Document:

exv10w19

 

Exhibit 10.19

METAMORPHIX, INC.

SHAREHOLDERS AGREEMENT

Dated as of February 28, 2002

 

 

METAMORPHIX, INC.

SHAREHOLDERS AGREEMENT

          This SHAREHOLDERS AGREEMENT (the “Agreement”) is dated as of the 28th day of February,
2002, and is entered into by and among MetaMorphix, Inc. (the “Company”), a Delaware
corporation, and each of the several shareholders of the Company executing a counterpart of this
Agreement from time to time and so long as such parties hold any Shares (each, a “Shareholder”
and collectively, the “Shareholders”).

RECITALS

          WHEREAS, on the date hereof, Celera (as defined below) and the Company have entered into the
Series E Convertible Preferred Stock Purchase Agreement dated as of the date hereof (the “Stock
Purchase Agreement”), pursuant to which Celera purchased from the Company certain shares of
capital stock of the Company, upon the terms and conditions set forth therein; and

          WHEREAS, the Stock Purchase Agreement requires that, as a condition to the consummation of
the transactions contemplated thereby, the Shareholders shall enter into this Agreement; and

          WHEREAS, the Shareholders desire to enter into certain agreements among themselves and with
the Company relating to the ownership and operation of the Company, all as set forth herein.

          NOW, THEREFORE, the parties agree as follows:

ARTICLE I.

GENERAL PROVISIONS; INTERPRETATION

          Section 1.01 Term. This Agreement shall remain in effect from the date hereof until
the consummation of a firm commitment underwritten initial public offering of the Company’s common
stock pursuant to which the Company raises gross proceeds of at least $15 million and in connection
with the common stock is listed or qualified for trading on the New York Stock Exchange or the
NASDAQ Stock Market; provided that notwithstanding termination of the term hereof, the right of the
Shareholders pursuant to Section 2.04 to have legends removed from their stock certificates shall
survive. Termination of the term of this Agreement shall not relieve any party from any liabilities
accrued hereunder prior to such termination, including any liabilities arising out of or resulting
from a breach of this Agreement.

          Section 1.02 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:

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          (a) “Celera” means PE Corporation (NY), a New York corporation, acting through
its Celera Genomics Group, and any of its permitted successors and assigns.

          (b) “Shares” means, except as otherwise expressly provided herein, all shares of
capital stock of the Company held by the Shareholders, as well as any other securities
issuable to the holders thereof as holders of such Shares, including, without limitation
as a result of or in connection with (i) any recapitalization or reclassification,
including any stock split or reverse stock split, (ii) any merger or consolidation, or
(iii) any dividend or distribution in respect of the Shares.

          (c) “Strategic Shareholder” means, in reference to Celera, Celera so long as Celera
owns at least 75% of the number of Shares acquired pursuant to the Stock Purchase
Agreement.

          (d) “Transfer” means any sale, assignment, pledge, encumbrance, gift, or other
transfer or disposition of any nature.

          Section 1.03 Singular and Plural; Gender. Whenever appropriate in the context,
terms used in this Agreement in the singular also include the plural, and vice versa, and each
masculine, feminine or neuter pronoun shall also include the other genders.

          Section 1.04 Meaning of Including. As used herein, the word “including” shall be
deemed to mean “including, without limitation,” unless otherwise expressly provided in any
instance.

          Section 1.05 Headings. The article, section and other headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or affect the meaning
or interpretation of any provisions of this Agreement.

          Section 1.06 Drafting. The parties agree that if any ambiguity or question of intent
or interpretation regarding this Agreement may arise, no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

ARTICLE II.

TRANSFER PROVISIONS

          Section 2.01 Transfers Restricted. Subject to Section 2.05, no Shareholder shall
Transfer any Shares, except a Shareholder may sell Shares to third parties in bona fide
transactions subject to compliance with this Article II, the Right of First Refusal in Article
III and the Tag Along Right and Drag Along Right in Article IV.

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To extent the Company has approval or consent rights with respect to any Transfer of shares by a
stockholder of the Company not a party to this Agreement holding at least five percent (5%) of the
capital stock of the Company on a fully-diluted basis, the Company will not approve and/or consent
to a Transfer or series of Transfers by such stockholder that would result in an aggregate of ten
percent (10%) of the capital stock of the Company being Transferred without the prior written
consent of Celera. Any Transfer of Shares which is not in compliance with such provisions shall be
void ab initio. The Company shall make a notation in its records of all
restrictions on transfer of the Shares. The Company shall not be required (a) to transfer on its
books any Shares which shall have been sold, transferred, assigned or pledged in violation of any
of the provisions set forth herein, or (b) to treat as owner of such Shares or to accord the right
to vote as such owner or to pay dividends to any transferee to whom such shares shall have been
purported to be so transferred.

          Section 2.02 Transferees Bound. Notwithstanding anything to the contrary contained in
this Agreement, no Shareholder or any person to whom Shares are Transferred hereafter may Transfer
any Shares unless prior to such Transfer, each proposed transferee executes and delivers to the
Company and the other Shareholders a written agreement (in form and substance reasonably
satisfactory to them) in which such Transferee agrees to be bound by the terms of this Agreement
with the same force and effect as if such transferee were deemed to be a Shareholder for all
purposes hereof. Any such Transferee which executes and delivers such a written agreement shall be
entitled to all of the benefits of the Transferor Shareholder under this Agreement but shall also
be subject to all of the obligations of the Transferor Shareholder under this Agreement. A valid
Transfer of Shares hereunder shall not relieve any Transferor Shareholder of any accrued
liabilities or obligations hereunder.

          Section 2.03 Compliance with Securities Laws. No Shares shall be Transferred (and no
Transfer shall be effective) unless (a) prior to the consummation thereof, the Transferee of such
Shares shall have made such written representations and warranties to the Company which, in the
Company’s sole judgement, are required to ensure compliance with applicable securities laws
(including, without limitation, written representations and warranties regarding such Transferee’s
investment intent and suitability as an investor in the Company) and (b) if required by the Company
in its sole discretion, the Company is provided with an opinion of counsel stating that such
Transfer is exempt from the Securities Act of 1933, as amended (the “Securities Act”) and is
permissible under all other applicable Federal and state securities laws without registration or
qualification of any security or any person or entity.

          Section 2.04 Legends. Each certificate representing the Shares shall bear legends in
substantially the following form (in addition to any legend required under applicable state
securities laws):

          (a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN

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REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR UNDER
APPLICABLE STATE SECURITIES LAWS (THE “STATE LAWS”) NOR IS SUCH REGISTRATION CONTEMPLATED.
SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER
THE ACT OR THE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IF CLAIMING
SUCH EXEMPTION, AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE BOARD OF
DIRECTORS OF THE COMPANY STATING THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER AND
THAT SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE ACT OR STATE LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.

          (b) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY BE
TRANSFERRED ONLY IN
COMPLIANCE WITH, AN AGREEMENT AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS SECURITIES, A
COPY OF WHICH IS ON FILE AT AND MAY BE OBTAINED FROM THE PRINCIPAL OFFICE OF THE COMPANY.

