute; or the name of
any then-current LSU employee; in news releases, advertisements, promotional
materials, or otherwise, without the prior written consent of Demeter or LSU,
respectively, for each such use.
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ARTICLE VIII - PATENT ENFORCEMENT
A. INFRINGEMENT OF LICENSED PATENTS. Licensee will investigate and report any
infringements or possible infringements of Licensed Patents to Mycogen. If
infringing activity is occurring within the scope of any license granted to
Licensee under this Agreement, then Licensee's royalty and other payment
obligations under this Agreement will be suspended until an action to enforce
the Licensed Patents against said infringement is instituted, unless Licensee is
granted permission to enforce Licensed Patents against said infringement. Any
damages recovered in connection with the enforcement of Licensed Patents in an
action maintained solely by Licensee will be retained by Licensee. Any such
recovery by Licensee in excess of the expenses incurred by Licensee in pursuing
said enforcement will be subject to the royalty and other payment obligations of
this Agreement. Licensee will provide reasonable cooperation to Mycogen, LSU and
or Demeter in the conduct of any enforcement action, provided that the entity
requesting such participation reimburses Licensee for any reasonable expenses
incurred by Licensee in connection therewith.
B. LITIGATION DOES NOT AFFECT ROYALTIES. For so long as a proceeding has been
initiated to enforce Licensed Patents, the pendency of a lawsuit for
infringement of Licensed Patents, or other action concerning the validity or
enforceability of Licensed Patents, will not affect Licensee's obligations to
pay royalties or other amounts under this Agreement.
C. INDEMNIFICATION BY LICENSEE. If Licensee or any Affiliate takes any action
under the Agreement or otherwise (other than a proceeding by Licensee or such
Affiliate against LSU or Demeter on the validity or invalidity of the LSU
Licensed Patents) that leads to or results in litigation or other legal
proceedings (in any country) concerning or related to Licensed Patents or the
Agreement, including but not limited to a suit for declaratory
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judgment or claim or counterclaim for infringement, non-infringement, validity,
invalidity, enforceability, unenforceability, ownership, or inventorship of
Licensed Patents, then Licensee will assume the responsibility for such legal
proceedings (at both trial and appellate levels) at Licensee's sole expense. If
Demeter or LSU so requests, Licensee's legal counsel shall represent Demeter
and/or LSU, at Licensee's expense, in any such legal proceedings at both trial
and appellate levels. If Licensee's legal counsel is unable to represent Demeter
and/or LSU because of a conflict of interest or other bona fide reason, Demeter
and/or LSU may engage other competent legal counsel, whose reasonable fees and
expenses will be promptly paid or reimbursed by Licensee, to represent Demeter
and/or LSU in any such suit or legal proceeding. If Demeter and/or LSU does not
wish to be represented by Licensee's legal counsel, Demeter and/or LSU may
engage competent legal counsel of Demeter's and/or LSU's choosing to represent
Demeter and/or LSU at Demeter's and/or LSU's own expense (except in the case of
a conflict of interest or other bona fide reason as described in the preceding
sentence, in which case reasonable expenses for such representation will be
borne by Licensee). Licensee will indemnify Demeter and/or LSU and hold Demeter
and/or LSU harmless from any and all claims, damages, or other obligations
arising out of or resulting from any such claim or legal proceedings; provided
that Demeter and/or LSU will not settle any such claim without Licensee's prior
written consent, such consent not to be unreasonably withheld.
ARTICLE IX. INDEMNIFICATION
A. GENERAL. Except as otherwise set forth below, Licensee will defend,
indemnify, and hold harmless Mycogen, Demeter, LSU and their respective agents,
officers, board members, employees, and anyone for whom Mycogen, Demeter and/or
LSU may be liable (each, individually, referred to as an "INDEMNITEE" hereafter)
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from and against any and all claims, damages, losses, and expenses, in any
country, including reasonable attorney's fees at both trial and appellate levels
to or for attorneys of an Indemnitee's choosing, for claims for damages to
property, injury to persons, or death of persons, or for any other damage
arising out of or in any way relating to Licensee's or its Affiliates'
manufacture, use, distribution, marketing, importation, lease, sale or other
conduct relating to Licensed Products, Licensed Patents or Licensed Technology
by Licensee or Licensee's Affiliates and/or those manufacturing, marketing,
selling, or otherwise acting on behalf of Licensee and/or Licensee's Affiliates.
