Joint Venture Agreement - Diversa Corp. and Novartis Seeds AG
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (the "Agreement") dated and effective as of
December 1, 1999 (the "Effective Date"), is entered into by Diversa Corporation
('Diversa"), a Delaware corporation, and Novartis Seeds AG ("Novartis"), a
corporation organized under the laws of Switzerland (individually a "Party" and
collectively the "Parties").
RECITALS
Whereas, the Parties desire to establish a joint venture (the "Joint
Venture") to develop and commercialize enzyme-related products for the animal
feed and agricultural product processing markets through a combination of
licensing, technology development and product development;
Whereas, Diversa, among others, will perform research and development
activities for the Joint Venture pursuant to appropriate agreements;
Whereas, Novartis will cause the formation of a new wholly-owned,
affiliated company ("Newco") which will be responsible for commercializing
products resulting from the Joint Venture with respect to non-transgenic
products;
Whereas, Novartis will be responsible for commercializing products
resulting from the Joint Venture with respect to transgenic crops;
Whereas, each Party will lend its expertise to the successful achievement
of Newco's commercialization objectives;
Whereas, the Parties agree that Newco will manage and direct the business
of the Joint Venture with respect to non-transgenic products;
Whereas, the Parties desire to enter into a written agreement providing for
the formation and performance of each Party's activities under the Joint
Venture; and
Now, Therefore, in consideration of the mutual covenants set forth in this
Agreement, the parties hereby agree as follows:
1. Definitions.
"Affiliate" shall mean any entity that directly or indirectly controls, is
controlled by or is under common control, with Novartis, or Diversa, as the case
may be, where control means direct or indirect possession of more than [*****]
of the outstanding voting securities of a corporation or a comparable equity
interest in any other type of entity, or operational control of such entity.
"Agreement" shall mean this Joint Venture Agreement.
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"Agricultural Product Processing Field" shall mean the use of Biomolecules
on or in Crops to alter, modify or improve the performance or other
characteristics of the Crop. This field specifically excludes the [*****] Field.
"Animal Feed Field" shall mean the use of Biomolecules on or in Crops for
feed applications to alter, modify or improve feed conversion and/or animal
nutrition. This field specifically excludes all vaccines and therapeutic
applications.
"Biomolecule(s)" shall mean enzymes and/or genes encoding them.
"Board" shall mean the Board of Directors of Newco.
"Change of Control" shall mean any of the following transactions involving
another company (other than Novartis or any of its Affiliates) (a) a merger or
consolidation of Diversa which results in the voting securities of Diversa
outstanding immediately prior thereto ceasing to represent at least [*****] of
the combined voting power of the surviving entity immediately after such merger
or consolidation; (b) the sale of all or substantially all of the assets of
Diversa; or (c) any one person (other than Diversa, any trustee or other
fiduciary holding securities under an employee benefit plan of Diversa, or any
corporation owned directly or indirectly by the stockholders of Diversa, in
substantially the same proportion as their ownership of stock of Diversa),
together with any of such person's "affiliates" or "associates", as such terms
are used in the Securities Exchange Act of 1934, as amended, becoming the
beneficial owner of [*****] or more of the combined voting power of the
outstanding securities of Diversa or by contract or otherwise having the right
to control the Board of Directors or equivalent governing body of Diversa or the
ability to cause the direction of management of Diversa.
"Commercial Development Biomolecule" shall mean Diversa Biomolecules and/or
Derivative Newco Biomolecules that have been, pursuant to Preliminary Efficacy
Trials, designated by Newco in accordance with the Research and Development
Agreement, for commercialization in or as a Product.
"Confidential Information" shall have the meaning set forth in Section 7.1.
"Crop" shall mean any component of any cultivated plant species, including,
[*****]
"Derivative Newco Biomolecules" shall mean all Biomolecules that are
derived or discovered from Newco Biomolecules through application of Diversa
Technology, and any derivatives of such Biomolecules.
[*****] shall mean the difference in value between [*****] and [*****]
containing [*****] determined in accordance with the definition of Net Sales
(excluding the provisions applicable to
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Combination Products), as established by competent written records, with the
intent of determining the value contributed to such product(s) by the Commercial
Development Biomolecule(s).
"Disclosing Party" shall mean that Party disclosing Confidential
Information to the other Party under Section 7.
"Diversa Biomolecules" shall mean all Biomolecules owned by, or licensed to
Diversa, with the right to license or sublicense, as of the Effective Date or
during the Research Period.
"Diversa Know-How" shall mean all trade secrets, inventions, data,
processes, procedures, devices, methods, formulas, media and/or all lines,
Biomolecules, clones, strains, genes, reagents, protocols and marketing and
other information or know-how including improvements thereon, whether or not
patentable, which are not covered by the Diversa Patent Rights, but which are
necessary or useful for the commercial exploitation of the Diversa Patent Rights
or the conduct of the Projects or otherwise relate to Biomolecules or Products,
and which are owned by or licensed to Diversa, with the right to license, as of
the Effective Date or otherwise during the Research Period,
"Diversa Patent Rights" shall mean all patent and provisional patent
applications, issued and subsisting patents and substitutions, divisionals,
continuations, continuations-in-part, reissues, reexaminations, extensions and
supplementary protection certificates thereof, including foreign counterparts of
the foregoing, in each case which are owned by or licensed to Diversa, with the
right to license, as of the Effective Date or otherwise during the Research
Period, which are necessary or useful to achieve the commercial objectives of
the Joint Venture, or otherwise relate to Biomolecules or Products arising from
the conduct of the Projects. Without limiting the generality of the foregoing,
Diversa Patent Rights include any patents and patent applications claiming
Inventions owned by Diversa under the terms of the Research and Development
Agreement.