          The Company shall promptly reissue a certificate representing Shares without the legend
referenced in clause (a) above at the request of any holder thereof if the holder shall have
obtained an opinion of counsel reasonably acceptable to the Company to the effect that the Shares
subject to such certificate may lawfully transferred without registration, qualification or
legend. The Company shall promptly reissue a certificate without the legend referenced in clause
(b) above at the request of any holder thereof upon the termination of the term of this Agreement
pursuant to Section 1.01(a) or if the Shareholders otherwise unanimously agree in writing to
release the Shares represented by such certificate from the restrictions in this Agreement.

          Section 2.05 Exempt Transfers . The provisions of Article III and Article IV will not
apply to (i) any transfer or transfers by a Shareholder which in the aggregate, over the term of
this Agreement, (A) amount to no more than five percent (5%) of the Shares owned by the Shareholder
as of the date hereof (as adjusted for stock splits, dividends and the like) and (B) amount to no
more than one percent (1%) of the outstanding capital stock of the Company on a fully diluted
basis, (ii) transfers to which the transferee (a) is a subsidiary, stockholder, partner, general
partner, limited partner, retired partner, member or retired member of such transferor, or (b) is
an entity affiliated by common control (or other related entity) with such transferor or its
affiliates, (iii) any transfer to the ancestor, descendants or spouse of a Shareholder or to trusts
made pursuant to Clause (ii), and (iv) any transfer by The Johns Hopkins University (“JHU”) to any
of its professors, divisions, departments, employees, past professors or employees or other
affiliates of JHU in accordance with JHU’s intellectual property policies pertaining to the
internal distribution of equity; provided that the transferee must enter into a written

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agreement to be bound by and comply with all provisions of this Agreement, as if it were an
original party hereunder.

ARTICLE III.

RIGHT OF FIRST REFUSAL

          Subject to Section 2.05 and any transaction subject to and for which the applicable
Shareholders have exercised the Drag-along Rights in Section 4.03, no Shareholder may Transfer
any Shares except sales to third parties pursuant to bona fide, binding written offers (each an
“Offer”), subject to compliance with the following right of first refusal in favor of the Company
and the other Shareholders (the “Right of First Refusal”):

          Section 3.01 Notice of Intent to Transfer Shares. Any Shareholder which receives an
Offer (the “Selling Shareholder”) shall deliver a written notice (the “Notice”) to the Company
and any other Shareholders stating (a) his or her bona fide intention to sell such Shares to the
third party who or which has made an Offer to purchase such shares in writing, (b) the number of
Shares proposed to be sold pursuant to the Offer (the “Offered Shares”), (c) the price per Share
at which Shareholder proposes to sell the Offered Shares (which must be payable in cash upon the
sale), and other terms and conditions of sale, and (d) the name and address of the proposed
purchaser (the “Third Party Purchaser”). The Notice shall include a copy of the document
evidencing the Offer of the Third Party Purchaser to purchase the Offered Shares. The Notice
shall be deemed an irrevocable notice to sell the Offered Shares on the terms and conditions set
forth therein.

          Section 3.02 Purchase by Company. For a period of ten (10) days following receipt of
any Notice described in Section 3.01, the Company will have the right to purchase all (but not less
than all) of the Offered Shares subject to such Notice on the same terms and conditions as set
forth therein. The Company’s purchase right must be exercised by written notice signed by an
officer of the Company (the “Company Notice”) and delivered to the Selling Shareholder within such
ten (10) day period. The Company will effect the purchase of the Offered Shares, including payment
of the purchase price, if at all, not more than fifteen (15) business days after delivery of the
Company’s Notice, and at such time the Selling Shareholder must deliver to the Company the
certificate(s) representing the Offered Shares to be purchased by the Company, each certificate to
be properly endorsed for transfer. The Offered Shares so purchased must thereupon be cancelled and
cease to be issued and outstanding shares of the Company’s Preferred Stock or Common Stock, as the
case may be.

          Section 3.03 Purchase by other Shareholders. In the event that the Company does not
elect to purchase all of the Offered Shares pursuant to its rights under Section 3.02 within the
period set forth therein, the Selling Shareholder must promptly give written notice (the “Second
Notice”) to each of the other Shareholders, which must

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set forth the number of Offered Shares not purchased by the Company and which must include the
terms of the Notice set forth in Section 3.01. The other Shareholders shall then be entitled
to purchase all (but not less than all) of the Offered Shares at the same price as set forth
in the Offer, and otherwise on substantially the same terms and

conditions as those set forth in the Offer, as follows:

          (a) Manner of Exercise. Each of the other Shareholders must exercise this
right by giving written notice to the Selling Shareholder within twenty (20) business days
after receipt of the Second Notice by the other Shareholders. Such written notice must
specify the number of Shares that the other Shareholder intends to purchase, up to its pro
rata share based on its fully diluted interest in the Company. The Shareholders that fully
exercise the Right of First Refusal shall have a right of over-allotment such that they may
purchase their full pro rata share (relative to the other Shareholders that are entitled to
the over-allotment option) of the Shares not being purchased by the other Shareholders. The
Selling Shareholder shall give such Shareholders written notice of the over allotment
option (including the available number of Shares) after determining the number of Shares
available for the over-allotment option, if any, and such Shareholders shall have five (5)
business days after receipt of such notice to exercise the over allotment option by written
notice to the Selling Shareholder. In order for the Right of First Refusal to be
effectively exercised, the Company and/or one or more of the other Shareholders must agree
to purchase, in the aggregate, all of the Offered Shares.

          (b) Closing. If the Right of First Refusal is effectively exercised by the
other Shareholders, then the other Shareholders’ purchase of the Shares shall occur as
soon as practicable after they exercise the Right of First Refusal pursuant to clause (a)
above, but in no event later than thirty (30) days thereafter (and the transfer of all of
such shares shall occur simultaneously). Any shares sold to the other Shareholders
pursuant to this Article III shall be sold to them free and clear of all liens and
encumbrances, and shall otherwise be documented on customary terms and conditions
consistent with the Second Notice.

          Section 3.04 Sale to Third Party. If the Company and/or the other Shareholders do not
exercise the entire Right of First Refusal under this Article III, as provided in Sections 3.02
and 3.03 above, then the Selling Shareholder may sell all (but not less than all) of the Offered
Shares to the Third Party Purchaser at the price specified in the Offer or at a higher price (and
otherwise on the same terms and conditions as set forth in the Offer) subject to compliance with
Articles II and IV hereof, provided that such sale is consummated within three (3) months after
the date of the later of the Notice or the Second Notice, as applicable. Any proposed sale to be
consummated after the expiration of such three (3) month period shall again be subject to the
Right of First Refusal set forth in this Article III.

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ARTICLE IV.

CO-SALE PROVISIONS

          Section 4.01 Notice of Sale. If (after complying with Article III) a Selling
Shareholder (or Selling Shareholders acting in concert) accepts an Offer to purchase Shares which
would result in the acquisition by any person, entity or group of related persons or entities of
more than 50% of the outstanding voting power of the Company (a “Company Sale”), then the Selling
Shareholder or Selling Shareholders shall give the other Shareholders and the Company prompt
written notice thereof, including a copy of the accepted offer (a “Sale Notice”).

