Exhibit 10.5
LONG TERM FUNDED RESEARCH AGREEMENT
This LONG TERM FUNDED RESEARCH AGREEMENT ("Agreement") is effective as
of the ___ day of ______, 1996, and is by and between DNA PLANT TECHNOLOGY
CORPORATION ("DNAP"), a corporation duly organized and existing under the laws
of the State of Delaware, and EMPRESAS LA MODERNA, S.A. de C.V., a
corporation organized under the laws of the United Mexican States, directly or
through its subsidiaries and/or its affiliates (collectively, "ELM").
W I T N E S S E T H:
WHEREAS, DNAP has expertise, personnel, facilities, equipment,
technology and intellectual property useful in the development of improved
plants using biotechnological techniques; and
WHEREAS, ELM is, among other things, a leading developer and marketer of
improved varieties of fruits, vegetables and agronomic crops; and
WHEREAS, the parties desire to enter a long term relationship whereby
the parties will consult with each other regarding utilization of
biotechnology in the seed industry and ELM will fund research and development
projects to be conducted by DNAP;
NOW, THEREFORE, the parties hereto agree as follows:
Article I. Definitions
For the purposes of this Agreement, the following terms shall have
the following meanings:
1.1 "DNAP" means DNA Plant Technology Corporation, a Delaware
corporation, and its Affiliates.
1.2 "ELM", means EMPRESAS LA MODERNA, S.A. de C.V., a
corporation organized under the laws of the United Mexican States, and its
subsidiaries and/or its Affiliates including Agroindustrias Moderna, S.A. de
C.V., a corporation organized under the laws of the United Mexican States,
Bionova, S.A. de C.V., Seminis, Inc., an Illinois corporation and its
Affiliates, which as of the date of this Agreement include PetoSeed Company,
Inc., Asgrow Seed Company, and Royal Sluis.
1.3 "Affiliates" means, with respect to a particular party,
persons or entities controlling, controlled by or under common control with
the party, as well as any majority owned entities of the party and of its
other affiliates. "Control" of an entity means either the power, directly or
indirectly, to direct or cause the direction of the management and policies of
the entity, whether by contract or otherwise, or the right to receive at least
50% of the profits from such entity.
1.4 "Research Program" means the research and development
program described in Article II to this Agreement, and includes Projects.
1.5 "Project" means a particular research or development project
to be carried out by DNAP for ELM as approved and accepted by the parties
pursuant to paragraph 2.2.
1.6 "Developed Intellectual Property" or "Developed IP" means
inventions, discoveries, know-how, trade secrets, confidential information,
biomaterials, patents, plant variety protection act rights, breeders' rights,
or other intellectual or industrial property on a worldwide basis arising out
of or developed in the course of the Research Program or any Project.
1.7 "DNAP Intellectual Property" or "DNAP IP" shall mean the
intellectual property (including know how, trade secrets, confidential
information, biomaterials, patents, plant variety protection rights, breeders'
rights, and rights under licenses) owned in whole or in part, controlled or
licensable by DNAP from time to time. A listing of DNAP's patent portfolio of
issued patents, which is part of DNAP IP, as of the date of this Agreement is
set forth in Appendix A.
1.8 "ELM Intellectual Property" or "ELM IP" means the
intellectual property (including know how, trade secrets, confidential
information, biomaterials, patents, plant variety protection rights, breeders'
rights, and rights under licenses) owned in whole or in part, controlled or
licensable by ELM from time to time.
1.9 "Product" means any product or process which incorporates
DNAP IP.
Article II. Research Program
2.1 The Research Program
On the terms and conditions set forth in this Agreement,
DNAP shall conduct research and development on approved Projects for ELM and
shall consult with ELM regarding the application of biotechnology to products
manufactured and distributed by ELM from time to time, including, without
limitation, products of the agricultural seed industry. The Research Program
shall have a ten-year (10) term, commencing with the date of this Agreement.