"Diversa Technology" shall mean the Diversa Know-How and the Diversa Patent
Rights.
"Fields" shall mean the Animal Feed Field and the Agricultural Product
Processing Field.
"Inventions" shall mean all inventions, discoveries, developments and
improvements conceived of in the course of work performed on any Project.
"Joint Venture Period" shall mean the period beginning on the Effective
Date and ending on the fifth anniversary of the Effective Date.
"Management Expenses" shall mean all actual expenses incurred by Newco in
the management of the Joint Venture, including expenses of the President and
other employees or consultants of Newco as provided in Section 6.1.
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"Net Sales" shall mean the [*****] of a Royalty-Bearing [*****] sold by
Novartis or any of its Affiliates or by Sublicensees less discounts, rebates,
returns, taxes (other than income tax), transportation costs, and insurance in
amounts actually incurred and customary in the trade. For each Royalty-Bearing
[*****], the [*****] shall include [*****] as applicable, [*****] of such
Royalty-Bearing [*****] even if such amounts [*****] of such Royalty-Bearing
[*****] including, without limitation, [*****].
With respect to sales by Novartis or any of its Affiliates or Sublicensees
of any product which incorporates both (i) [*****] Royalty-Bearing [*****] and
(ii) [*****] or [*****] or [*****] that involve an additional trait (a
"Combination Product"), Net Sales shall be calculated by multiplying the [*****]
by the [*****]. The [*****] as used herein, shall mean [*****]. The fair market
value of such components shall be equal to [*****]; provided, however, that, in
the event that the [*****] of any such component is not available, the fair
market value of such component shall be [*****].
"Newco Biomolecules" shall mean all Biomolecules which are provided by
Newco to Diversa under the Research and Development Agreement.
"Novartis/Newco Agreement" shall mean that agreement between Novartis and
Newco under which Novartis grants to Newco, all rights, to the extent Novartis
has such a transferable right, required for Newco to commercialize Products for
non-transgenic applications.
"Novartis Patent Rights" shall mean all patent and provisional patent
applications, issued and subsisting patents and substitutions, divisionals,
continuations, continuations in-part, reissues, reexaminations, extensions and
supplementary protection certificates thereof, including foreign counterparts of
the foregoing owned by or licensed to Novartis or any of its Affiliates, with
the right to license, as of the Effective Date or otherwise during the Research
Period, claiming inventions owned (or in-licensed) and controlled by Novartis or
any of its Affiliates which are necessary or useful to the achieve the
commercial objectives of the Joint Venture, or otherwise relate to Biomolecules
or Products arising from the conduct of the Projects. Without limiting the
generality of the foregoing, Novartis Patent Rights include any patents and
patent
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applications claiming Inventions owned by Newco under the terms of the Research
and Development Agreement.
"Preliminary Efficacy Trials" shall mean, with respect to each Commercial
Development Biomolecule, preliminary testing conducted by or for Novartis or
Newco to determine functional efficacy conducted under anticipated use
conditions, generally outside of a laboratory environment. Preliminary Efficacy
Trials [*****], such as [*****] in the [*****] and [*****] for [*****] including
[*****] for [*****] and [*****] trials, [*****] for [*****].
"President" shall mean the executive officer of Newco appointed by the
Board pursuant to Section 5.1.
"Product" when used without further qualification shall mean a commercial
product containing or consisting of any Biomolecule designated in accordance
with the Research and Development Agreement as a Commercial Development
Biomolecule.
"Profit" shall mean an amount, which shall not be less than zero, equal to
(a) [*****] less (b) [*****] (but excluding [*****] and any payment by [*****]
under the [*****], in each case calculated in accordance with U.S. generally
accepted accounting principles consistently applied.
"Project(s)" shall mean research efforts undertaken pursuant to the terms
of the Research and Development Agreement.
"Receiving Party" shall mean that Party receiving Confidential Information
under Section 7.1.
"Research and Development Agreement" shall mean that certain Research and
Development Agreement, dated on or about the Effective Date, between Newco and
Diversa.
"Research FTE" shall mean the equivalent of one full year of work on a full
time basis by a scientist or other professional possessing skills and experience
necessary to carry out the Project by a Party, determined in accordance with
such Party's normal policies and procedures.
"Research Period" shall mean the period beginning on the Effective Date and
ending upon the termination or expiration of the Research and Development
Agreement.
"Royalty-Bearing [*****] shall mean any Product that is a commercial
transgenic Crop.
"Royalty Period" shall mean, with respect to each Royalty-Bearing [*****]
in any country, every [*****] or [*****] commencing with the [*****]
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and ending upon the later to occur of (a) [*****], or (b) [*****], or (c)
[*****].
"Sublicensee" shall mean any third party (other than an Affiliate of
Novartis or an Affiliate of Diversa) licensed by Novartis or its Affiliates to
make, use (except where the implied right to use accompanies the sale to the
third party of any Royalty-Bearing [*****] by Novartis or its Affiliates or
Sublicensees), sell, import, export, advertise, promote and otherwise
commercialize any Royalty-Bearing [*****].
"Valid Claim" shall mean a claim included in any pending patent application
or any issued patent included within the Novartis Patent Rights or the Diversa
Patent Rights, which, if with respect to any pending claim, has not been
irrevocably abandoned or held to be unpatentable by a court or other authority
of competent jurisdiction in a proceeding which is not reversed, not appealable
and not appealed, or, with respect to any issued claim, has not been held
invalid by a decision of a court or other authority of competent jurisdiction
which is not reversed, not appealable and not appealed.
"Year" shall mean any consecutive 12-month period during the Joint Venture
Period that begins on the Effective Date or the [*****] anniversary of the
Effective Date. For example, Year 1 shall be the consecutive 12-month period
beginning on the Effective Date.