          Section 4.02 Tag Along Right. In the event of any Company Sale which is not subject
to, or with respect to, or with respect to which the requisite Shareholders have not exercised the
Drag-along Rights in Section 4.03, each of the other Shareholders shall have the right to
participate in such Company Sale by including all of its Shares in such Company Sale (the “Tag
Along Right”). The Tag Along Right shall be exercised by each of the other Shareholders by giving
written notice to the Selling Shareholder or Selling Shareholders within ten (10) business days
following receipt of the Sale Notice from the Selling Shareholder or Selling Shareholders, which
written notice shall state the number of Shares which such other Shareholder intends to include in
the Company Sale. With respect to any of the other Shareholders that exercise their Tag Along
Right, the Company Sale may not occur unless such Shares are included in the Company Sale at the
same time and on the same terms and conditions as are applicable to the Shares being sold by the
Selling Shareholder or Selling Shareholders; provided that no such Shareholder shall be required to
make any representation or warranty (other than that such Shareholder has good title to the Shares
being sold by such Shareholder, free and clear of any liens and authority to sell), or covenant or
indemnity except that such Shareholder shall be required to participate in all indemnification
obligations on a pro rata basis so long as such Shareholder’s liability (absent fraud) in
connection with such sale shall not exceed such Shareholder’s proceeds from such sale.

          Section 4.03 Drag-Along Right.

          (a) In the event that one or more Shareholders holding Shares aggregating more than
50% of the outstanding voting power of the Company (the “Triggering Shareholders”)
determines to effect a Company Sale or sell or otherwise dispose of all or substantially
all of the assets of the Company determined on a consolidated basis or all or substantially
all of the capital stock of the Company in a bona fide negotiated transaction and such
transaction has been approved by all holders of Shares entitled to approve or consent to
such transaction (an “Approved Sale”), each Shareholder shall be obligated to and shall
upon written request of the Triggering Shareholders: (i) consent to and raise no objections
against the Approved Sale, (ii) if the Approved Sale is structured as (A) a merger or
consolidation, waive any dissenters or similar rights in connection

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with such merger or consolidation, (B) a sale of capital stock, agree to sell all of his
Shares on the terms and conditions approved by the Triggering Shareholders, or (C) as a sale
of assets, vote in favor of such sale and any subsequent liquidation of the Company or other
distribution of the proceeds therefrom, (iii) execute and deliver such instruments of
conveyance and transfer and take all other necessary or desirable actions in connection with
the consummation of the Approved Sale reasonably requested by the Triggering Shareholders
(including, without limitation, executing any purchase agreements, merger agreements, escrow
agreements and related agreements) and (iv) join on a pro rata basis (based on the share of
the aggregate proceeds received by such Shareholder from such Approved Sale) in any
indemnification or other obligations that the Triggering Shareholders agree to provide in
connection with such Approved Sale other than any such obligations that relate specifically
to a particular Shareholder such as indemnification with respect to representations and
warranties given by a Shareholder regarding title to and ownership of Shares; provided that
(i) any Shareholder’s aggregate liability (absent fraud) in connection with such Approved
Sale shall not exceed such Shareholder’s proceeds from such Approved Sale and (ii) that no
such Shareholder shall be required to make any representation or warranty (other than that
such Shareholder has good title to the Shares being sold by such Shareholder, free and clear
of any liens and authority to sell), or covenant or indemnity except that such Shareholder
shall be required to participate in all indemnification obligations on a pro rata basis so
long as such Shareholder’s liability (absent fraud) in connection with such sale shall not
exceed such Shareholder’s proceeds from such sale.

ARTICLE V.

PRE-EMPTIVE RIGHTS

          Section 5.01 General. If the Company hereafter proposes to offer to sell any shares
of its capital stock (or securities convertible or exchangeable into such capital stock), it shall
give Celera written notice thereof, describing the securities to be offered, the price, and the
other terms and conditions upon which the Company proposes to issue such capital stock. Celera
shall have a right to participate in such offering on a pro rata basis (i.e., based on the
percentage of the Company owned by Celera on a fully-diluted basis). Celera shall have fifteen
(15) business days after receipt of written notice of any such offering to exercise its
pre-emptive right.

          Section 5.02 Company’s Right To Issue to Third Parties. To the extent that Celera
does not exercise its preemptive right as provided in Section 5.01, then the Company shall have
one hundred twenty (120) days thereafter to offer shares not subscribed for to third party
investors at a price and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company’s notice to Celera as provided in Section 5.01
above; provided, that, if either (a) any such

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purchaser acquires more than five percent (5%) of the capital stock of the Company or (b) after
such issuance, the Shareholders who are a party to this Agreement would hold, in the aggregate,
less than fifty-one percent (51%) of the issued and outstanding shares of the voting stock of the
Company (based on the number of votes per share), then as a condition to such issuance the Company
shall obtain the written agreement of either the purchaser or purchasers of such shares, or such
other additional shareholders of the Company as maybe chosen at the Company’s discretion to be a
party to this Agreement and be subject to the terms and conditions applicable to the Shareholders
contained herein with respect to the shares acquired or held by them, such that after the issuance
the Shareholders who are a party to this Agreement hold, in the aggregate, fifty-one percent (51%)
of the issued and outstanding voting stock of the Company (based on the number of votes per
share).

          Section 5.03 Exclusions. The pre-emptive right set forth in this Article V shall not
be applicable to transactions involving any of the following securities:
(a) options issued to Company employees or directors pursuant to any stock option, stock purchase
or similar benefit plan or warrants issued to consultants in consideration for services provided,
or securities issued pursuant to the exercise of options issued under any such stock option plan or
upon exercise of such warrants, (b) capital stock of the Company issued pursuant to any rights or
agreements including, without limitation, rights, warrants or other securities exercisable for or
exchangeable or convertible into capital stock of the Company (other than any warrants, whenever
issued, or any of the benefit plans referred to in clause (a) above), provided that the
pre-emptive right under this Article V applied with respect to the initial sale or grant by the
Company of such rights, warrants or other securities, (c) any security issued for consideration
other than cash pursuant to a merger, consolidation, acquisition or similar business combination,
(d) any securities issued in connection with any stock split, stock dividend, reverse stock split
applied without discrimination among the Company’s shareholders; provided that, if either
(i) the acquiror (as a result of the issuance of such securities) holds at least five percent (5%)
or more of the capital stock of the Company or (b) after such issuance, the Shareholders who are a
party to this Agreement would hold, in the aggregate, less than fifty-one percent (51%) of the
issued and outstanding shares of the voting stock of the Company (based on the number of votes per
share), then as a condition to the issuance the Company shall obtain the written agreement of the
acquiror of such shares, or such other additional shareholders of the Company as may be chosen at
the Company’s discretion, to be a party to this Agreement and be subject to the terms and
conditions applicable to the Shareholders contained herein with respect to the shares acquired or
held by them, such that after such issuance the Shareholders who are a party to this Agreement
hold, in the aggregate, fifty-one percent (51%) of the issued and outstanding voting stock of the
Company (based on the number of votes per share), (e) any capital stock of the Company issued
pursuant to a Qualified Financing (as defined in the Certificate of Designations of Series E
Preferred Stock) and (f) any capital stock of the Company issued pursuant to the conversion of the
10.9% Convertible Promissory Notes of the Company issued between November 1999 and December 2001
and any 8% Convertible Promissory

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Notes of the Company issued
prior to the date of this Agreement pursuant to that certain Offering
Memorandum dated November 30, 2001 of the Corporation as in
effect on January 22, 2002.

ARTICLE VI.

BOARD OF DIRECTORS; APPROVAL MATTERS

          Section 6.01
Board of Directors. So long as Celera is a Strategic
Shareholder, Celera shall have the right to designate one
(1) nominee to serve as a director (or the equivalent for
entities other than corporations) of the Company (collectively,
“Company Board”). The Company and the Shareholders agree to
cause the person so named to be nominated for election to the Company
Board at the time and in the manner proper for such nomination,
whereupon the Shareholders and the Company agree to cast all of the
votes they are entitled to cast in such election (whether at an
annual or special meeting of shareholders or by written consent in
lieu of a meeting or otherwise) for the election of such nominees to
the Company Board. In the event of a vacancy due to the resignation,
removal, death or incapacity of a Celera nominee on any Company
Board, Celera shall be entitled to designate a successor to fill such
vacancy. A Celera nominee on the Company Board may not be removed
without the consent of Celera except for good cause. No action of the
Company Board may be taken by written consent unless such written
consent is unanimous.

          Section 6.02
Matters Requiring Celera Approval. So long as Celera is a
Strategic Shareholder, the Company shall not take and shall cause its
Subsidiaries not to take, and the other Shareholders shall not
authorize or permit the Company or any of its Subsidiaries to take,
any of the following actions without Celera’s prior written
consent:

          (a)  Winding
up, dissolving, or liquidating the Company;

          (b)  Substantially
and fundamentally changing the nature of the Company’s business
from the business as conducted on the date hereof or as proposed to
be conducted on the date hereof (whether through organic growth,
acquisition, or otherwise);

          (c)  Selling
or otherwise disposing of all or substantially all of the
Company’s business in one or a series of related transactions,
whether effected by sale or license of assets, merger, consolidation,
sale of stock, or otherwise (including any transaction(s) pursuant to
which more than 50% of the voting power of the Company is passed to
or acquired by a person or entity or group of related persons or
entities);

          (d)  Entering
into any material contract or transaction with any affiliate of the
Company (which for these purposes would include, but not be limited
to, the officers and directors of the Company, their family members,
and the affiliates

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of all of such parties) (“Affiliate Contracts”) other than Affiliate Contracts which do
not individually or in the aggregate exceed $100,000 in value; and

          (e) Effecting any amendment to the Company’s Certificate of Incorporation or
By-laws which is reasonably likely to have an adverse effect on Celera’ s rights
pursuant to this Agreement or the Certificate of Incorporation.

Provided such repayment is permitted pursuant to Section 7.06 hereof, Section 6.02(d) shall not
require Celera’s approval for the repayment of loans to Shareholders outstanding on the date hereof
with proceeds of any future financing, provided, that no more than 10% of such net proceeds
maybe used to repay such existing Shareholder loans.

ARTICLE VII. COMPANY COVENANTS

          Section 7.01 Basic Financial Information and Reporting.

          (a) The Company will maintain true books and records of account at the Company’
principal place of business in which full and correct entries will be made of all its
business transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied. The
Company will set aside on its books all such proper accruals and reserves as shall be
required under generally accepted accounting principles consistently applied.

          (b) The Company shall prepare, or have prepared by its auditors, monthly, quarterly
and annual financial statements for the Company. The Company shall provide each Shareholder
a copy of such financial statements promptly after the preparation thereof. Such financial
statements: (i) shall include balance sheets, income statements, statements of stockholder
equity, and cash flow statements; (ii) in respect of annual statements only, shall be
prepared in accordance with generally accepted accounting principles; (iii) shall be
certified (subject to audit) by the Company’s chief financial officer or chief executive
officer; and (iv) if audited, shall be accompanied by an appropriate report of such
auditors.

          Section 7.02 Inspection Rights. Each Shareholder shall have the right to visit and
inspect, during normal business hours and on a mutually agreed upon, prearranged date, any of the
properties of the Company or any of its subsidiaries, and to discuss the affairs, finances and
accounts of the Company or any of its subsidiaries with its officers, to examine the books of
accounts and records and to review such other information as is reasonably requested for any
proper purpose reasonably related to such Shareholder’s interest in the Company and its rights and
responsibilities as a shareholder of the Company.

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          Section 7.03 Reporting of Other Events. The Company shall give Celera prompt written
notice of (a) any legal action suit or claim, or administrative or governmental investigation or
proceeding, which has been instituted against or with respect to the Company or which has been
threatened in writing, or (b) any other material event, which in the case of either (a) or (b)
could have a material adverse effect on the Company, its business, financial condition, or
prospects.

          Section 7.04 Confidentiality of Records. Each Shareholder agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same degree of care as such
Shareholder uses to protect its own confidential information to protect Company confidential
information furnished to it (so long as such information is not in the public domain). This Section
7.04 shall not prohibit a Shareholder from disclosing Company confidential information to its
officers, directors, employees, legal counsel, accountants, consultants with whom such Shareholder
has a confidentiality agreement and representatives, and those of its affiliates, for the purposes
described in Section 7.02 as long as such parties are advised of the confidentiality provisions of
this Section 7.04.

          Section 7.05 Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of preferred stock, all common
stock issuable from time to time upon such conversion.

          Section 7.06 Dividends; Repayment of Shareholder Loans. Notwithstanding anything in
this Agreement to the contrary, the Company may not declare, pay or set aside for payment any
dividends to Shareholders or repay any outstanding Shareholder loans until Celera has received
full payment in immediately available funds of all amounts due and payable to Celera pursuant to
Section 4.1 of that certain Livestock Database License Agreement dated the date hereof by and
among Celera and the Company.

          Section 7.07 No Conflicts. The Company represents and warrants that there are no
agreements with any existing stockholders that conflict with the rights of the Shareholders in this
Agreement.

          Section 7.08 Stockholders Not Parties to the Agreement. The Company agrees to use
its commercially reasonable best efforts to cause each of the existing stockholders, holding at
least five percent (5%) of the capital stock of the Company and any future stockholder holding at
least five percent (5%) of the capital stock of the Company, not a party to this Agreement to
become a party to this Agreement and be subject to the terms and conditions applicable to
Shareholders contained herein.

12

 

ARTICLE VIII.

REPRESENTATIONS AND WARRANTIES

          Each Shareholder hereby represents and warrants to each other Shareholder, and
the Company hereby represents and warrants to each of the Shareholders, as follows as
of the date of execution of this Agreement by such Shareholder or the Company, as
applicable:

          Section 8.01 Organization and Good Standing. If such party is an entity, such entity
has been duly organized and is validly existing and in good standing under the laws of the
jurisdiction in which such entity was formed.

          Section 8.02 Power and Authority. If such party is an entity, such party has all
requisite corporate or other organizational power and authority, and if such party is a natural
person, such party has legal capacity, to enter into this Agreement and to consummate the
transactions contemplated hereby.

          Section 8.03 Due Authorization. If such party is an entity, the execution, delivery
and performance by such party of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate or other organizational
proceedings.

          Section 8.04 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby:

          (a) if such party is an entity, violates or conflicts with such party’s charter
documents;

          (b) results in the creation of any lien or encumbrance upon any of the properties of
such party;

          (c) violates or conflicts with, or constitutes a default under, or results in a
breach of (including any circumstances that would result in any of the foregoing with
notice or lapse of time or both), or requires any consent, authorization or approval
under, any contract or agreement to which such party is a party or by which such party or
its assets or properties are bound; or

          (d) (i) legally requires such party to obtain any consent, authorization or approval
of, or make any filing with, any governmental agency, body or instrumentality (whether
federal, state, local or foreign) or other entity or (ii) violates any provision of (x)
any applicable law or (y) any judicial, administrative or arbitration order, award,
judgment, writ, injunction or decree to which such party is a party or by which such party
or any of its properties is subject.