Licensee agrees to defend any Indemnitee against any such lawsuit,
administrative or arbitration proceeding at Licensee's expense, and to pay any
judgment rendered against any Indemnitee in any such lawsuit, administrative or
arbitration proceeding, together with all costs and reasonable attorney's fees
at both trial and appellate levels to or for attorneys of Mycogen, Demeter's
and/or LSU's choosing incurred in preparing for or defending any such lawsuit,
administrative or arbitration proceeding. Mycogen, Demeter and/or LSU will not
settle any such claim without Licensee's prior written consent, such consent not
to be unreasonably withheld.
ARTICLE X. INSURANCE
A. Prior to the first sale of any Licensed Product, Licensee shall maintain a
program of self-insurance reasonably acceptable to Mycogen, Demeter and LSU or
shall obtain liability insurance coverage on an "occurrence" basis for any and
all liability arising out of the sublicensing, manufacture, use, distribution,
marketing, importation, or sale of any Licensed Product, by Licensee, its
Affiliates, and their customers, in all countries. Mycogen, Demeter and LSU
shall be additional insureds in any such liability insurance. This liability
insurance must be issued by a company having a current A. M. Best rating of A+ 8
or better.
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The limits of this insurance coverage shall be not less than three million
Dollars ($3,000,000) per occurrence, with aggregate limits not less than five
million Dollars ($5,000,000) per year. The amount of liability insurance
coverage required by this Paragraph A is subject to the inflation adjustment set
forth in Paragraph B, below. The maximum deductible may not exceed fifty
thousand Dollars ($50,000) or such other amount as may be reasonably acceptable
to Mycogen, Demeter and LSU. This liability insurance shall include contractual
liability coverage and products/completed operations coverage in at least the
minimum amounts required by this Article. If applicable, Licensee shall forward
written evidence of such liability insurance coverage, including the
declarations page(s) describing the coverage provided by the policy, and
including the endorsement naming Mycogen, Demeter and LSU as additional
insureds, to Mycogen, Demeter and LSU at least sixty days prior to the first use
or sale of any Licensed Product. The insurer shall be required to give at least
thirty days' notice of cancellation or modification of coverage to Mycogen,
Demeter and LSU. The obligation to provide Mycogen, Demeter and LSU the
liability insurance required by this Article and written evidence thereof shall
continue until the earliest of the following two events: (a) the expiration or
termination of this Agreement in accordance with its terms; or (b) the time when
Licensee permanently ceases to make, use, import, sell, or offer to sell
Licensed Products. In addition, Licensee shall thereafter obtain and maintain a
"tail" insurance policy otherwise satisfying the requirements of this Paragraph,
and insuring the same persons against the same risks until the expiration of any
remaining pertinent statute of limitations period. At any time when Licensee
obtains, renews, or replaces a liability insurance policy, the aggregate limits
for the liability insurance coverage shall be at least equal to Net Sales for
the most recently completed Licensee fiscal year. The alternative amount of
liability insurance provided by the preceding sentence is not subject to the
inflation adjustment otherwise required by this
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Article X, and only applies if this alternative amount is greater than the
amount of insurance otherwise required by this Paragraph A.