The above definitions are intended to encompass the defined terms in both the
singular and plural tenses.
2. Purpose; Grant of Exclusive License; Preferred Manufacturer.
2.1 Purpose. The purpose of the Joint Venture is to develop and
commercialize enzyme-related products in the Animal Feed Field and the
Agricultural Product Processing Field. It is anticipated that Newco will
negotiate and enter into agreements with third parties providing for the
sublicense of Products to such third parties in the Fields, for [*****] pursuant
to the terms of license agreements between Newco and such third parties. It is
anticipated that Novartis will commercialize Products in the Fields for [*****].
In furtherance of this purpose, and to the extent that each Party has the right
to do so, each Party hereby agrees to (a) make available to Newco those rights
and technology which are necessary for Newco to commercialize Products for
[*****], and (b) Diversa agrees to make available to Novartis those rights and
technology, which are necessary for Novartis to commercialize Products for
[*****].
2.2 Grant of Exclusive License. Subject to the royalty payment obligations
under
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Sections 6.5 and 6.6, Diversa hereby grants to Novartis an exclusive, worldwide
license, with the right to sublicense, under the Diversa Technology for making,
using, selling, offering for sale, and importing Products in the Animal Feed
Field, In addition, subject to the royalty payment obligations under Sections
6.5 and 6.6, Diversa hereby grants to Novartis an exclusive, worldwide license,
with the right to sublicense, under the Diversa Technology for making, using,
selling, offering for sale, and importing Products in the Agricultural Product
Processing Field, such license to be limited to mutually agreed upon Projects.
Novartis agrees to make available to Newco, by way of the Novartis/Newco
Agreement, those rights under this Section 2.2 which are necessary for Newco to
commercialize Products for non-transgenic applications.
2.3 Preferred Manufacturer. Novartis hereby agrees that Newco will include
a bid from Diversa for manufacturing by fermentation in any proposal made to a
third party licensee seeking a source for manufacture, and Diversa will
negotiate with the third party the terms upon which Diversa would produce such
Commercial Development Biomolecules by fermentation, such terms to include a
supply guarantee sufficient to meet the commercial objectives of the Joint
Venture with respect to such third party licensee. For the avoidance of doubt,
Novartis has sole exclusive right to produce Commercial Development Biomolecules
by means other than fermentation.
3. [This Section Was Intentionally Deleted]
4. Board of Directors.
4.1 Board of Directors of Newco. The Board of Directors of Newco shall
oversee the operations of the Joint Venture with respect to [*****] in a manner
consistent with the articles of incorporation of Newco and operation of a
Novartis Affiliate. The Board shall be comprised of not more than fifteen
regular members elected by the shareholder(s) of Newco. The Parties agree that
the initial Board shall be composed of seven regular members. Novartis shall
have the right to nominate [*****] regular members for the initial Board, and
Diversa shall have the right to nominate [*****] regular members for the initial
Board. In addition, a [*****] member of the initial Board shall be elected by
the shareholder(s) from a list of nominees submitted by either, or both,
Parties. The shareholder(s) of Newco shall authorize one of these members to
serve as the chairman of the Board. Each regular member shall have [*****] vote,
and all decisions shall be by majority vote consistent with this Agreement
except as provided in Section 4.3. Withdrawal or removal of a Board member shall
be performed consistent with the articles of incorporation of Newco. If a
Party's nominated member resigns or is removed from the Board, then only such
Party may nominate a replacement for the departing member.
4.2 Board Meetings and Actions. The chairman of the Board will call semi-
annual meetings as determined by Board resolution. He shall send written notice
at least 10 days in advance of such meetings to each regular member of the
Board. Special Board meetings, however, may be called by any regular member at
any time by reasonable prior written notice to
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all regular members. Telephonic meetings of the Board may be held as necessary.
A telephonic meeting is valid if all members in attendance are able to hear each
other simultaneously. A waiver of notice as to the time and place for any
meeting may be executed by all of the members of the Board. The Board will
appoint a Secretary, who will keep the minutes of the meetings and distribute
them to all members. A quorum, as defined in the articles of incorporation for
Newco, shall be required for the transaction of business; provided that at least
[*****] must be present to constitute a quorum. Should a [*****] representative
fail to appear at a properly noticed Board meeting, whether regular or Special,
for [*****] then [*****] shall forfeit, without recourse, the right of having at
least [*****] being present to constitute a quorum. The Board may also act
without conducting a formal meeting by the execution of a unanimous consent
resolution that provides a summary description of the action to be taken and
other pertinent information necessary to inform the members entitled to vote on
such matters.
4.3 Requirement for [*****] of the Board. The approval of greater than
[*****] of the sitting Board members shall be required for any of the following:
4.3.1 Approval, in advance of the next fiscal year, of the annual
strategic business plan and financial plan of Newco and any activity outside the
scope of such business and financial plan;
4.3.2 Any agreement or contract entered into between Newco and
Diversa, or any agreement or contract between Newco and Novartis that materially
impact the terms of this Agreement or termination of or waiver of compliance
with any such agreements or contracts;
4.3.3 Approval of any dissolution, liquidation, merger,
consolidation, business combination or similar transaction involving Newco;
4.3.4 Any change in the authorized number of members of the Board, or
the representation of each Party; and
4.3.5 Approval of the terms of reference under which the officers of
Newco are authorized to act on behalf of Newco.
5. Operational Management.
5.1 Appointment and Responsibility of the President. The President of
Newco shall be appointed by the Board. Subject only to the overall direction of
the Board, including the obligation to implement the orders and resolutions of
the Board, and to the limitations set forth in Section 4, the President shall
(i) be responsible for the direction, performance and supervision of the Joint
Venture in accordance with the terms of reference, policies and procedures
established by the Board; (ii) prepare budgets and reports relating to
activities under the Joint Venture, including an annual budget for Management
Expenses; (iii) hire and terminate the other employees and consultants of Newco
in accordance with guidelines established by the Board; (iv) negotiate and enter
into agreements with third parties
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within the terms of reference established by the Board; and (v) provide reports
to the Board at the semi-annual Board meetings. The President may be replaced or
removed by the Board. The President shall serve until replaced or removed by the
Board.