13

 

          Section 8.05 Enforceability. This Agreement is a valid and binding agreement
of such party, enforceable against such party in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other laws affecting the enforcement of
creditors’ rights generally, and the application of equitable principles (whether
considered in a proceeding at law or in equity).

ARTICLE IX.

MISCELLANEOUS

          Section 9.01 Implementation of Agreement. The Shareholders hereby agree, for their
successors and assigns, heirs, and legal representatives, to take such actions (including the
execution and delivery of such further instruments and documents), as may be required to give full
effect the provisions of this agreement and the transactions, rights and obligations contemplated
hereby. Without limitation of the foregoing, such actions shall include, without limitation,

voting of Shares at shareholder meetings (or in written consents), and causing any nominees on the
Company’s board of directors to vote at board meetings (or in written consents) in a manner which
is consistent with this Agreement and gives full effect to the transactions, rights, and
obligations contemplated hereby.

          Section 9.02 No Agency. The relationship among the parties to this Agreement shall be
strictly contractual in nature and, except as required by or implicit in law, there shall not be
any agency or fiduciary relationship among them arising out of this Agreement. No party to this
Agreement shall identify itself as or hold itself out to be the agent of any other party to this
Agreement or an affiliate of any such other party.

          Section 9.03 Expenses. Except as may otherwise be expressly provided herein, each of
the parties hereto shall bear its own costs and expenses, including fees and disbursements of their
counsel and accountants, in connection with the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby.

          Section 9.04 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT CONSIDERATION OF PRINCIPLES OF
CONFLICTS OR CHOICE OF LAWS.

          Section 9.05 Specific Performance; Remedies. Each of the parties agrees that damages
for a breach of or default under this Agreement would be inadequate and that in addition to all
other remedies available at law or in equity that the parties and their successors and assigns
shall be entitled to specific performance or injunctive relief, or both, in the event of a breach
or a threatened breach of this Agreement. In any legal action or proceeding brought to enforce any
provision of this Agreement, the prevailing party shall be entitled to recover all reasonable
expenses, charges, court costs and

14

 

reasonable attorneys’ fees in addition to any other available remedy at law or in equity. All
rights and remedies specified herein are in addition to, and not in substitution of, all rights
and remedies available at law or in equity.

          Section 9.06 Notices. All notices, requests, demands or other communications made
pursuant to this Agreement shall be in writing in the English language and shall be addressed (a)
if to any Shareholder, to such Shareholder’s address or telecopy number as set forth on such
Shareholder‘s signature page to this Agreement, or (b) if to MetaMorphix, Inc., 1450
South Rolling Road, Baltimore, Maryland 21227, facsimile number (410) 455-5885, to the attention of
the President, with a copy to William E. Carlson, Esq., Shapiro Sher & Guinot, P.A., 36 South
Charles Street, Baltimore, Maryland 21201. Any party may change its address for purposes of this
Section 9.06 by notice to the other parties of such change in the manner specified above. Notices,
requests, demands or other communications shall be deemed given (i) if delivered personally, upon
delivery, (ii) if delivered by registered or certified mail (postage prepaid, return receipt
requested), upon the earlier of actual delivery or three (3) business days after being mailed,
(iii) if delivered by overnight courier or similar service, upon delivery, or (iv) if given by
facsimile, upon receipt of confirmation of transmission by facsimile; provided that if such
notices or other communications would otherwise be deemed given on a day which is not a business
day, the delivery shall be deemed the first business day following such day.

          Section 9.07 Assignment Successors. This Agreement shall be binding upon and inure to
the benefit of any permitted successors and assigns of any party hereto. The Company may not, and
other than in connection with a permitted transfer of Shares hereunder no Shareholder may, assign
or delegate its rights or obligations hereunder. Without limitation of the foregoing, except as may
otherwise expressly be provided herein, a permitted transferee of Shares shall be subject to all of
the obligations and entitled to all of the benefits hereunder applicable to such Shares and the
holder of such Shares hereunder or under applicable law prior to the transfer.

          Section 9.08 Entire Agreement. This Agreement constitutes the entire and sole
agreement and understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior or contemporaneous understanding, agreements, representations or
warranties, whether oral or written, with respect to the subject matter hereof.

          Section 9.09 Severability. Any provision of this Agreement which may be determined
by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in such jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

15

 

          Section 9.10 Time. Subject to any required notice and the lapse of any applicable
cure periods, time is of the essence of this Agreement with respect to each and every provision of
this Agreement in which time is specifically expressed to be a factor.

          Section 9.11 Modification, Amendment, Waiver. No modification or amendment of any
provision of this Agreement shall be effective unless approved in writing by all of the parties to
the Agreement affected by such modification or amendment. No party shall be deemed to have waived
compliance by any other party with any provision of this Agreement unless such waiver is in
writing, and the failure of any party at any time to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall not affect the
rights of any party thereafter to enforce such provisions in accordance with their terms. No waiver
of any provision of this Agreement shall be deemed to be a waiver of any other provision of this
Agreement. No waiver of any breach of any provision of this Agreement shall be deemed the waiver of
any subsequent breach thereof or of any other provision of this Agreement.

          Section 9.12 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the same effect as if
all parties had signed the same document. All such counterparts will be deemed to be an original,
shall be construed together and shall constitute one and the same instrument.

16

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

          This Shareholders Agreement is hereby executed as of the date first above written.

	 	 	 	 	 
	 	 	METAMORPHIX, INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Edwin C. Quattlebaum
	

	 	 	 	 
	 	 	Name: Edwin C. Quattlebaum.
	 	 	          Title: President and CEO

17

[SIGNATURE PAGE TO METAMORPHIX SHAREHOLDERS AGREEMENT]

 

          This Shareholders Agreement is hereby executed as of the date first above written.

	 	 	 	 	 
	 	 	AMERICAN HOME PRODUCTS
	 	 	CORPORATION, by and through
	 	 	GENETICS INSTITUTE,LLC
	 
	 	 	 	 
	

	 	By:
	 	/s/ Jeffrey S. Sherman      (SEAL)
	

	 	 	 	 
	

	 	 	 	Name: Jeffrey S. Sherman
	

	 	 	 	Title:Vice President
	 
	 	 	 	 
	 	 	Address of Shareholder:
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	Date of Execution:

18

 

          This Shareholders Agreement is hereby executed as of the date first above written.

	 	 	 	 	 
	 	 	THE JOHNS HOPKINS UNIVERSITY
	 
	 	 	 	 
	

	 	By:
	 	/s/ william E. Snow. Jr.      (SEAL)
	

	 	 	 	 
	

	 	 	 	Name: william E. Snow. Jr.
	

	 	 	 	Title: Treasurer
	 
	 	 	 	 
	 	 	Address of Shareholder:
	 
	 	 	 	 
	 	 	Johns Hopkins University
	 	 	Office of the Teasurer
	 	 	Suite E200, 1101 East 33rd Street
	 	 	Baltimore, MD 21218
	 
	 	 	 	 
	 	 	Date of Execution: 2/14/02

19

[SIGNATURE PAGE TO METAMORPHIX SHAREHOLDERS AGREEMENT]

 

          This Shareholders Agreement is hereby executed as of the date first above written.