2.2 Research Projects
a. Projects. During the term of the Agreement, the
parties will discuss potential Projects. Either party may propose such
Projects. ELM will decide which particular Projects to undertake. The
parties shall use their best efforts to agree on reasonable terms for all
Projects proposed, and DNAP shall not unreasonably refuse to agree to the
terms of any project proposed by ELM, including any confidentiality
restrictions regarding the subject matter and scope of a Project.
b. Project Plan. Each such agreed Project shall have a
Project Plan, which shall include at least: (i) the goals of the Project, (ii)
research plan, including benchmarks to be used in judging the Project's
progress and timelines therefor, (iii) a budget and payment schedule, (iv) a
listing prepared by DNAP of the DNAP IP to be used in the Project, (v) a
listing prepared by ELM if the ELM IP is to be used in the Project, and (vi) a
definition of the "Field" for such project. For purposes of this Agreement,
"Field" means the intended market for commercialization of the Developed IP at
the time a Project is initiated but in no event shall the Field include a
market (which may be defined broadly to include, for example, all vegetables
or narrowly, to refer, for example, to a specific vegetable, depending on the
circumstances) that the entity proposing the Project does not actively
participate in or intend to participate in at the time the Project is
initiated.
c. Project Termination. ELM may terminate any Project at
any time for any reason, upon payment of Project costs to date of termination
and reimbursement to DNAP of actual loss on account of commitments made (but
no consequential damages).
2.3 Reports
DNAP shall provide ELM with written reports on the progress
of each Project, on a quarterly basis or more often if requested by ELM.
2.4 Oversight
ELM shall have the right to oversee each Project, including
reasonable access to the DNAP employees and facilities being utilized in the
Project.
2.5 License to Existing IP
a. License. ELM shall have a worldwide royalty bearing
non-exclusive license under this Agreement with respect to DNAP IP solely to
the extent necessary or reasonably appropriate for ELM to commercialize the
Developed IP, including the right to make, have made, use and sell any Product
or technology resulting from a Project.
b. Royalty.
(i) ELM shall pay a royalty to DNAP for the use of
DNAP IP which royalty shall be at standard industry rates, with the specific
amount to be negotiated as Projects are identified; provided that the royalty
rate shall be equitably adjusted to the extent that the Non-Exclusive Patent
License between DNAP and Bionova U.S. Inc. remains in full force and effect.
(ii) With each royalty payment, ELM will provide to
DNAP a written royalty statement verified by the President or Chief Financial
Officer of ELM, setting forth the total sales identified by Product
designation or other basis upon which royalties are calculated during the
period covered by the statement. DNAP shall have the right once per year to
designate an independent certified public accountant to inspect ELM's books
and records relating to the basis upon which royalties are calculated.
c. Exclusivity. DNAP agrees that it will not undertake
to perform substantially the same research and development program as any
Project without the prior written consent of ELM.
2.6 License to ELM IP
a. License. If ELM IP is utilized in a Project and
incorporated in Developed IP, unless otherwise agreed in a Project Plan, DNAP
shall have a royalty bearing non-exclusive license under this Agreement with
respect to ELM IP solely to the extent necessary or reasonably appropriate for
DNAP to exercise its rights with respect to the Developed IP pursuant to
Section 4.2.
b. Royalty.
(i) DNAP shall pay a royalty to ELM for the use of
ELM IP which royalty shall be at standard industry rates, with the specific
amount to be negotiated as Projects are identified.
(ii) With each royalty payment, DNAP will provide to
ELM a written royalty statement verified by the President or Chief Financial
Officer of DNAP, setting forth the total sales identified by Product
designation or other basis upon which royalties are calculated during the
period covered by the statement. ELM shall have the right once per year to
designate an independent certified public accountant to inspect DNAP's books
and records relating to the basis upon which royalties are calculated.