5.2 Authority of the President. The President may delegate his/her
authority to another officer of Newco. Notwithstanding any other provisions of
this Agreement, in no circumstances may the President, or any other officer,
employee or agent of Newco, take any of the actions set forth in Section 4.3
without the prior approval of the Board.
The President shall report in writing at least quarterly to the chairman
(with copies to other Board members) on the progress of the Projects as well as
the status of other Joint Venture activities. Such report shall include Project
results and general status updates and operational budget summaries, including
explanations of any variance from budget. The report shall inform the chairman
of any anticipated or actual problems in regard to the Projects or the general
business of Newco, including any significant changes in schedule or staffing.
6. Contributions, Other Payments, Profit Sharing.
6.1 Contributions.
6.1.1 On or about the Effective Date, it is anticipated that Diversa
and Newco will enter into the Research and Development Agreement.
6.1.2 During the Joint Venture Period, it is anticipated that Newco
will employ or engage as consultants the following number of full-time
equivalents ("FTEs") for the management of the activities of the Joint Venture:
Year Management FTEs
Year 1 [*****]
Year 2 [*****]
Year 3 [*****]
Year 4 [*****]
Year 5 [*****]
6.1.3 During the Joint Venture Period, Novartis and Diversa will
share the payment of all Management Expenses in the ratio of [*****] payable by
Novartis and [*****] payable by Diversa; provided that Management Expenses over
the Joint Venture Period shall not exceed a total of [*****]. The President will
establish an annual budget for Management Expenses, subject to Board approval.
Management Expenses shall be paid promptly following receipt of a quarterly
invoice from Newco detailing the applicable expenses. Following the Joint
Venture Period, Diversa will not be responsible for any Management Expenses,
except as otherwise agreed in writing by the Parties.
6.2 Exclusivity Fees. In consideration of the grant of exclusive rights to
Novartis pursuant to Section 2.2:
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6.2.1 Within [*****] of the execution of this Agreement, subject to
approval by the appropriate regulatory or governmental authorities, Novartis
shall pay to Diversa [*****] in consideration of the exclusive rights in the
[*****] granted to Novartis, pursuant to Section 2.2; and
6.2.2 Upon the [*****] anniversary of the Effective Date, Novartis
shall pay to Diversa [*****] in consideration of the exclusive rights in the
[*****] pursuant to Section 2.2.
6.3 Research Funding. During the Joint Venture Period, Novartis will fund,
or will cause to be funded, under the terms of the Research and Development
Agreement the minimum total number of Research FTEs for research and related
activities of the Joint Venture indicated in the column "Total Research FTEs"
below, which includes the minimum number of Research FTEs at Diverse indicated
in the column "Diversa Research FTEs" below. Funding for the Research FTEs for
research and related activities of the Joint Venture conducted at Diversa shall
be provided to Diversa through Newco pursuant to the Research and Development
Agreement. Subsequent to [*****] and until such time as the Research and
Development Agreement is entered into by the Parties, payments shall be made in
accordance with the Letter of Intent executed between the Parties on [*****] Any
such payments made pursuant to the Letter of Intent shall be applied to the FTE
payment obligations under the Research and Development Agreement.
<TABLE>
<CAPTION>
Year Total Research FTEs Diversa Research FTEs
<S> <C> <C>
Year 1 [*****] [*****]
Year 2 [*****] [*****]
Year 3 [*****] [*****]
Year 4 [*****] [*****]
Year 5 [*****] [*****]
</TABLE>
The cost per Research FTE for the first [*****] of the Joint Venture Period
shall be [*****] for Diversa Research FTEs and [*****] for all other Research
FTEs. Beginning in the [*****] year of the Joint Venture Period, a cost-of-
living adjustment will be applied to all Research FTEs. Thereafter, the cost-
of-living adjustment will be applied on a yearly basis and will be based on
standard Consumer Price Index values.
6.4 Commercialization Payments. In consideration of the licenses granted to
Novartis by Diversa, Novartis shall pay to Diversa commercialization fees for
each Commercial Development Biomolecule within [*****] after the first
commercial sale of the first Product as follows: (a) [*****] for Products that
are [*****] and (b) [*****] for all other Products.
6.5 Profit Sharing. In consideration of the rights granted under Section
2.2, Diversa and Novartis shall each share in all Profit of Newco as follows:
(a) [*****] shall receive [*****] of the [*****] of Profit, and (b) thereafter,
Novartis shall receive [*****] and Diversa shall receive [*****] of all Profit
paid as a royalty to each, and (c) thereafter, the Novartis U.S.
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parent company of Newco shall receive the remaining [*****] of Profits paid as a
dividend. Profit shall be calculated on [*****], but each of Diversa and
Novartis shall receive [*****] on their respective share of the Profit paid as
[*****] after the [*****] based upon the [*****] adjusted [*****] and [*****] to
take account of [*****]. Copies of Newco's financial statements will be provided
to Diversa within [*****].
6.6 Royalties from Novartis to Diversa. Regarding the sale by Novartis,
its Affiliates and Sublicensees of Royalty-Bearing [*****] in the applicable
Fields, Novartis shall pay Diversa, as a royalty, [*****] of Differential Net
Sales on a [*****] within [*****] after the end of the applicable [*****]
provided that, if Differential Net Sales cannot be determined, Diversa and
Novartis will assess in good faith the [*****] [*****] and will [*****] based on
[*****] which would be comparable to the royalty on Differential Net Sales
described above. In those cases where Novartis must obtain a third party license
specific to bringing a Commercial Development Biomolecule to market, the
amortized cost of such license will be deducted from Differential Net Sales
before calculating the royalty due to Diversa.