	 	 	 	 	 
	 	 	Star Biotech Inc. formerly BIOSTAR, INC.
	 
	 	 	 	 
	

	 	By
	 	/s/ Todd Lahti      (SEAL)
	

	 	 	 	 
	 	 	Name: Todd Lahti
	 	 	Title: Treasurer
	 
	 	 	 	 
	 	 	Address of Shareholder:
	 
	 	 	 	 
	 	 	Saskatoon SK.
	 
	 	 	 	 
	 	 	Date of Execution:                     

20

[SIGNATURE PAGE TO METAMORPHIX SHAREHOLDERS AGREEMENT]

 

          This Shareholders Agreement is hereby executed as of the date first above written.

	 	 	 	 	 
	

	 	/s/ Se-Jin Lee                                    (SEAL)
	 	 	Se-Jin Lee, M.D., Ph.D.	 	 
	 
	 	 	 	 
	

	 	Address of Shareholder:	 	 
	 
	 	 	 	 
	

	 	6711 Chokeberry Road	 	 
	

	 	Baltimore, MD 21209	 	 
	 
	 	 	 	 
	

	 	Date of Execution: 2/14/02	 	 

21

[SIGNATURE PAGE TO METAMORPHIX SHAREHOLDERS AGREEMENT]

 

	 	 	 	 	 
	 	 	PE CORPORATION (NY)
	 
	 	 	 	 
	

	 	By:
	 	/s/ Ugo D. DeBlasi      (SEAL)
	

	 	 	 	 
	

	 	 	 	Ugo D. DeBlasi
	

	 	 	 	Assistant Controller
	 
	 	 	 	 
	 	 	Address of Shareholder:
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	Date of Execution:

22exv10w20

 

Exhibit 10.20

[***Confidential Treatment Requested. Confidential portions of this agreement have been redacted

and have been separately filed with the Commission]

SWINE IMPROVEMENT AGREEMENT

     This agreement, effective this 1st of June, 2004, is by and between Monsanto Company, a
Delaware corporation having its primary place of business at 800 North Lindbergh Blvd., St. Louis,
MO 63167 (“Monsanto”), and MetaMorphix, Inc., a Delaware corporation having its primary place of
business at 8510A Corridor Rd., Savage, MD 20763 (“MMI”), and shall be effective as of the
Effective Date.

BACKGROUND

     A. MMI has expertise in applied genomic and proteomic technologies for optimization of
livestock and has developed information on the swine genome.

     B. Monsanto is in the business of breeding swine and licensing the resulting swine genetics
to swine producers and other entities in the pork value chain (the “Swine Business”), and conducts
research in the areas of swine genomics, QTL discovery and fine mapping, and the practical
application of marker-assisted selection in swine.

     C. Monsanto desires to obtain a license to MMI’s technology related to a swine genome and use
it to improve its breeding business and the resulting swine genetics for certain Traits.

     D. MMI desires to grant such a license to Monsanto under certain
terms.

AGREEMENT

     In consideration of the covenants, conditions, and undertakings hereinafter set forth, it is
agreed by and between the parties as follows:

     1. DEFINITIONS

          1.1 “Affiliate” means any corporation, association, partnership, or other entity
which directly or indirectly controls, is controlled by or is under common control with the party
in question (but, in respect to MMI, excluding PE Corporation (NY) and Applera Corporation, itself
and/or acting through its Celera Genomics Group).

          1.2 “Base Year Revenue” means the amount calculated as shown in Attachment A.

          1.3 “Celera License Agreement” means that February 28, 2002 Livestock Database
License Agreement, as amended.

          1.4 “Commercially Exploit” means to make, have made, propagate, have propagated, use,

Page 1

 

have used, import, or export a Product for the purpose of selling or offering to sell such
Product. “Commercial Exploitation” means the act of Commercially Exploiting a Product.

Page 2

 

          1.5 “Confidential Information” means (i) the terms and conditions of this Agreement,
(ii) any proprietary or confidential information or material, including all trade secrets, in
tangible form disclosed hereunder that is marked as “Confidential” at the time it is delivered to
the receiving party, and (iii) proprietary or confidential information or material, including all
trade secrets, disclosed orally hereunder which is identified as confidential or proprietary when
disclosed and such disclosure of confidential information is confirmed in writing (or by
facsimile or email) within thirty (30) days by the disclosing party; provided however,
that the above information shall not be deemed Confidential Information, to the extent the
receiving party can establish by competent written proof that such information:

               1.5.1 was already known to the receiving party, other than under an obligation of
confidentiality owed to the disclosing party, at the time of disclosure;

               1.5.2 was generally available to the public or otherwise part of the public domain at the
time of its disclosure hereunder to the receiving party;

               1.5.3 becomes generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of the receiving party in breach of
this Agreement;

               1.5.4 is independently developed by the receiving party without reference to any
Confidential Information disclosed by the disclosing party; or

               1.5.5 was subsequently disclosed to the receiving party by a person other than the
disclosing party without breach of any legal obligation to the disclosing party.

          1.6 “Control” means:

               1.6.1 as to third party Confidential Information or Intellectual Property that is
in-licensed by a party, the possession of the ability to disclose or grant the licenses or
sublicenses as provided for herein without violating the terms of any agreement or other
arrangement with any third party; and

               1.6.2 as to the prosecution of patent applications, the maintenance of patent rights, and
the enforcement and/or defense of patent rights, Control includes the authority to select legal
counsel, solicit other expert advice and assistance, and to make decisions pertaining to the
conduct of patent prosecution, interferences, patent issuance, maintenance, reissue,
reexamination, patent enforcement or defense, as applicable.

               (a) In the context of patent prosecution and patent maintenance, Control also includes the
authority to authorize and oversee the assessment of patentability, the preparation and filing of
a patent application, to authorize a claim amendment or the cancellation or addition of a claim,
to authorize the payment of an issue fee, maintenance fee, or patent annuity.

               (b) In the context of patent enforcement or defense, Control further includes the authority
to file and conduct a lawsuit, to offer a settlement, and to accept or reject a proposed
settlement.

Page 3

 

          1.7 “Dairy Field” means the breeding of bovine breeds used in the U.S. primarily
for dairy purposes.

          1.8 “Effective Date” means the date first written above.

          1.9 “Improvements” means discoveries and inventions related to the genetics of
animals that are discovered or developed through access to the MMI Database by Monsanto’s or its
Affiliates’ employees or consultants, with or without contribution to their conception from
employees or consultants of MMI.

          1.10 “Intellectual Property” means generally any and all right, title, and interest
in, arising from, or relating to inventions, ideas, know-how, works of authorship, and
confidential information, including copyrights, patents and patent applications, trade secrets,
trademarks, service marks, any registrations, or applications relating to any of the foregoing,
and any other rights of a similar nature or character whether now existing or hereafter created,
developed, arising, or otherwise coming into being.

          1.11 “Licensing Costs” means the costs actually expended to establish and maintain a
value recognition and/or collection system in a given geography. Examples of such out-of pocket
costs are consultants’ fees, legal fees, governmental fees, and travel costs, but do not include
salaries or any overhead for employees or facilities.