2.7 Consultation. The parties specifically understand that the
modification of phenotypic traits through biotechnology and genetic
engineering is of potential significant competitive importance to the
industry. The parties need to work closely together to create and define
appropriate Projects. DNAP will use its reasonable best efforts to
continually apprise ELM of scientific developments relating to ELM's products,
and ELM will apprise DNAP of those aspects of its competitive strategy and
development plans for its products which are necessary or useful to DNAP with
respect to its obligations hereunder.
Article III. Research Program Funding
3.1 Payment by ELM
ELM shall pay DNAP in accordance with the payment schedule
established for each Project in the Project Plan, provided that if DNAP fails
to provide the resources it is committed to provide to a Project, then, in
addition to its other remedies provided for herein, such payments shall be
equitably adjusted.
3.2 Minimum Project Funding
ELM and DNAP shall undertake Projects with payment schedules
that will generate payments to DNAP of at least $9,000,000 each three years,
up to a maximum of $30,000,000 during the ten-year period beginning on the
effective date hereof, with the understanding that if the minimum payments in
any year exceed the amounts payable for research services provided by DNAP
hereunder, then such excess shall be available as a credit towards future
services but shall not reduce ELM's obligation to continue minimum funding.
Unless otherwise agreed by the parties, minimum funding of $625,000 shall be
paid to DNAP at the beginning of each calendar quarter during the term of this
Agreement until the maximum of $30,000,000 has been reached.
The payment obligations of ELM shall be reduced by payments
by ELM to DNAP, if any, under other agreements (e.g., calling for joint
development of seed or crops) whereby DNAP provides research or development
services for ELM. Similarly, in such event, DNAP's corresponding duty to
provide services hereunder shall be reduced.
3.3 Payment Level
Unless otherwise agreed in the Project Plan, ELM shall pay
DNAP all of DNAP's direct costs (including direct R&D overhead) plus an
industry standard operating margin, but in no event more than % of DNAP's
modified direct costs, as customarily computed by DNAP to include only
salaries, benefits, supplies and travel with respect to Project personnel.
Article IV. Rights to Results of Research Program
4.1 Ownership Rights
Subject to paragraph 4.2, ELM will own the entire right,
title and interest in all Developed IP, as well as all other inventions,
discoveries, improvements or other technology, arising out of each Project and
the Research Program, whether or not patentable, together with all patent
applications or patents based thereon, regardless of whether the Developed IP
are made by employees of ELM or employees of DNAP. ELM will have the right to
file, prosecute and maintain patent applications for all Developed IP (at
ELM's expense if outside a Project Plan). DNAP will promptly disclose to ELM
both the conception and the reduction to practice of Developed IP. DNAP
hereby represents and agrees that all employees and other persons acting on
its behalf in performing its obligations under this Agreement will be
obligated under a binding written agreement or applicable law to assign to
DNAP or ELM, as directed, all Developed IP made or developed by such employee
or other person. DNAP will make available to ELM or to ELM's authorized
attorneys, agents or representatives, (at ELM's expense if outside a Project
Plan) DNAP employees as necessary or appropriate to enable ELM to file,
prosecute and maintain patent applications and resulting patents with respect
to all Developed IP, for a period of time sufficient for ELM to obtain the
assistance it needs from such personnel. If DNAP requests that ELM take any
action in a proceeding incident to the Developed IP and ELM refuses or fails
to take such action, DNAP shall then have the right, but not the obligation,
in the name of ELM, to prosecute or defend any action or proceeding incident
to the Developed IP. Any such action shall be at the sole expense of DNAP.
DNAP shall have no obligation to undertake any such action, and if DNAP should
do so, it shall have no liability to ELM for the sufficiency or adequacy of
any such actions taken by DNAP.
4.2 License Rights to Developed IP
Unless otherwise agreed in a Project Plan, ELM hereby grants
to DNAP a perpetual, royalty-free (except as provided in Section 2.6 hereof)
(a) non-exclusive license, to use the Developed IP for research purposes only
within the Field, and (b) sole license to use the Developed IP outside the
Field (which sole license is subject to ELM's retained rights to use the
Developed IP outside the Field). Such retained rights to use the Developed IP
outside the Field shall include, but not be limited to, the right to make
products and otherwise commercialize the Developed IP. ELM will promptly, on
request, execute any further document or license with respect to DNAP's rights
under this Section 4.2.