6.7 Reports and Payments. Within [*****] after the conclusion of each
Royalty Period, Novartis shall pay to Diversa the estimated royalty payment due
for such Royalty Period based on the royalty rates applicable to units of
Royalty-Bearing [*****] shipped during such Royalty Period less estimated
returns, and shall deliver to Diversa a report containing the following
information:
(a) Adjustments and calculation of Net Sales for the applicable
Royalty Period in each country of sale; and
(b) Calculation of royalty.
Any corrections to the [*****] royalty payment will be established at the end of
the [*****] and factored into the corresponding royalty payment for such
[*****]. All amounts payable under this Section will first be calculated in the
currency of sale and then converted into U.S. dollars. The buying rates involved
for the currency of the United States into which the currencies involved are
being exchanged shall be the one quoted by The Wall Street Journal at the close
of business on the last business day of the applicable Royalty Period. Such
amounts shall be paid without deduction, except as required by law, of any
withholding taxes, value-added taxes, or other charges applicable to such
payments.
6.8 Records. Novartis and its Affiliates shall maintain complete and
accurate records of Royalty Bearing [*****] made, used or sold by them or their
Sublicensees under this Agreement, and any amounts payable to Diversa in
relation to Royalty Bearing [*****] which records shall contain sufficient
information to Diversa to confirm the accuracy of any reports delivered to them
in accordance with Section 6.7. Novartis and its Affiliates shall retain such
records relating to a given Royalty Period for at least three (3) years after
the conclusion of that Royalty Period. Diversa (acting as the "Auditing Party")
shall
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have the right, at its own expense, to cause an independent certified public
accountant reasonably acceptable to Novartis, to inspect such records of
Novartis or its Affiliates (the "Audited Party") during normal business hours
for the sole purpose of verifying any reports and payments delivered under this
Agreement. Such accountant shall not disclose to the Auditing Party any
information other than information relating to accuracy of reports and payments
delivered under this Agreement and shall provide the Audited Party with a copy
of any report given to the Auditing Party. The Parties shall reconcile any
underpayment or overpayment within [*****] after the accountant delivers the
results of the audit. The Auditing Party shall bear the full cost of the audit
unless, the audit performed under this Section reveals an underpayment in excess
of [*****] in any Royalty Period, in which case the Audited Party shall bear the
full cost of such audit. Diversa may exercise its rights under this Section only
once every year and only with reasonable prior notice to Novartis. Novartis
shall use commercially reasonable efforts to ensure that said auditor will have
access to records of Royalty-Bearing Transgenic Products sold by its Affiliates.
6.9 Late Payments. In the event that any payment, including royalty
payments, due hereunder is not made when due, the payment shall accrue interest
from that date due at the rate of [*****] per month; provided however, that in
no event shall such rate exceed the maximum legal annual interest rate. The
payment of such interest shall not limit Diversa nor Novartis from exercising
any other rights it may have as a consequence of the lateness of any payment
6.10 Commercialization Outside the Fields. In the event that (a) Diversa
pursues commercialization of any Commercial Development Biomolecule contained in
a Product outside the Fields, (b) Newco has not exercised its right of first
option under the Research and Development Agreement, and (c) Diversa desires to
commercialize a Product containing such Commercial Development Biomolecule
outside the Field by itself or through a third party license, Diversa agrees to
pay Novartis a royalty on sales of such Products under commercially reasonable
terms and conditions set forth in a separate agreement entered into and
negotiated in good faith between the Parties prior to such commercialization.
6.11 Payments in U.S. Dollars. All payments due under this Agreement shall
be payable in United States dollars by wire transfer to an account designated by
the Party entitled to receive the payment.
7. Confidential Information.
7.1 Definition of Confidential Information. Confidential Information shall
mean any technical or business information, whether orally or in writing,
furnished by the Disclosing Party to the Receiving Party in connection with this
Agreement. Such Confidential Information shall include, without limitation, the
existence and terms of this Agreement, the identity of a Biomolecule, the
Biomolecule, any gene encoding such Biomolecule, if relevant, the use of a
Biomolecule, patent rights, trade secrets, know-how, inventions, technical data
or specifications, testing methods, business or financial information, research
and development activities, product and marketing plans, and customer and
supplier information, including, but
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not limited to, such terms that become known to a Party during visits to the
facilities of any other Party.
7.2 Obligations. The Receiving Party agrees that it shall:
7.2.1 Maintain all Confidential Information in strict confidence,
except that the Receiving Party may disclose or permit the disclosure of any
Confidential Information to its Affiliates, directors, officers, employees,
consultants and advisors who are obligated to maintain the confidential nature
of such Confidential Information and who need to know such Confidential
Information for the purposes set forth in this Agreement. Further, each Party
will be entitled to disclose to its Sublicensees that Confidential Information
of the other Party as those Sublicensees need to know in order to commercialize
Products, provided that those Sublicensees are obligated to maintain the
confidential nature of such Confidential Information;
7.2.2 Use all Confidential Information solely for the purposes set
forth in, or as permitted by, this Agreement;
7.2.3 Allow its Affiliates, directors, officers, employees,
consultants and advisors to reproduce the Confidential Information only to the
extent necessary to effect the purposes set forth in this Agreement, with all
such reproductions being considered Confidential Information; and
7.2.4 If the Receiving Party is Novartis, then Novartis shall also
have the right to disclose Confidential Information to Novartis Agricultural
Discovery Institute, Inc. (NADII) provided that NADII is obligated to maintain
the confidential nature of such Confidential Information.