B. INFLATION ADJUSTMENT. The dollar amounts of insurance coverage stated in
Paragraph (A) above will be subject to inflation adjustment as follows: The
"Multiplier" on any given date is defined to be the ratio of (a) the Consumer
Price Index for All Urban Consumers, All Items, U.S. City Average (the "Index")
most recently issued by the United States Government as of that date to (b) the
Index on the effective date of this Agreement. At any time when the Multiplier
is at least 1.10 times the value of the Multiplier on the date of the most
recent adjustment under this Paragraph (or is at least 1.10 if there has been no
previous adjustment under this Paragraph), then Mycogen, Demeter or LSU may give
Licensee written notice that each of the dollar amounts defined in Paragraph A
is adjusted to the original amount of insurance required under this Agreement as
specified above, multiplied by the Multiplier. The adjustment notice under this
Paragraph is effective as of the time when Licensee (or a sublicensee) next
renews or replaces its then-current liability insurance policy; and the amount
of liability insurance coverage required shall be the amount specified in this
Article X, multiplied by the Multiplier as of the date of issuance, renewal, or
replacement of the policy. The required adjusted coverage shall then remain
constant until another notice of adjustment under this Paragraph is given.
ARTICLE XI. NOTICES
All written notices, payments, and other correspondence under this Agreement
shall be considered given when deposited in the United States Mail, first class
postage prepaid, to:
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LICENSEE: MYCOGEN:
Mr. Andrew C. Barnes
Executive Vice President
Mycogen Corporation
5501 Oberlin Drive
San Diego, California 92121
These names or addresses may be changed by giving notice as provided in this
Paragraph.
ARTICLE XII. MISCELLANEOUS
A. ENTIRE UNDERSTANDING. This Agreement constitutes the entire understanding
between Mycogen and Licensee, and supersedes any prior agreement or
understanding on the same subject matter. Any modification or amendment to this
Agreement shall not be effective unless and until reduced to writing and signed
on behalf of both Mycogen and Licensee and, to the extent that it affects any of
the rights or obligations relating to the LSU Patent Rights or Supplemental
Patent rights, approved in writing by LSU, which approval will not be
unreasonably withheld.
B. CONSTRUCTION. The parties acknowledge that this Agreement followed
negotiations by the parties, and that this Agreement incorporates the negotiated
suggestions of both parties, and that both parties have had the benefit of the
advice of counsel in the conduct of these negotiations. The parties therefore
agree that no presumptions shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement.
C. HEADINGS. The headings or captions appearing at the beginnings of the
Articles and Paragraphs of this Agreement are provided for convenience of
reference only, and do not constitute part of this Agreement.
D. COMPLIANCE WITH LAWS. In fulfilling its obligations under the Agreement,
Licensee shall comply with all applicable licensing, regulatory, and statutory
requirements. Licensee shall be responsible for paying any taxes or other
assessments, and for complying with all applicable laws and regulations of the
United States and other countries, including without limitation
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all applicable laws and regulations relating to the environment, to agriculture,
and to foodstuffs.
E. MARKING. Licensee shall mark any article or composition within the claims of
any issued patent within Licensed Patents, or any article or composition
intended for a use within the claims of any issued patent within Licensed
Patents, with the word "Patent," "Patents," "For Use Under Patent," or "For Use
Under Patents," and the number or numbers of each such issued patent. When, from
the character of the article or composition, this marking cannot be made, the
marking shall instead be placed on a label attached to any packaging containing
any such article or composition.
F. PROHIBITION ON MISUSE. Licensee shall engage in no activity that would
constitute a misuse of any patent or patent application within Licensed Patents.
As used in this Paragraph, "misuse" of a patent or patent application means an
action that, aside from issues of patent validity or infringement, renders a
patent wholly or partially unenforceable, whether temporarily or permanently.
G. LICENSEE TRADEMARKS. Subject to Article VII of the Agreement, Licensee may
acquire its own trademarks for use in connection with Licensed Products.
H. EFFECT OF AN INVALID PROVISION. If any part of the Agreement is finally
adjudged to be invalid by a court of competent jurisdiction, or by an arbitrator
as provided in Article XII.J, the remaining parts of the Agreement shall remain
in full force and effect. Furthermore, in lieu of that invalid part, there shall
be automatically added to the Agreement a provision as similar in terms to that
invalid part as may be possible, legal, valid, and enforceable.