4.3 Notice of Patents Affecting Commercialization Rights
During the term of the Research Program, DNAP shall use all
reasonable efforts to inform ELM of:
(a) any patent owned by or patent application filed
by a third party of which DNAP is aware which claims a technology that DNAP is
considering for use in a Project, and that requires or may require one or both
of the parties to license rights thereunder in order to commercialize the
results of the Project; and
(b) any possible alternative to such a patented
technology of which DNAP is aware. In each such instance where DNAP is aware
of an alternative technology, the parties shall consider and discuss the
feasibility of using the alternative technology in place of the patented
technology.
Article V. Confidentiality
5.1 Duties
Each party shall: (i) keep confidential and not disclose to
any third person or entity, (ii) restrict access to only those of its
employees and consultants who have reason to know for the purposes of this
Agreement, and (iii) use solely for purposes of this Agreement, any and all
information and biomaterials received from the other party under this
Agreement, and all Developed IP of which it obtains knowledge, except as
provided in paragraph 5.2 below. Notwithstanding the foregoing each party
shall be free to use such information, biomaterials and Developed IP for
purposes of exercising its rights and fulfilling its duties under this
Agreement.
5.2 Exceptions
The duties of confidentiality, access restrictions and non-
use provided by paragraph 5.1(a) above shall not apply to information received
by one party ("Receiving Party") from the other party ("Disclosing Party") if
the information:
(a) is public information at the time of disclosure
by the Disclosing Party to the Receiving Party;
(b) subsequently becomes public information other
than by act or omission of the Receiving Party;
(c) is already in the lawful possession of the
Receiving Party, as can reasonably be demonstrated by documentary evidence
from the Receiving Party, at the time of first disclosure by the Disclosing
Party to the Receiving Party; or
(d) is independently developed by employees of the
Receiving Party who did not have access to the information.
Article VI. Event of Default/Remedies/Other Termination Rights
6.1 Event of Default
It shall be an Event of Default hereunder if either party
(i) fails to pay any sums payable pursuant to this Agreement as and when they
are due; or (ii) materially breaches this Agreement.
6.2 Termination
The non-defaulting party shall have the right to terminate
this Agreement upon the occurrence of an Event of Default unless (i) the Event
of Default occurs under clause (i) of Section 6.1 and is cured within ten (10)
days after written notices thereof, or (ii) the Event of Default occurs under
clause (ii) of Section 6.1 and is cured within thirty (30) days after written
notice thereof, or (iii) the Event of Default occurs under clause (ii) of
Section 6.1 and is remediable but is not reasonably susceptible to cure within
such thirty (30) day period, then within such period of time as may be
required to cure the same if the defaulting party promptly commences to cure
such Event of Default within such thirty (30) day period and diligently
prosecutes such cure to completion as soon as is reasonably practicable; or
(iv) if such Event of Default is not one that can be remedied, the defaulting
party shall have taken reasonable steps within such thirty (30) day period to
prevent a recurrence of such breach; provided, however, that if such Event of
Default that cannot be remedied recurs in the same calendar year, the
nondefaulting party may, at its option, terminate this Agreement immediately
upon the recurrency by written notice to the other party. ELM's rights to
Developed IP and DNAP IP shall survive any termination by ELM pursuant to this
Agreement. DNAP's License rights to Developed IP shall survive any
termination by DNAP pursuant to this Agreement.
6.3 Other Remedies
In addition to all other remedies specified in Article 6,
the non-defaulting party shall have the right to pursue any and all available
legal or equitable remedies for the breach.