Each Party shall be responsible for any breaches of this Section 7.2 by any of
its Affiliates, directors, officers, employees, consultants and advisors, and,
in the case of Novartis, also for any breach of this Section 7.2 by NADII.
7.3 Exceptions. The obligations of the Receiving Party under Section 7.2.
above shall not apply to any specific Confidential Information to the extent
that the Receiving Party can demonstrate that such Confidential Information:
7.3.1 Was in the public domain prior to the time of its disclosure
under this Agreement;
7.3.2 Entered the public domain after the time of its disclosure
under this Agreement through means other than an unauthorized disclosure
resulting from an act or omission by the Receiving Party or its Affiliates,
directors, officers, employees, consultants, advisors or agents;
7.3.3 Was or is independently developed or discovered by the
Receiving Party without use of the Confidential Information, and which can be
demonstrated by written record;
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7.3.4 Is or was disclosed to the Receiving Party at any time,
whether prior to or after the time of its disclosure under this Agreement by a
third party having no fiduciary relationship with the Disclosing Party and
having no obligation of confidentiality to the Disclosing Party with respect to
such Confidential Information; or
7.3.5 Is required to be disclosed to comply with applicable laws
or regulations (such as disclosure to the SEC, the EPA, the FDA, or the United
States Patent and Trademark Office or to their foreign equivalents), or to
comply with a court or administrative order, provided that the Disclosing Party
receives prior written notice of such disclosure and that the Receiving Party
takes all reasonable and lawful actions to obtain confidential treatment for
such disclosure and, if possible, to minimize the extent of such disclosure.
7.4 Survival of Obligations. The obligations set forth in Sections 7.1,
7.2 and 7.3 shall remain in effect after termination or expiration of this
Agreement for a period of [*****].
7.5 Public Announcement. The Parties shall issue a Joint press release
regarding the Joint Venture, the text of which shall be subject to mutual
written agreement of the Parties. Except for the information disclosed in the
joint press release, no Party shall use the name of any other Party or reveal
the existence of or terms of this Agreement in any publicity or advertising
without the prior written approval of the other party, except that (i) a Party
may use the text of a written statement approved in advance by the Parties
without further approval, and (ii) a party shall have the right to identify the
other parties and to disclose the terms of this Agreement as required by
applicable securities laws or other applicable law or regulation, provided that
such Party takes reasonable and lawful actions to minimize the degree of such
disclosure.
8. Representations And Warranties.
8.1 Authorization. Each Party represents and warrants to the other that
it has the legal right and power to enter into this Agreement and to fully
perform its obligations hereunder, and that the performance of such obligations
will not conflict with its charter documents or any agreements, contracts, or
other arrangements to which it is a party. Novartis will strive to cause the
U.S. parent company of Newco to comply with the applicable provisions of this
Agreement.
8.2 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY REPRESENTATION AND EXTENDS NO WARRANTY OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING WARRANTIES AS TO MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT.
8.3 Limitation of Liability. IN NO EVENT WILL EITHER PARTY, ITS
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES,
WHETHER BASED UPON A CLAIM OR ACTION OF
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CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT, OR OTHERWISE,
ARISING OUT OF THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS TO THE OTHER
PARTY THAT IN CARRYING OUT ITS OBLIGATIONS UNDER THIS AGREEMENT IT WILL NOT
KNOWINGLY VIOLATE OR INFRINGE THE VALID AND ENFORCEABLE INTELLECTUAL PROPERTY
RIGHTS, INCLUDING THOSE CONFERRED BY A VALID, ENFORCEABLE US PATENT, OF ANY
THIRD PARTY, NOR AID AND ABET THE OTHER PARTY IN ANY SUCH VIOLATION OR
INFRINGEMENT.
9. Term; Termination.
9.1 Term. The term of this Agreement will commence as of the Effective
Date and will continue until the end of the Joint Venture Period unless
terminated earlier in accordance with Section 9.2 or extended by mutual
agreement of the Parties. Novartis shall have an exclusive option to extend the
Joint Venture Period for a period of [*****] subject to the execution of an
extension of the Research and Development Agreement under mutually agreeable
terms, and further provided that the exercise of such option [*****]. Diversa
and Novartis will commence negotiations [*****] prior to the end of the Joint
Venture Period to extend the Joint Venture Period on mutually acceptable terms,
and complete such negotiations [*****] prior to the end of the Joint Venture
Period. If the Joint Venture Period is not extended pursuant to the preceding
sentence, Diversa. and Novartis will negotiate in good faith to establish a
[*****].
9.2 Termination.
9.2.1 Change of Control. Novartis shall have the right to
terminate this Agreement upon the occurrence of a Change of Control during the
term of this Agreement by providing written notice of termination to Diversa
within sixty (60) days following receipt of written notice of the occurrence of
such Change of Control. In the event that Novartis does not terminate this
Agreement under this Section 9.2.1, this Agreement will be binding upon
Novartis, Diversa or any successor to Diversa in such Change of Control. Diversa
may notify Novartis in advance of a proposed Change of Control and, if Novartis
approves of such Change of Control in writing or notifies Diversa in writing
that it does not intend to terminate this Agreement within forty five (45) days
after such notice from Diversa, then the foregoing right of termination shall be
deemed waived.
9.2.2 Mutual Consent. This Agreement may be terminated at any time
by mutual written agreement of the Parties.
9.2.3 Material Breach. In the event that a Party commits a
material breach of any of its obligations under this Agreement or any party
commits a material breach under the Research and Development Agreement, or the
Novartis/Newco Agreement, and such party fails (i) to remedy that breach within
[*****] after receiving written notice thereof
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from the other party to such agreement or (ii) to commence dispute resolution
under such agreement, within [*****] after receiving written notice of that
breach from the non-breaching party or parties, the non-breaching party or
parties may immediately terminate this Agreement and the Research and
Development Agreement or Novartis/Newco Agreement, as applicable, upon written
notice to the breaching party.