I. GOVERNING LAW. This contract, its terms, and the enforcement of this contract
shall be governed by the substantive law of the State of California for all
situations except where rights or obligations of LSU are being interpreted in
which instance Louisiana Law applies.
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J. DISPUTE RESOLUTION. In the event of a controversy or claim arising out of or
relating to this Agreement, or the breach, validity, or termination of this
Agreement, the parties shall first negotiate in good faith for a period of sixty
days to try to resolve the controversy or claim. If the controversy or claim is
unresolved after this period of good-faith negotiations, the parties shall then
make good-faith efforts for a period of sixty days to mediate the controversy or
claim in ____________________, before a sole mediator selected by the Center for
Public Resources, Inc. (New York, New York), under the Center for Public
Resources' Model Mediation Procedure for Business Disputes in effect as of the
Effective Date. If the controversy or claim is unresolved after this period of
mediation, on the written demand of either party, any controversy arising out of
or relating to this Agreement or to the breach, termination, or validity of this
Agreement, will be settled by binding arbitration in ___________________, unless
LSU is a party, in which case the location will be Baton Rouge, Louisiana. The
arbitration will be conducted in accordance with the Center for Public
Resources' Rules for Non-Administered Arbitration of Patent and Trade Secret
Disputes in effect as of the Effective Date before one neutral arbitrator
selected by the parties. If the parties are unable to agree upon the appointment
of a neutral arbitrator within 45 days then the Center for Public Resources will
appoint an arbitrator. The appointed arbitrator will be neutral, impartial, and
independent of the parties and others having any known interest in the outcome,
abide by the ABA and AAA Canons of Ethics for neutral arbitrators, and have no
ex parte communications about the case with either party in the appointing
process or during the pendency of the arbitration. The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. All applicable statutes of limitation and defenses
based upon the passage of time shall be tolled while the procedures described
above in this Paragraph are pending. Mycogen and Licensee will each take such
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action, if any, required to effectuate this tolling. Each party is required to
continue to perform its obligations under this Agreement pending final
resolution of any dispute arising out of or relating to this Agreement.
Otherwise, any controversy arising under or relating to this Agreement, or the
breach, termination, or validity of this Agreement, may be adjudicated only in a
court, state or federal, having jurisdiction over the subject matter and
including ______________________________ within its territorial district. Both
parties consent to the jurisdiction and venue of such a court unless LSU is a
party in which case the location will be Baton Rouge, Louisiana. A party's right
to demand arbitration of a particular dispute arising under or related to this
Agreement, or the breach, termination, or validity of this Agreement, shall be
waived if that party either: (1) brings a lawsuit over that controversy or claim
against the other party in any state or federal court; or (2) does not make a
written demand for mediation, arbitration, or both within 60 days of service of
process on that party of a summons or complaint from the other party instituting
such a lawsuit in any state or federal court. Notwithstanding the foregoing,
except with respect to LSU, to whom the following will not apply, either party
may avail itself of any appropriate tribunal to obtain injunctive or other
equitable relief to protect its rights in any technology covered by the terms of
this Agreement, or to prevent the unauthorized disclosure of any Confidential
Information disclosed by one party to the other under this Agreement.
K. NO WAIVER. The failure of either party to insist upon strict performance of
any provision of the Agreement, or to exercise any right under the Agreement
shall not constitute a waiver of that provision or right.
L. NO LICENSE BY ESTOPPEL. Except as the Agreement may expressly and
unambiguously provide otherwise, nothing in the Agreement shall be construed as
granting by implication, estoppel, or otherwise any licenses or rights under any
patents, patent applications, or know how owned in whole or in part by Demeter,
Mycogen or LSU, other than the express license under Licensed
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Patents provided in Paragraph (A) of Article II of the Agreement, regardless of
whether such patents, patent applications, or know-how are dominant of or
subordinate to any patent within Licensed Patents.
M. RESERVED LSU RIGHTS. The license granted by this Agreement is subject to a
reserved, non-exclusive, worldwide right in LSU to use LSU Licensed Patents and
Supplemental Patent Rights for non-commercial purposes that are experimental or
educational in nature.
