Research And Development Agreement Dated 1/24/96

EXHIBIT 10.121


RESEARCH AND DEVELOPMENT
AGREEMENT


This Research and Development Agreement (the "Agreement") is made as of January 24, 1996, by and between Monsanto Company, a Delaware corporation, with its general offices at 800 North Lindbergh Boulevard, St. Louis, Missouri 63167 ("Monsanto"), and Ecogen Inc., a Delaware corporation having its principal office at 2005 Cabot Boulevard West, Langhorne, PA 19047 ("Ecogen").


W I T N E S S E T H


WHEREAS, Ecogen owns certain existing Bt strain libraries, certain crystal protein gene libraries, and certain proprietary rights regarding protein engineering of Bt crystal proteins;


WHEREAS, Monsanto is acquiring certain of such libraries and proprietary rights in accordance with the Technology Assignment Agreement dated as of January 24, 1996 ("Assignment Agreement");


WHEREAS, Monsanto has expertise in the field of plant biotechnology and Ecogen has expertise in finding, screening and commercializing compounds, including proteins based on the bacterium Bacillus thurigiensis ("Bt");


WHEREAS, both Monsanto and Ecogen have research facilities and are capable of conducting research and development within the Field of the Agreement; 2


WHEREAS, Monsanto and Ecogen wish to conduct research and development which may lead to the commercialization of (i) improved bioinsecticides, and (ii) plants and/or plant seeds into the genomes of which Bt genes have been included so that such plants or plant seeds will express proteins;


NOW, THEREFORE, in consideration of the mutual covenants contained herein, Monsanto and Ecogen agree as follows:


ARTICLE 1 - DEFINITIONS


Capitalized terms not otherwise defined in this Agreement shall have the same meaning given such terms in the Assignment Agreement. In addition, the following terms shall have the meanings set forth below and will include the plural as well as the singular.


1.1 "Budget Year" shall have the meaning set forth in Section 3.3.


1.2 "Contract Year" shall mean the year beginning on January 24, 1996 and ending on January 23, 1997 and each anniversary thereafter until such time as the Agreement is no longer in force.


1.3 "Date of this Agreement" shall mean the date first written above.


1.4 "Ecogen" shall mean Ecogen and its Subsidiaries.


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1.5 "Field of the Agreement" shall mean research and development in finding, discovering, screening and developing new proteins and genes.


1.6 "Initial Term of the Agreement" shall mean the period beginning on the Date of this Agreement and ending on the fourth anniversary thereof.


1.7 "In Planta Application" means (i) use, development, or commercialization of transgenic plants, seeds, cells or components thereof (collectively "Plants") or (ii) use, development, or commercialization of genetic material used so that Plants express a new material or an existing material at levels different from the levels that such Plants otherwise would.


1.8 "Intellectual Property Rights" means (i) all patent rights and all right, title and interest in and to all letters patent and applications for letters patent, and other government issued or granted indicia of invention ownership including any substitutions, extensions, reissues, divisions, continuations or continuations-in-part or applications thereof or therefor throughout the world; (ii) all rights, title and interest in and to all trade secrets and trade secret rights arising under the common law, state law, federal law and laws of foreign countries; (iii) all copyright rights, and all other literary property and author rights whether or not copyrightable; and all rights, title and interest in and to all copyrights, copyright registrations, certificates of copyright and copyrighted interests throughout the world; (iv) all rights, title and interest in and to all know-how whether or not protectable by patent, copyright or trade secret law; and (v) all goodwill associated with any of the foregoing; provided, however, that the term "Intellectual Property Rights" shall not include any trademarks, trade names or service marks, whether


3 4 registered or arising under the common law, state law, federal law or the laws of foreign countries or any registrations thereof or interests therein.


1.9 "Microbial Applications" shall mean use, development or commercialization of insecticidal, bacterial, fungicidal, pesticidal, medical, veterinary, scientific, nutritional, food additive or preservative, materials, textiles, and similar products; provided, however, that such products shall not include any product for an In Planta Application.


1.10 "Naturally Occurring Genes" shall mean genes expressed by Bt that produce proteins without genetic engineering or protein engineering.


1.11 "R&D Technology" shall mean the Bt strains or genes discovered or developed pursuant to the Research Program and the Intellectual Property Rights arising pursuant to the performance of the parties' obligations under this Agreement.


1.12 "Research Budget" shall mean the forecast of expenses and expenditures set by Monsanto from time to time for each Budget Year for that part of the Research Program undertaken by Ecogen, which may be revised based on the recommendation of the Supervisory Committee; provided, however the Research Budget shall not include the cost or expenses of filing, prosecution or maintenance of patent applications or issued patents.


1.13 "Research Plan" shall mean the Research and Development Plan as may be amended from time to time, a preliminary draft of which is attached hereto as Exhibit A, and which Plan shall include a specific schedule for work, resources to be allocated by each party,


4 5 the identification of target pests, personnel requirements, capital needs, and a schedule for the duplication and transfer to Monsanto of copies of all strains and genes developed under the Research Program. The selection of projects within the Research Plan is to be determined by Monsanto, with Ecogen having the right to object to any project which is inconsistent with the practices and procedures of Ecogen.


1.14 "Research Program" shall mean all research, experimentation or development relating to the projects to be conducted or conducted by the parties hereto under the terms of the Research Plan, including decisions regarding the filing, prosecution and maintenance of patent applications and issued patents.


1.15 "Subsidiary" shall mean a subsidiary more than 50 percent of whose outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors, is owned by the applicable party and/or one or more of such party's other majority-owned Subsidiaries. Subsidiaries of Ecogen shall also include the entities set forth in Schedule 3.01 to the Investment Agreement signed contemporaneously herewith.


1.16 "Supervisory Committee" shall mean the Committee described in Article 2 hereof.