          1.12 “Meat Quality Revenues” means the net royalties paid to Monsanto, an Affiliate,
or a Sublicensee, by a pork meat packing entity for the value of the Meat Quality Trait(s) in
meat processed by that entity. Gross royalties shall be reduced by any rebates, discounts, or
commissions to determine net royalties.

          1.13 “Meat Quality Trait” means a Trait which is manifested by improved meat
quality, for example, pH, color, water holding capacity, marbling, texture, tenderness, and
similar meat quality attributes.

          1.14 “MMI” has the meaning set forth in the Preamble.

          1.15 “MMI Database” means swine genomics information owned or controlled by MMI,
including porcine sequence reads and consensus sequence, identification of the animal/breed from
which each sequence was derived, sequence contig files identifying the approximately 631,000
“in silico” single nucleotide polymorphisms (SNPs), and comparative sequence analysis
from which approximately 217,000 porcine SNPs with synteny to human sequences were identified.

          1.16 “MMI Intellectual Property” means the Intellectual Property owned, Controlled,
or sublicensable by MMI at or after the Effective Date that (i) is necessary to the effective
access to the MMI Database by Monsanto, including the complete information on the MMI Database,
or (ii) is relevant to the development and/or commercialization of Meat Quality Traits or
Production Traits in swine.

          1.17 “MMI Sublicense Revenues” means the total payments received by MMI for (i)
sublicenses to use Improvements or Intellectual Property embodying Improvements and (ii) the

Page 4

 

revenue from the sale of goods or the provision of services (less actual costs), which goods or
services are made or used by applying or using an Improvement . Any goods or services, as well as
cash or debt, paid by any party in exchange for the rights received in a sublicense to
Improvements shall be considered MMI Sublicense Revenues. Revenues shall not begin to accumulate
for purposes of calculating royalties due to Monsanto until such time as MMI has recouped the
associated Licensing Costs, if any.

          1.18 “Monsanto” has the meaning set forth in the Preamble.

          1.19 “Monsanto License Revenues” means the total payments received by Monsanto for
licenses to unrelated third parties under Intellectual Property for Improvements in the Swine
Field, which licenses do not include the use of swine breeding stock owned or controlled by
Monsanto or its Affiliates or do not involve the provision of Products by Monsanto or its
Affiliates. Revenues from such licenses that do include the use of swine breeding stock owned or
controlled by Monsanto or its Affiliates or do involve the provision of Products by Monsanto or
its Affiliates are intended to be included in the terms “Meat Quality Revenues” and “Production
Royalty Revenue.” Revenues shall not begin to accumulate for purposes of calculating royalties
due to MMI until such time as Monsanto has recouped the associated Licensing Costs, if any.

          1.20 “North America” means the countries of Canada, Mexico, and the United States
of America.

          1.21 “Other World Areas” means all countries outside of North America.

          1.22 “Prime Rate” means the base lending rate on corporate loans from commercial
banks, as published from time to time in The Wall Street Journal.

          1.23 “Product” means any method, service, or activity performed by or for Monsanto
through the use of an Improvement or any animal or animal part or product, such as semen or
embryos, produced by or for Monsanto or its Sublicensees through the use of an Improvement.

          1.24 “Production Royalty Revenue” means the amount calculated as shown in Attachment
A.

          1.25 “Production Trait” means a Trait manifested by sow productivity, growth
efficiency, disease resistance, or leanness in swine.

          1.26 “Restricted Line Products” means the boars, gilts, embryos, or semen, from any
source, used by Monsanto to generate weaned pig royalties from swine producers.

          1.27 “Sublicensee” means a third party who has been granted a
sublicense. 1.28 “Swine Business” has the meaning given in the
Preamble.

          1.29 “Swine Field” means the activities and genetics useful in production of swine
and products derived from swine.

Page 5

 

          1.30 “Trait” means any biochemical, physiological, or physical attribute or phenotype
of an animal.

          2. LICENSE GRANTS.

          2.1 License to Monsanto.

               2.1.1 Subject to the terms and conditions of this Agreement, MMI grants
to Monsanto an exclusive, worldwide, royalty-bearing license under MMI Intellectual Property,
including the right to access the MMI Database, in the Swine Field. Subject to full payment under
Section 3.1, this license constitutes a partial, field-restricted sublicense to access and use
certain rights and technology licensed by MMI from Applera Corporation, through its Celera
Genomics Group, and as successor to PE Corporation (NY) under the Celera License Agreement.
Monsanto shall not have the right to grant sublicenses for either (a) MMI Intellectual Property or
(b) access to MMI Database, but notwithstanding the foregoing, shall be free to Commercially
Exploit in any way the Improvements, including any genotypic markers discovered through access to
the MMI Database and MMI Intellectual Property. Access to the MMI Database shall be accomplished
by MMI’s delivery of an electronic version thereof, including the information listed in Attachment
C.

               2.1.2 Any license granted hereunder with respect to any portion of the MMI. Intellectual
Property that is licensed by MMI from a third party shall be subject to any terms, conditions, or
restrictions, other than financial terms, included in such third party license of which MMI
notifies Monsanto in writing. For any pre-existing third-party agreements, such notice shall be
delivered prior to the execution of this Agreement. Monsanto has no obligation to accept a
sublicense under an agreement executed by MMI after the Effective Date. MMI has no obligation to
obtain any rights that are transferable to Monsanto hereunder. MMI shall make any payments arising
under any such third party license.

               2.1.3 In the event Monsanto has not begun Commercial Exploitation in North America within
five (5) years of the Effective Date, the license granted to Monsanto under MMI Intellectual
Property, including the right to access the MMI Database, shall become nonexclusive; and
thereafter, MMI shall be free to grant any nonexclusive license under MMI Intellectual Property or
the MMI Database to any third party in the Swine Field.

          2.2 Monsanto’s Grant Back Obligation Outside the Swine Field.

               2.2.1 Monsanto agrees to grant and hereby grants to MMI royalty-bearing exclusive, worldwide
licenses to use Improvements in any area outside of the Swine Field, subject to the right of
Monsanto in the Dairy Field as set forth in subsection 2.2.2 below. Such license shall be fully
transferable by assignment, sublicense or any other means. The parties agree that they will
negotiate adjustments to the definition of MMI Sublicense Revenues for circumstances in which MMI
combines an Improvement with its own Intellectual Property in granting a sublicense or selling a
good or service. The adjustments shall be negotiated on the basis of the proportion of the
contribution of the relevant Improvement(s) to the value of the business that MMI has established
or intends to establish or the total technology to be licensed/sublicensed to a third party.

Page 6

 

               2.2.2 Prior to the grant of a sublicense from MMI to any third party for the use of any
Improvement in the Dairy Field, MMI shall notify Monsanto in writing prior to the grant of a
sublicense to a third party of the terms of such proposed sublicense (the “Notice”). If Monsanto
so desires, MMI shall then exclusively negotiate with Monsanto for a period of ninety (90) days
from the Notice date to attempt to reach agreement on terms for an exclusive license to Monsanto
for the same Improvement(s) in the Dairy Field. If Monsanto and MMI do not reach such an
agreement and thereafter MMI offers, or receives an offer for, a license for the same
Improvement(s) in the Dairy Field to/from a third party with terms different from that last
offered Monsanto during the previous exclusive negotiation period, MMI shall, before entering
into such a license, offer the same terms Monsanto shall have ninety (90) days to accept or
reject the offer. For clarity, any proposed license on terms that are different from those
previously offered to Monsanto at any time must first be offered to Monsanto, which shall have
ninety (90) days to accept or reject the offered license terms.