ARTICLE XIII DEFAULT AND TERMINATION
A. EFFECT OF TERMINATION GENERALLY. Upon termination of the Agreement for any
reason, each of the following provisions shall continue in effect indefinitely,
until its purpose can no longer be fulfilled, or is no longer meaningful:
Article I;III; IV; V; VI; VII; VIII; IX; X; XI; XII; and XIII. Following the
termination of the Agreement, any provision of the Agreement not referred to in
the preceding list shall cease to have effect. By way of illustration and not
limitation, following the termination of the Agreement, Licensee shall remain
obligated to pay Mycogen all licensing fees, royalties, minimum royalties, and
other amounts that were due under Article III or Article IV which were accrued
prior to termination, except for amounts properly placed in escrow under
Paragraph B of this Article XIII.
B. EFFECT OF LICENSEE'S DEFAULT. If Licensee is in breach or default of any term
or condition of the Agreement, or fails to perform any obligation under the
Agreement, Mycogen may give written notice to Licensee, specifying the reason
why there is a default or breach, after which notice Licensee shall have thirty
(30) days to cure the breach. If the breach is not cured, or if efforts
reasonably satisfactory to Mycogen are not instituted within that 30 day period
to cure the breach, the Agreement may be terminated at the option of Mycogen,
upon written notice of termination to Licensee, and Licensee shall have no
further rights to make, use, import, offer to sell, or sell Licensed
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Products. If the breach is cured, or if efforts reasonably satisfactory to
Mycogen are instituted within the thirty (30) day period to cure the breach, the
Agreement shall continue as if no breach had occurred; provided, however, that
upon the third default arising out of failure to pay monies due to Mycogen under
the Agreement or upon default or rejection under paragraph D of this Article, no
notice or period to cure shall be necessary, and Mycogen may terminate the
Agreement at its option without further notice to Licensee and without allowing
Licensee a period to cure, and in such an event Licensee shall have no further
rights under this Agreement. A bona fide dispute with respect to the amount of
any payment required to be made by Licensee under this Agreement will not
constitute a default by Licensee under this Agreement, if the payment in dispute
is paid to an escrow agent, mutually selected by Mycogen and Licensee, for
placement into an interest bearing investment or account jointly approved by
Mycogen and Licensee.
C. SALE OF INVENTORY AND WORK-IN-PROCESS. Following termination of the Agreement
under either Paragraph A or B, Licensee shall have one hundred eighty days (180)
to sell any Licensed Products then in stock or then under production, subject to
the payment of royalties, fees, and payments on those Licensed Products as
otherwise provided in Article III.
D. ACCELERATED PROCEDURES. If bankruptcy proceedings under any Chapter of the
Bankruptcy Code, or other insolvency proceedings, voluntary or involuntary, are
filed by or against Licensee, then Licensee or its representative must assume
the Agreement within thirty (30) days of that filing, and Licensee must cure all
defaults existing under the Agreement within that thirty day period, and
Licensee must provide such adequate assurance of future performance of its
obligations under the Agreement as may be required by the Bankruptcy or other
Court, and should Licensee fail to assume the Agreement within thirty (30) days
of that filing, or should Licensee fail to cure all defaults existing under the
Agreement within that thirty (30) day period, or should Licensee fail to provide
adequate assurance of its future
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performance of its obligations under the Agreement, as may be required by the
Bankruptcy or other Court, then the Agreement shall be deemed to be rejected.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in duplicate counterparts, each of which shall be deemed to
constitute an original, effective as of the date first above written.
The Undersigned verify that they have the power to bind to this
Agreement the party on behalf of which they are executing below.
WITNESSES: [NAME OF LICENSEE]
___________________________ BY: ________________________________
[NAME & TITLE]
___________________________ DATE: ______________________________
___________________________ BY: ________________________________
[NAME & TITLE]
___________________________ DATE: ______________________________
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