9.2.4 Breach of Payment Obligations. In the event that a party
fails to make timely payment of any amounts due under this Agreement, or under
the Research and Development Agreement within 10 business days after demand
therefor, the non-breaching party or parties may terminate any of these
agreements upon 30 days prior written notice, unless the breaching party cures
such breach by paying all past-due amounts within such 30 day notice period,
provided that such breaching party shall be entitled to use such cure provision
no more than once in any 12 month period.
9.3 Disposition of Confidential Information. In the event of termination
or expiration of this Agreement, the Parties shall return or destroy a forms of
Confidential Information provided to them under this Agreement within 30 days
after such termination or expiration, provided, however, that each Party may
retain one copy of such Confidential Information for the sole purpose of use in
any litigation resulting from this Agreement or the activities undertaken
pursuant thereto, and further provided that each Party shall retain full use of
Confidential Information as provided under this Agreement to the extent it
relates to any of the rights accrued to a Party hereunder prior to such
termination or expiration.
9.4 Effect of Termination or Expiration. Termination or expiration of
this Agreement shall not relieve the parties of any obligation accruing prior to
such termination or expiration, nor shall it encumber any of the rights accrued
to a Party hereunder prior to such termination or expiration. In addition, upon
termination or expiration of this Agreement, the rights granted to the Parties
under Sections 2.1, 2.2 and 2.3 for Diversa Technology shall survive but only as
they relate to (a) Transferred Biomolecules as defined in the Research and
Development Agreement, or (b) Commercial Development Biomolecules. Further,
Diversa will not assert against Novartis, its Affiliates or Sublicensees any
rights to patents or know-how it may develop or acquire after the Research
Period with respect to such Transferred Biomolecules or Commercial Development
Biomolecules, and further provided that the financial obligations of each Party
with respect to Transferred Biomolecules or Commercial Development Biomolecules
under the provisions of Sections 6.4, 6.5, 6.6, 6.7 and 6.10 shall survive
termination or expiration of this Agreement but only to the extent that the
Parties mutually agree through good faith negotiation to payment at royalty
rates equivalent thereunder but in the absence of the Joint Venture. Further,
the provisions of Sections 7.1, 7.2, 7.3, 7.4, 8.2, 8.3, 9.3, 9.4 and 10 shall
survive the expiration or termination of this Agreement. Termination of this
Agreement pursuant to Section 9.2 shall not limit any other rights and remedies
of the terminating party.
10. Miscellaneous.
10.1 Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency or employer-employee
relationship between the
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parties. No Party shall incur any debts or make any commitments for the other,
except to the extent, if at all, specifically provided herein.
10.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of [*****] other than those provisions
governing conflicts of law.
10.3 Dispute Resolution Procedures.
10.3.1 The Parties hereby agree that they will attempt in good faith
to resolve any controversy, claim or dispute arising out of or relating to this
Agreement ("Dispute") promptly by negotiations. Any such dispute which is not
settled by the parties within 15 days after notice of such Dispute is given by
one Party to the others in writing shall be referred to the Chief Executive
Officer of Diversa and the appropriate Senior Executive of Novartis who are
authorized to settle such Disputes on behalf of their respective companies
("Senior Executives"). The Senior Executives will meet for negotiations within
15 days of such notice of Dispute, at a time and place mutually acceptable to
both Senior Executives. If the Dispute has not been resolved within 30 days
after the end of the 15 day negotiation period referred to above (which period
may be extended by mutual agreement), unless otherwise specifically provided for
herein, any Dispute will be settled first by non-binding mediation and
thereafter by arbitration as described in Sections 10.3.2 and 10.3.3 below.
10.3.2 Any Dispute which is not resolved by the Parties within the
time period described in Section 10.3.1 shall be submitted to an alternative
dispute resolution process ("ADR"). Within five business days after the
expiration of the 30-day period set forth in Section 10.3.1, each of Diversa and
Novartis shall select for itself a representative with the authority to bind
such Party and shall notify the other Party in writing of the name and title of
such representative. Within 10 business days after the date of delivery of such
notice, the representatives shall schedule a date for engaging in non-binding
ADR with a neutral mediator or dispute resolution firm mutually acceptable to
both representatives. Any such mediation shall be held in [*****] if brought by
Novartis and Research Triangle Park, [*****] if brought by Diversa. Thereafter,
the representatives of Diversa and Novartis shall engage in good faith in an ADR
process under the auspices of such individual or firm. If the representatives of
the Diversa and Novartis have not been able to resolve the Dispute within 30
business days after the conclusion of the ADR process, or if the representatives
of such Parties fail to schedule a date for engaging in non-binding ADR within
the 10-day period set forth above, the Dispute shall be settled by binding
arbitration as set forth in Section 10.3.3 below. If the representatives of
Diversa and Novartis resolve the dispute within the 30-day period set forth
above, then such resolution shall be binding upon all Parties. If Diversa or
Novartis fails to abide by such resolution, the other Party can immediately
refer the matter to arbitration under Section 10.3.3.
10.3.3 If the parties have not been able to resolve the dispute as
provided in Sections 10.3.1 and 10.3.2 above, the Dispute shall be finally
settled by binding arbitration. Any arbitration hereunder shall be conducted
under rules of conciliation and arbitration of the
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International Chamber of Commerce by three arbitrators chosen according to the
following procedure: each of Diversa and Novartis shall appoint one arbitrator
and the two so nominated shall choose the third. If the arbitrators chosen by
the Parties cannot agree on the choice of the third arbitrator within a period
of 30 days after their appointment, then the third arbitrator with such
requisite qualifications shall be appointed by the Court of Arbitration of the
International Chamber of Commerce. Any such arbitration shall be held in San
Diego, California if brought by Novartis and Paris, France if brought by
Diversa, or such other location as the arbitrators may agree, and shall be
conducted in English. The arbitral award (i) shall be final and binding upon all
Parties; and (ii) may be entered in any court of competent jurisdiction.