1.17 "Third Party" shall mean any entity other than Monsanto, Ecogen and/or Subsidiaries or Affiliates.


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ARTICLE - RESEARCH COLLABORATION


2.1 Research Plan. During the term of this Agreement and subject to its terms and conditions, Monsanto and Ecogen shall use all commercially reasonable efforts to undertake their respective obligations under the Research Program in accordance with the Research Plan. The Research Plan shall be updated in writing and revised from time to time upon mutual written agreement of the parties upon the recommendation of the Supervisory Committee. Ecogen agrees to diligently pursue each project covered by the Research Program and to assign the appropriate number of personnel required to carry out the Research Program, each of whom shall be qualified to perform his/her assigned duties. The parties acknowledge that Ecogen makes no representation or assurance whatsoever that the Research Program will be successfully completed or result in the development of products with any technical or commercial value.


2.2 Research Funding. Monsanto shall be responsible for providing all funding necessary for both parties to undertake their respective duties and obligations under the Research Program and all other costs and expenses related thereto. Transfers of funds to Ecogen under the Research Budget during the Initial Term of this Agreement shall be in accordance with the terms of Article 3 hereof.


2.3 Supervisory Committee.


(a) Collaboration between the parties shall be determined by a Supervisory Committee of four (4) people; two (2) people appointed by each party. The Chairman of the Supervisory Committee shall be appointed by Monsanto.


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(b) It is the intent of the parties that information related to the Research Program be shared with one another in an open manner. For this purpose, the Supervisory Committee shall meet periodically and no less than once a quarter to review the status of the Research Program at mutually convenient locations. It is contemplated, however, that the parties may meet as frequently as weekly at Ecogen's facility to review results of the Research Program. At such meetings the implementation of the Research Program, including insectary services, insect targets and sources of insecticidal or other biocidal proteins, shall be discussed and mutually agreed upon. Each of the parties hereto shall provide to the Supervisory Committee quarterly written summaries of data and the status of its work under the Research Program in such form as such party routinely uses for the summary of similar research work for its own purposes. Modifications to the Research Program may be made by the Supervisory Committee as collaboration progresses in accordance with this Agreement. In the event that the Supervisory Committee cannot reach a decision regarding the Research Program, the issue shall be referred for resolution to a senior business executive of each party responsible for the Research Program. In the event that the parties continue to have a good faith dispute, the issue will be resolved by the Monsanto business executive.


2.4 Continuity of Supervisory Committee. Each party shall attempt in good faith to maintain continuity in the identity of its representatives to the Supervisory Committee.


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ARTICLE 3 - COSTS


3.1 Minimum Payment During Initial Term. Monsanto shall provide a minimum of $10 Million for the funding of the Research Program during the Initial Term of the Agreement in accordance with the timing set out in Sections 3.2 and 3.3 herein.


3.2 Initial Payment. Monsanto shall transfer to Ecogen the sum of $3 Million upon execution of the Assignment Agreement; provided, however, that Monsanto shall be entitled to receive a credit in the amount of $2 Million against payment of this $3 Million for the loans made pursuant to the Senior Promissory Note dated November 2, 1995 from Ecogen to Monsanto. Such Note shall be cancelled and returned to Ecogen at the Closing of the transactions contemplated pursuant to the terms of the Assignment Agreement and Ecogen shall have no further obligations with respect to such Note.


3.3 Research Budget. On or before thirty (30) days after the Date of this Agreement, Monsanto will develop, with input from the Supervisory Committee, and present to the Supervisory Committee a Research Budget for the period beginning on the Date of this Agreement and ending on October 31, 1996. At least ninety (90) days prior to November 1, 1996, Monsanto will present to the Supervisory Committee a Research Budget developed by Monsanto for the year beginning on November 1, 1996 and ending on October 31, 1997 taking into consideration the recommendations made by the Supervisory Committee. This period and each yearly period ending on October 31 of the applicable year thereafter shall be designated as a _Budget Year". The Research Budget shall include, to the extent practicable, a break-down of the budget by "Budget Year" quarters. Monsanto will present to the Supervisory Committee


8 9 at least 90 days prior to the beginning of any Budget Year a Research Budget developed by Monsanto for each of the following Budget Years taking into consideration the recommendations made by the Supervisory Committee. In any given Contract Year Monsanto shall spend not less than $1.5 Million under that part of the Research Program undertaken by Ecogen. In no event shall Monsanto transfer to Ecogen less than $1.5 Million in any one Contract Year. Monsanto shall transfer to Ecogen such amounts as are sufficient to ensure that Ecogen prior to the beginning of each quarter of the Budget Year has funds available from Monsanto in an amount equal to the expenses set forth in the Research Budget for the then current Budget Year quarter. Such amount shall be adjusted for the difference, if any, between (i) actual expenses and expenditures incurred by Ecogen in prior quarters under the Research Program and (ii) the cash transfers made by Monsanto to Ecogen with respect to such previous quarters.


3.4 Allocated Researchers and Equipment Purchases. In establishing the Research Budget, each researcher employed by Ecogen shall be included in the Research Budget at an annual rate of $______*, which annual rate shall include all costs and expenses for personnel, supplies, existing equipment, and overhead with respect to such researcher and shall include the cost of any new equipment required to be purchased hereunder the individual cost of which is less than $50,000. If any piece of equipment purchased pursuant to the Research Budget costs $50,000 or more, Monsanto shall pay the entire cost of such piece of equipment. Any such payment for new equipment will be paid to Ecogen within fifteen (15) days of delivery to Monsanto of an invoice from the vendor. Any payments for new equipment shall be credited against Monsanto's obligations under Section 3.1 and 3.3 hereof. Any new equipment purchased pursuant to the Research Program shall be owned by ...