6.4 No Consequential Damages
In no event will either party be liable to the other or any
third party for any indirect, incidental or consequential damages with respect
to the performance or non-performance of this Agreement, whether arising out
of breach of warranty, breach of contract, tort (including negligence), strict
products liability or otherwise, even if advised of the possibility of such
damage or if such damage could have been reasonably foreseen, except only in
case of personal injury where applicable law requires such liability.
Article VII. Miscellaneous
7.1 Notices
All notices, demands, requests, and other communications
required or permitted hereunder shall be in writing and shall be deemed to
have been given when received by DNAP or ELM, as the case may be, at the
following addresses, or such other address as DNAP or ELM may from time to
time designate by written notice to the other as herein required:
EMPRESAS LA MODERNA, S.A. DE C.V.
Attn: Lic. Xxxxxxxxx Xxxxxxx-Xxxxxx
Edificio Torrealta
Av. Xxxxx 300 Mezzanine
66265 Xxxxx Xxxxxx, N.L.
Mexico
With a copy to: Xxxxxxxx & Knight, P.C.
Attn: Xxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
DNA PLANT TECHNOLOGY CORPORATION
0000 Xxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Vice President, Business Development with a
copy to DNAP Legal Department at same address
7.2 Choice of Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of California, United States of America,
without giving effect to conflict of law principles.
7.3 Severability
In the event that any provision of this Agreement is held by
a court of competent jurisdiction to be unenforceable because it is invalid or
in conflict with any law of any, relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the rights and obligations of
the parties shall be construed and enforced as if the Agreement did not
contain the particular provision held to be unenforceable, and any provision
that is held not to be enforceable in shall nevertheless be enforceable to the
full extent permitted by law.
7.4 Amendments
No amendment or modification of this Agreement shall be
valid or binding unless in writing signed by the parties.
7.5 Assignment
Neither party may assign this Agreement to any other party
except to an Affiliate or to an entity acquiring the party or a all of the
party's business in the subject area.
7.6 Arbitration
(a) The parties hereby undertake to use good faith
efforts to settle all disputes arising under this Agreement. Failing
settlement, all disputes, including without limitation, claims of breach of
contract, fraud in the inducement and negligence shall be referred to binding
arbitration in Dallas, Texas, if arbitration is initiated by DNAP, or in San
Francisco, California, if the arbitration is initiated by ELM, in accordance
with the Commercial Rules of Arbitration of the American Arbitration
Association.
(b) If, within seven (7) days after receipt by one party
of the other party's notice of intention to arbitrate, the parties are unable
to agree on a single arbitrator, each party shall have seven (7) days to
appoint its own arbitrator from a list selected by the American Arbitration
Association, and the arbitrators thus chosen shall together, within seven (7)
days of their appointment, appoint a third arbitrator from the list selected
by the American Arbitration Association. If either party fails to appoint its
own arbitrator within the specified period, the arbitrator appointed by the
other party shall be the sole arbitrator. If both parties fail to appoint
arbitrators within the specified period, or if the arbitrators appointed by
the parties fail to appoint a third arbitrator within the specified period,
the American Arbitration Association shall make the appointment. The parties
shall use their best efforts to appoint arbitrators who are knowledgeable in
the biotechnology industry. The decision of the arbitrator(s) shall be final
and may be enforced in any court of competent jurisdiction. The prevailing
party in any proceeding shall be reimbursed by the other party for all
expenses incurred in connection with arbitration.
7.7 No Joint Venture
The parties shall perform their obligations under this
Agreement as independent contractors and each party shall be solely
responsible for its own financial obligations. Nothing contained in this
Agreement shall be construed to imply a joint venture or principal and agent
relationship between the parties and neither shall have the right to create
any obligation, express or implied, on behalf of the other.
7.8 Counterparts
This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, but all of which will constitute one
and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement in
duplicate originals as of the date first above written, as evidence by the
signature below of thee authorized representatives.
EMPRESAS LA MODERNA, S.A. de C.V.
DNA PLANT TECHNOLOGY
CORPORATION
By:
Name:
By: Title:
Name:
Title: By:
Name:
Title:
