COLLABORATIVE RESEARCH AND LICENSE AGREEMENT

Exhibit 10.12


COLLABORATIVE RESEARCH AND LICENSE AGREEMENT


BETWEEN


PIONEER HI-BRED INTERNATIONAL, INC.


AND


MAXYGEN, INC.


December 23, 1998


* CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-
PUBLIC INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


COLLABORATIVE RESEARCH AND LICENSE AGREEMENT


THIS COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (the "Agreement") is entered into as of December 23, 1998, by and between PIONEER HI-BRED INTERNATIONAL, INC., a corporation organized and existing under the laws of the State of Iowa at 800 Capital Square, 400 Locust Street, Des Moines, Iowa 50309 ("PIONEER") and MAXYGEN, INC., a corporation organized and existing under the laws of the State of Delaware, located at 3410 Central Expressway, Santa Clara, California 95051 ("MAXYGEN").


WHEREAS, MAXYGEN has expertise in the rearrangement of DNA to produce and discover genes utilizing proprietary technologies; and


WHEREAS, PIONEER has expertise in the breeding and development of proprietary crop species; and


WHEREAS, PIONEER and MAXYGEN wish to enter into this Agreement in order to perform research together to discover and develop new genes that can be used by PIONEER to produce improved seeds and agricultural products; and


WHEREAS, MAXYGEN will perform research on projects funded and supported by PIONEER in order to discover and develop such genes and will license the results of such research to PIONEER for the purpose of the development, manufacture and sale of products by PIONEER. MAXYGEN will also modify and adapt the MAXYGEN Intellectual Property


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as set forth herein in order to facilitate the R&D Program and will work with PIONEER to develop and modify screening methods for each project as needed; and


WHEREAS, PIONEER will perform research to develop products and technology based on the research results discovered by MAXYGEN and/or PIONEER and will grant to MAXYGEN a license to the results of such research for the purpose of the development, testing, manufacture and sale of products by MAXYGEN.


NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the parties hereby agree as follows:


SECTION 1. DEFINITIONS.
------------------------


1.1 "Affiliate" means any corporation, firm, limited liability company, partnership or other entity that directly or indirectly controls or is controlled by or is under common control with a party to this Agreement. Notwithstanding the actual control exercised by PIONEER, Optimum Quality Grains, L.L.C., is to be considered an Affiliate of PIONEER. As used in this Section, "control" means ownership, directly or through one or more Affiliates, of 50 percent or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or 50 percent or more of the equity interests in the case of any other type of legal entity, status as a general partner


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in any partnership, or any other arrangement whereby a party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity, or if such level of ownership or control is prohibited in any country, any entity owned or controlled by or owning or controlling at the maximum control or ownership right permitted in the country where such entity exists.


1.2 "Agent" means any corporation or other entity through which PIONEER or MAXYGEN or one or more of their respective Affiliates produces, markets, or sells PIONEER or MAXYGEN Licensed Products, as the case may be.


1.3 "Benchmark Product" shall mean a product that (i) does not contain a Shuffled Gene and (ii) is not made or identified using any MAXYGEN Intellectual Property or Joint Intellectual Property (including without limitation, any method or process included therein), but which is otherwise identical to a PIONEER Licensed Product (or if no such product exists, substantially similar to a PIONEER Licensed Product) and is available in the same geographic market and time period. A Benchmark Product shall be a commercial product sold by PIONEER or its Affiliates or Agents; provided, if PIONEER or its Affiliates or Agents do not sell such a Benchmark Product, then the most comparable product sold by a third party in the applicable geographic market during the applicable time period shall be used as the Benchmark Product. By way of


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illustration, and without limitation, the Benchmark Product for a PIONEER Licensed Product which contained one or more Shuffled Genes would be an otherwise comparable product not containing any Shuffled Genes.


1.4 "Confidential Information" means the Work Plans, and all information, including, but not limited to, Know-How, biological materials (including the PIONEER Material(s) and MAXYGEN Material(s)), and data, scientific, technical, or non-technical, business plans, and marketing and sales information disclosed by one party to the other hereunder or under the Confidentiality Agreement between MAXYGEN and PIONEER and E.I. duPont de Nemours and Company dated November 4, 1997, or under the Amendment to the Confidentiality Agreement between MAXYGEN, E.I. duPont de Nemours and Company and PIONEER dated July 27, 1998, for the purposes of the R&D Program, or to fulfill obligations under this Agreement, whether disclosed or provided in oral, written, graphic, photographic or any other form, except to the extent that such information:


(i) as of the date of disclosure is known to the receiving party or its Affiliates, as shown by written documentation, other than by virtue of a prior confidential disclosure from the disclosing party to the receiving party or its Affiliates;


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(ii) as of the date of disclosure is in, or subsequently enters, the public domain, through no fault or omission of the receiving party; or


(iii) as of the date of disclosure or thereafter is obtained from a third party free from any obligation of confidentiality; or


(iv) after the date of disclosure or thereafter is developed by the receiving party independent of the disclosure as shown by written documentation.


1.5 "Controls" or "Controlled" means, with respect to intellectual property, possession (other than by virtue of this Agreement and the licenses granted herein) of the ability to grant licenses or sublicenses to the other party hereto without violating the terms of any agreement or other arrangement with, or the rights of, any agreement with a third party.


1.6 "Effective Date" means December 23, 1998.


1.7 "Enabling Technology" means such specific tools, technologies and/or methods relating to [*******] as the parties may agree in writing to have MAXYGEN develop in the R&D Program in accordance with an agreed upon written Work Plan, to facilitate the development of PIONEER Licensed Products, in each case, which is designated by written agreement by the parties as Enabling Technology.


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1.8 "FTE" means 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 R&D Program by MAXYGEN, determined in accordance with MAXYGEN's normal policies and procedures.


1.9 "Gene" means any gene selected for Shuffling in the R&D Program by the RDSC pursuant to (P)2.1D(a).


1.10 "Gene Library" means, with respect to a particular Gene, the complete collection of Gene Variants produced from the Shuffling of such Gene in connection with the R&D Program.


1.11 "Gene Variant" means any altered form of a Gene made in connection with the R&D Program which is the result of Shuffling.


1.12 [*******]


1.13 [*******]


1.14 [*******]


1.15 "Intellectual Property" means all Patent Rights and Know-How. It is understood that Intellectual Property does not include any intellectual property owned or Controlled by MAXYGEN relating to the practice of Shuffling Technology. It is further understood that Intellectual Property does not include any intellectual property owned or Controlled by MAXYGEN or PIONEER as of the


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Effective Date or developed outside of and not in connection with the R&D Program.


(a) "MAXYGEN Intellectual Property" means MAXYGEN Patent Rights and MAXYGEN Know-How.


(b) "PIONEER Intellectual Property" means PIONEER Patent Rights and PIONEER Know-How.


(c) "Joint Intellectual Property" means Joint Patent Rights and Joint Know-How.


1.16 "Jointly Developed" or "Jointly Invented" means any item developed or invented by both parties. If the item developed or invented is a patentable invention, such invention is jointly developed if both parties' employees or consultants are considered inventors under 35 U.S.C. (S)1 et. seq., and as
-------- interpreted by the U.S. Patent and Trademark Office and the United States courts.


1.17 "Know-How" means all Research Results and all non-patented inventions, improvements, discoveries, data, instructions, processes, formulas, information (including, without limitation, chemical, physical and analytical, safety, manufacturing and quality control data and information) and trade secrets created, discovered, or developed during the Research Term and in connection with the R&D Program. It is understood that Know-How does not include any (i) Shuffling Technology or (ii) inventions within the Patent Rights.


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(a) "MAXYGEN Know-How" means Know-How owned or Controlled by MAXYGEN or created, discovered, or developed solely by MAXYGEN in the R&D Program.


(b) "PIONEER Know-How" means Know-How owned or Controlled by PIONEER or created, discovered or developed solely by PIONEER in the R&D Program.


(c) "Joint Know-How" means Know-How which is created, discovered, or developed jointly by both parties in the R&D Program.


1.18 "Licensed Product" means a PIONEER Licensed Product or MAXYGEN Licensed Product.


1.19 "MAXYGEN Crops" means [*******].


1.20 "MAXYGEN Licensed Product" means any product that is, or is derived from:


(i) Plant cells, Plant parts, Plants or seeds of a MAXYGEN Crop, which (a) [*******] or (b) is identified or produced utilizing PIONEER Intellectual Property or Joint Intellectual Property; or


(ii) Plant cells, Plant parts, Plants or seeds of a PIONEER Crop, which (a) incorporates or is made through the use of Research Materials permitted pursuant to (P)2.1F(f), or (b) is


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identified or produced utilizing PIONEER Intellectual Property or Joint Intellectual Property; or


(iii) any other product that (a) [*******] which Plant or organism is not a PIONEER Crop or MAXYGEN Crop, and products derived from such a Plant or other organism, or (b) is identified or produced utilizing PIONEER Intellectual Property or Joint Intellectual Property.


It is understood and agreed that a MAXYGEN Licensed Product includes, without limitation, (i) a Plant, (ii) macro, micro, and molecular parts of a Plant, including, without limitation, seeds and DNA contained therein, and (iii) extracts from a Plant, whether in unprocessed or processed form, including [*******] in each case, that is or is from a MAXYGEN Crop in (i), above, or a PIONEER Crop in (ii), above.


1.21 "Net Sales" means, for a particular PIONEER Licensed Product, the gross monies or the monetary equivalent of all other consideration in any form, whether or not invoiced, billed by or due to PIONEER or its Affiliates, or Sublicensees for the use, sale, lease or transfer of such PIONEER Licensed Product(s); less qualifying costs directly attributable to such use, sale, lease, or transfer, to the extent actually allowed and borne by PIONEER. Such qualifying costs shall be limited to [*******] costs for the following: (i)credits or refunds, not exceeding the original or customary billing or invoice amount, for such claims or returns,


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(ii) packaging, (iii) returnable containers, (iv) prepaid transportation insurance premiums, (v) prepaid outbound transportation expenses, (vi) discounts, in amounts customary in the trade, for quantity purchases, cash payments, prompt payments, wholesalers, and distributors, and (vii) taxes, including sales, use, excise, import, export, and other taxes or duties (excluding taxes on income), separately billed or invoiced, and borne by PIONEER, imposed by a government agency with the authority to do so on such use, sale, lease or transfer. All sales of PIONEER Licensed Products shall be recorded in U.S. dollars and recognized per U.S. Generally Accepted Accounting Principles (GAAP), consistently applied. A PIONEER Licensed Product used, sold, leased, or transferred by gift or for consideration other than money shall be deemed to have a monetary value of the higher of [*******]. In the event that any PIONEER Licensed Product(s) are sold, leased or transferred between PIONEER and one of its Affiliates, Sublicensees, or Agents or between two of its Affiliates, Sublicensees, or Agents or any PIONEER Licensed Product is used by PIONEER or one of its Affiliates, Sublicensees, or Agents, the money or monetary equivalent of such PIONEER Licensed Product(s) shall be the higher of [*******]. PIONEER Licensed Product(s) used in testing, clinical or feeding trials, or as marketing samples to develop or promote the PIONEER Licensed Product(s) shall not be included as PIONEER Licensed Product(s)


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used, sold, leased, or transferred; provided the PIONEER Licensed Product(s) are supplied to the user at no cost.


For purposes of determining Net Sales, sales of PIONEER Licensed Products shall not be discounted due to any product "bundling" unless PIONEER and its Affiliates, Agents and Sublicensees do not offer the PIONEER Licensed Product outside of a "bundle". In the case of discounts on "bundles" of products or services which include PIONEER Licensed Products, PIONEER may with notice to MAXYGEN calculate the Net Sales for the applicable PIONEER Licensed Product by discounting the bona fide list price of a PIONEER Licensed Product by no more than the average percentage discount of all products of PIONEER and/or its Affiliates, Agents or Sublicensees in a particular "bundle", calculated as follows:


Average percentage
discount on a = (1 - A/B) x 100
particular "bundle"


where A equals the total discounted price of a particular "bundle" of products, and B equals the sum of the undiscounted bona fide list prices of each unit of every product in such "bundle". PIONEER shall provide MAXYGEN documentation, reasonably acceptable to MAXYGEN, establishing such average discount with respect to each "bundle".


1.22 "Patent Rights" means (i) all patents and patent applications that claim an invention conceived and reduced to practice by MAXYGEN and/or PIONEER during the Research Term and in


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connection with the R&D Program or conceived in connection with the R&D Program and reduced to practice within twelve (12) months after the end of the Research Term, and (ii) any divisions, continuations, continuations-in-part, and patents that issue therefrom, reissues, reexaminations, extensions or other governmental actions that extend any of the subject matter of the patent applications or patents in (i) above, and any substitutions, confirmations, registrations or revalidations of any of the foregoing, in each case, which is owned or Controlled, in whole or part, by license, assignment or otherwise by MAXYGEN or PIONEER during the term of this Agreement.


(a) "MAXYGEN Patent Rights" means Patent Rights owned or Controlled solely by MAXYGEN.


(b) "PIONEER Patent Rights" means Patent Rights owned or Controlled solely by PIONEER.


(c) "Joint Patent Rights" shall mean Patent Rights owned or Controlled by both PIONEER and MAXYGEN.


1.23 [*******]


1.24 "PIONEER Crop" means [*******].


1.25 "PIONEER Material" or "MAXYGEN Material" means the tangible assays or biological materials, and protocols for using the same, provided by PIONEER or MAXYGEN, respectively, to the


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other in order so that the recipient can perform its obligations under the R&D Program. All improvements to such assays, and derivatives and progeny of any such biological materials, whether made by the recipient or the provider, shall be considered to be owned by the provider of the original materials. By way of illustration and without limitation, improvements to an assay provided by PIONEER to MAXYGEN, whether made by MAXYGEN or PIONEER, would be considered PIONEER Materials and owned by PIONEER.


1.26 "PIONEER Licensed Product" means any product that is, or is derived from, Plant cells, Plant parts, Plants or seeds of a PIONEER Crop that: (a) [*******], or (b) is identified or produced utilizing MAXYGEN Intellectual Property or Joint Intellectual Property. It is understood and agreed that a PIONEER Licensed Product includes, without limitation, (i) a Plant, (ii) macro, micro, and molecular parts of a Plant, including, without limitation, seeds and DNA contained therein, and (iii) extracts from a Plant, whether in unprocessed or processed form, including [*******] in each case, that is or is from such a PIONEER Crop.


1.27 "PIONEER Product Technology" means such specific technologies, tools, assays and/or methods as the parties may agree in writing to have MAXYGEN develop in the R&D Program in accordance with an agreed upon written Work Plan, to facilitate PIONEER's development and testing of PIONEER Licensed Products, in each case, which is designated in writing by the RDSC as PIONEER Product Technology pursuant to (P)2.2A.


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1.28 "Plant" means a monocotyledonous or dicotyledonous plant that may or may not currently represent a commercial crop, excluding any organisms that are not monocots or dicots, whether unicellular or multicellular, and whether or not such organism can perform photosynthesis.


1.29 "Product Premium" means with respect to a particular PIONEER Licensed Product, the difference between the Product Price of the PIONEER Licensed Product and the Product Price of the applicable Benchmark Product in the same geographic market and time period. It is understood and agreed that the Product Premium shall also include any other consideration (e.g., technology access fees, up-front payments, and licensing fees) which PIONEER and its Affiliates, Agents and Sublicensees receive for the sale of a PIONEER Licensed Product as compared to the applicable Benchmark Product.


1.30 "Product Price" means average, actual price of a PIONEER Licensed Product or Benchmark Product, as the case may be, sold in a particular geographic market during a particular time period.


1.31 "R&D Program" means the research and development program to be conducted by MAXYGEN and PIONEER pursuant to Section 2 and as described in the Work Plan.


1.32 "R&D Steering Committee" or "RDSC" means the committee created pursuant to Section 2 hereof.


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1.33 "Research Data" means all data, inventions, and any other information obtained, developed, conceived and reduced to practice, or derived in the course of performance of the R&D Program.


1.34 "Research Materials" mean all tangible property, including without limitation, assays, invented, obtained, discovered, developed, or derived, or the function or utility of which is discovered or determined, in the course of performance of the R&D Program. It is understood and agreed that the Research Materials shall not include any PIONEER Materials or MAXYGEN Materials, and that any assay and/or biological materials developed solely by PIONEER or solely by MAXYGEN for use in the R&D Program shall be deemed to be PIONEER Materials or MAXYGEN Materials, respectively. It is understood and agreed that all Gene Variants shall be Research Materials.


1.35 "Research Results" means all Research Data and Research Materials collectively, including without limitation, all Enabling Technology.


A. "MAXYGEN Research Results" means Research Results invented or developed solely by MAXYGEN.


B. "PIONEER Research Results" means Research Results invented or developed solely by PIONEER.


C. "Joint Research Results" means Research Results invented or developed jointly by both parties.


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1.36 "Research Term" shall mean the period commencing on the Effective Date and, unless extended by written agreement of the parties pursuant to (P)2.1E(b) or sooner terminated as provided herein, terminating on the fifth anniversary of the Effective Date.


1.37 "Shuffle," "Shuffled" and "Shuffling" mean the recombination and/or rearrangement and/or mutation of genetic material for the creation of genetic diversity using intellectual property and/or tangible property owned or Controlled by MAXYGEN.


1.38 "Shuffled Gene" means (i) any Gene Variant that meets the applicable activity criteria established by the RDSC, which PIONEER selects to commercially develop, and which the RDSC designates pursuant to (P)2.1D(f), (ii) any PIONEER SGD, and (iii) any MAXYGEN SGD.


1.39 "Shuffled Gene Derivative" means any modified form of a Shuffled Gene, which modification is developed from or made to the Shuffled Gene by any means, including without limitation, any codon modified variant, splice variant, mutation, derivative or variant of a Shuffled Gene, and any fragment(s) of the preceding.


(a) "MAXYGEN Shuffled Gene Derivative" or "MAXYGEN SGD" means a Shuffled Gene Derivative which modification is developed or made by MAXYGEN or its Affiliates or Sublicensees.


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(b) "PIONEER Shuffled Gene Derivative" or "PIONEER SGD" means a Shuffled Gene Derivative which modification is developed or made by PIONEER or its Affiliates or Sublicensees.


1.40 "Shuffling Technology" means techniques, methodologies, processes, materials and/or instrumentation useful for Shuffling, and generally applicable screening techniques, methodologies, or processes of using the resulting genetic material to identify potential usefulness. It is understood and agreed that specific assays developed for screening Gene Variants for a particular biological or chemical activity are not included in Shuffling Technology.


1.41 "Sublicensee" means an entity to whom PIONEER or MAXYGEN, as the case may be, has granted a license or sublicense to make, have made, import, use, sell, offer for sale, or otherwise exploit Licensed Products.


1.42 "Sublicense Payments" shall mean all consideration (other than pass- through royalties on Net Sales of PIONEER Licensed Products by Sublicensees due to MAXYGEN pursuant to (P)4.3A)received by PIONEER or MAXYGEN, as the case may be, and their respective Affiliates and Agents from Sublicensees in respect of any grant of rights to propagate, use or sell or otherwise distribute Licensed Products (including, without limitation, technology access fees, milestone fees, payments for the sale of or right to sell Licensed Products, and license and/or sublicense fees, whether such consideration is in cash, payment in kind, exchange or another form). Notwithstanding the above, Sublicense Payments shall not


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include any amounts received by MAXYGEN or PIONEER, as the case may be, from a third party for [*******].


1.43 "Trait" means a characteristic of a PIONEER Crop associated with one or more genes sourced from any organism in any manner, that is manipulated or tracked by PIONEER or its Affiliates or Sublicensees as part of the PIONEER Licensed Product development process.


1.44 "Trait Categories" means, as shown in Appendix B, the areas of interest from which the projects to be conducted pursuant to the R&D Program will be selected and for which licenses under this Agreement will be granted. In particular, the areas include, for the PIONEER Crops: [*******].


1.45 "Work Plan" means a written plan approved by the R&D Steering Committee describing the activities to be carried out during each 12 month period of the R&D Program, as modified from time to time by the parties. The Work Plan for the twelve (12) month period starting on the Effective Date is attached hereto as Appendix A.


1.46 The listed Appendices are:


A. Appendix A - Work Plan for 1998-1999; and


B. Appendix B - Trait Categories in PIONEER Crops.


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SECTION 2. R&D PROGRAM.
-----------------------


2.1 Implementation of the R&D Program.
---------------------------------


A. Basic Provisions of Program.
---------------------------


(a) The primary objective of the R&D Program shall be the development of genes encoding enhanced or new Traits for PIONEER Crops within the applicable Trait Categories in order to develop new PIONEER Licensed Products. MAXYGEN and PIONEER shall use their reasonable efforts to conduct the research activities set forth in the Work Plan, and to provide PIONEER Materials and MAXYGEN Materials as set forth therein.


(b) In carrying out the R&D Program, MAXYGEN shall devote an average of [*******] FTEs per year for each of the five years of the Research Term ("Staffing Level"), and PIONEER shall pay MAXYGEN for the services of such FTEs as set forth herein. At the request of PIONEER, MAXYGEN will in good faith consider and discuss proposed increases or decreases to the Staffing Level; provided, however, that the Staffing Level shall remain at [*******] FTEs, unless the parties, in their sole discretion, agree in writing to different staffing levels. Any increase or decrease to the Staffing Level agreed to by the parties shall be reflected in the relevant Work Plan and budget associated with such Work Plan.


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(c) MAXYGEN and PIONEER shall each use reasonable efforts to perform such tasks as are set forth to be performed by the respective party in the relevant Work Plan, and to provide such facilities, materials, equipment, and assay methods, as are necessary to perform the research activities set forth in the Work Plans.


(d) It is understood and agreed that MAXYGEN shall not be obligated to utilize on average per year more than [*******] FTEs in the R&D Program. It is further understood that PIONEER sha ...