10.3.4 Nothing contained in this Section or any other provisions of
this Agreement shall be construed to limit or preclude Diversa or Novartis from
bringing any action in any court of competent jurisdiction for injunctive or
other provisional relief to compel the other Parties to comply with their
obligations hereunder before or during the pendency of mediation or arbitration
proceedings.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
10.5 Headings. All headings in this Agreement are for convenience only and
shall not affect the meaning of any provision hereof
10.6 Binding Effect. This Agreement and all rights and obligations
hereunder shall inure to the benefit of and be binding upon the Parties and
their respective lawful successors and assigns (including, without limitation,
any successor to Diversa upon a Change of Control).
10.7 Assignment. Except as otherwise provided herein, including the Change
of Control provisions of Section 9.2.1, neither this Agreement nor any interest
hereunder will be assignable in part or in whole by any Party without the prior
written consent of the other Parties; provided, however, that Novartis and
Diversa may assign this Agreement to any of their respective Affiliates or to
any successor by merger or sale of substantially all of its business to which
this Agreement relates (provided that, in the event of such merger or sale, no
intellectual property of any acquiring or acquired corporation that is not a
Party shall be included in the technology licensed hereunder). This agreement
will be binding upon the successors and permitted assigns of the Parties. Any
assignment which is not in accordance with this Section will be void.
10.8 Notices. All notices, requests, demands and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have been duly given upon the date of receipt if
delivered by hand, recognized international overnight courier, confirmed
facsimile transmission, or registered or certified mail, return receipt
requested, postage prepaid to the following addresses or facsimile numbers:
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If to Novartis: If to Diversa:
Novartis Seeds AG Diversa Corporation
Schwarzwaldallee 215 10665 Sorrento Valley Road
CH-4002 Basel San Diego, California 92121
Attention: Wally Beversdorf Attention: Carolyn Erickson
Tel: (+4161) 697-3650 Tel: (858) 453-7020
Fax: (+4161) 697-3972 Fax: (858) 453-7032
with a copy to: with a copy to:
Novartis Seeds AG Cooley Godward LLP
Schwarzwaldallee 215 4365 Executive Drive, Suite 1100
CH-4002 Basel San Diego, CA 9221
Attention: Verena Trutmann Attention: L. Kay Chandler
Tel: (+41.61) 697-2375 Tel: (858) 550-6000
Fax: (+4161) 697-2590 Fax: (858) 453-3555
A Party may change its designated address and facsimile number by notice to the
other Parties in the manner provided in this Section.
10.9 Amendment and Waiver. This Agreement may be amended, supplemented,
or otherwise modified only by means of a written instrument signed by all of the
Parties. Any waiver of any rights or failure to act in a specific instance shall
relate only to such instance and shall not be construed as an agreement to waive
any rights or fail to act in any other instance, whether or not similar.
10.10 Severability. In the event that any provision of this Agreement
shall, for any reason, be held to be invalid or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other provision hereof,
and the Parties shall negotiate in good faith to modify the Agreement to
preserve (to the extent possible) their original intent.
10.11 Entire Agreement. This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter hereof and supersedes all
prior agreements or understandings between the Parties relating to the subject
matter hereof, including but not limited to the Letter of Intent executed by the
Parties and dated [*****]. Notwithstanding the foregoing, the provisions of the
Letter of Intent with respect to research and development, including, without
limitation, research funding, shall remain in full force and effect until both
this Agreement and the Research and Development Agreement have been fully
executed.
10.12 Force Majeure. No Party shall be held liable or responsible to the
other party, nor be deemed to be in breach of this Agreement, for failure or
delay in fulfilling or performing any provisions of this Agreement (other than
payment obligations) when such failure or delay is caused by or results from any
cause whatsoever outside the reasonable control of the
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party concerned including, but not limited to, fire, explosion, breakdown of
plant, damage to plant material by pests or otherwise, strike, lock-out, labor
disputes, casualty or accident, lack or failure of transportation facilities,
flood, lack or failure of sources of supply or of labor, raw materials or
energy, civil commotion, embargo, any law, regulation, decision, demand or
requirement of any national or local government or authority. The Party claiming
relief shall, without delay, notify the other party by registered airmail or by
telefax of the interruption and cessation thereof and shall use its best efforts
to remedy the effects of such hindrance with all reasonable dispatch. The onus
of proving that any such Force Majeure event exists shall rest upon the Party so
asserting. During the period that a Party is prevented from performing its
obligations under this Agreement due to a Force Majeure event, the other Parties
may, in their sole discretion, suspend any obligations that relate thereto. Upon
cessation of such Force Majeure event, the Parties hereto shall use their best
efforts to make up for any suspended obligations. If such Force Majeure event is
anticipated to continue, or has existed for nine (9) consecutive months or more,
this Agreement may be forthwith terminated by any Party by registered mail or by
telefax. In case of such termination, the terminating Party will not be required
to pay to the other Parties any indemnity whatsoever.
In Witness Whereof, the undersigned have duly executed and delivered this
Agreement as a sealed instrument effective as of the date first above written.
Novartis Seeds AG Diversa Corporation
/s/ W.D. Beversdorf /s/ William H. Baum
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By: W.D. Beversdorf By: William H. Baum
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Title: Head, R & D Title: Sr. V. P. - Bus. Div.
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/s/ Verena Trutmann
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By: Verena Trutmann
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Title: General Counsel
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