Joint Venture Agreement

EXHIBIT 10.24



Confidential Treatment Requested

Under 17 C.F.R. (S)(S) 200.80(b)(4)

200.83 and 230.406





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").





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.





"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.



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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 [*****] repr ...