               2.2.3 Notwithstanding any other provision of this Agreement, any license granted pursuant to
Section 2.2.1 shall survive any termination or expiration of this Agreement and shall remain
fully enforceable thereafter so long as MMI makes required royalty payments.

               2.2.4 The licenses granted under Section 2.2.1 shall terminate if MMI has not
Commercially Exploited the relevant Improvements within five years from the dates on which the
relevant Improvement(s) has been disclosed to MMI under Section 2.4.1.

          2.3 Monsanto’s Grant Back Obligation and MMI’s Licensing Rights Inside the Swine
Field.

               2.3.1 If Monsanto’s license under Section 2.1 has become nonexclusive as provided in Section
2.1.3, Monsanto shall, upon request from MMI, grant to MMI a nonexclusive license in a given
country for any Improvement which Monsanto is not then Commercially Exploiting in that country.
However, Commercial Exploitation of the Improvement in any country of North America shall be
deemed to be Commercial Exploitation in all countries of North America, and further, Monsanto
shall be deemed to be Commercially Exploiting an Improvement in all major export countries for
primal meat components of swine from countries in which Monsanto’s, its Affiliates, or its
licensees are actually selling Products embodying the Improvement.

               2.3.2 The license to MMI under this Section 2.3 shall be royalty-bearing under, the terms of
Section 3.2.2 of this Agreement.

               2.3.3 Notwithstanding any other provision of this Agreement, any license granted pursuant to
Section 2.3.1 shall survive any termination or expiration of this Agreement and shall only
terminate or expire under its own terms.

          2.4 Collaboration by the Parties.

               2.4.1 The parties intend that Monsanto’s use of MMI Intellectual Property and the development
of Improvements based thereon be a collaborative effort along the lines of the work plan set forth
in Attachment B, the details of which are not binding on either party. To that end, each party
agrees to form a team that will work toward achieving the mutual goal of

Page 7

 

effective use of the MMI Database by Monsanto for their mutual benefit. The team members will be
the key technical interface between Monsanto and MMI. The team will meet (a) during the first six
months following the Effective Date at least once each month and (b) thereafter at least once per
calendar quarter. More frequent meetings can be requested by either party and agreement to meet
will not be unreasonably withheld providing that sufficient notice is given and the location or
means for a meeting is reasonable. The parties agree the use of telephone or video conferencing
is an acceptable means for a meeting. It is the intent of the parties that such meetings shall
include discussions of MMI’s technical effort on and contribution to the making of Improvements,
Monsanto’s progress in making Improvements, and Monsanto’s plans for filing patent applications
for such Improvements. The parties shall disclose to each other, inventions and discoveries
related to or based on the MMI Database for so long as Monsanto has access to the MMI Database,
provided, however, that neither party will disclose any information which is the confidential
information of a third party without the prior permission of the receiver and that third party.

               2.4.2 MMI agrees to provide Monsanto, upon reasonable request by Monsanto, to the extent
available, bioinformatics and mapping support related to Monsanto’s access to the MMI Database.
Such bioinformatics activities would include conducting useful sequence comparisons between the
full complement of porcine sequences and human and other animal sequences available to MMI.
Comparisons shall be made to sequences of other non-human species only to the extent that it does
not conflict with species-specific contractual agreements between MMI and a third party. For
example, sequences found to be linked to traits in other animals or humans could be compared to
MMI’s porcine sequence to identify potentially useful porcine SNPs. In addition, MMI would
provide consulting services to Monsanto, including applying the experience of working with other
licensees of MMI Intellectual Property. Nothing in this Agreement gives Monsanto any access or
rights to Celera’s Celera Discovery SystemTM software and Internet delivery system and
its “CDS subscription” DNA sequence information.

               2.4.3 Monsanto shall provide copies to MMI of any patent application to be filed on an
Improvement, at least fourteen (14) days prior to filing to allow MMI to make comments on the
application. After the filing of an application, Monsanto shall promptly, upon request of MMI,
provide to MMI any information necessary and useful for MMI to exercise its rights with respect to
Improvements. In the event that Monsanto desires to abandon a patent or patent application which
claims an Improvement, Monsanto shall first offer to assign such patent or application to MMI at
no cost to MMI other than the costs for preparing documents, recording assignments, and any taxes
due on such assignments. The failure of MMI to respond to such an offer in thirty (30) days may be
deemed by Monsanto to be a rejection of the offer.

          3. PAYMENTS.

          3.1 Access Fees. Within thirty (30) days of the Effective Date, Monsanto shall pay
MMI Five Hundred Thousand Dollars ($500,000). Within thirty (30) days of delivery of the
electronic version of the MMI Database required in Section 2.1.1, Monsanto shall pay MMI Five
Hundred Thousand Dollars ($500,000).

Page 8

 

          3.2 Royalty Payments.

               3.2.1 By Monsanto.

                    (a) Monsanto shall pay to MMI [***] of the sum
of (i) Meat Quality Revenues, (ii) Production Royalty Revenues less Base Year Revenues, and (iii)
Monsanto License Revenues. If the resulting product is less than zero because the value of
Production Royalty Revenues less Base Year Revenues is less than zero, the product shall be used
as a credit against royalties due in the following quarter(s) until the credit is depleted.

                    (b) In the event that MMI has a right to grant a sublicense to any Improvement(s) in the
Swine Field under Section 2.3, Monsanto shall pay to MMI [***] of Monsanto License Revenues derived from license royalties for the same
Improvement(s) from the same countries for which MMI holds a right.

                    (c) Beginning in the calendar year which contains the date which is seven (7) years from the
Effective Date and each year thereafter, if the total payments from Monsanto to MMI under this
Section 3.2.1 do not exceed [***] in the calendar
year, Monsanto shall pay the difference between the earned royalties of subparagraphs (a) and (b)
above and [***] with the payment due for the last
quarter of that year; provided, however, that if Monsanto elects not to pay this difference, then
the provisions of Section 10.6 shall apply and Section 10.3 shall not apply.

               3.2.2
By MMI. MMI shall pay to Monsanto [***] of MMI Sublicense
Revenues.

          3.3 Royalty Period. Except as provided in Section 3.4, Monsanto’s obligation to pay
royalties to MMI and MMI’s obligation to pay royalties to Monsanto shall continue for each
Improvement for ten (10) years from the first date Monsanto or a licensee commences Commercial
Exploitation based on that Improvement, but, on a country-by-country basis, the obligation is
extended until the expiration of all claims in MMI Intellectual Property or Monsanto’s
Intellectual Property which dominate the making, using or selling of Products based on the
relevant Improvement. MMI’s obligation to pay royalties to Monsanto shall continue on a country by
country basis until such time as Monsanto has no pending or granted patent rights for the licensed
Improvement(s).

          3.4 Suspension of Monsanto’s Royalty Obligation. If at the MMI Database or a
substantial portion of the contents of the MMI Database becomes available to third parties through
no fault of Monsanto, Monsanto’s obligations to pay royalties under Section 3.2.1 shall be
suspended and reduced to zero for so long as this condition exists. If MMI is able to return
Monsanto’s access to the MMI Database to an exclusive access, then Monsanto obligations under
3.2.1 shall be reinstated as of the first day of the following month. No royalties which might
have

Page 9

 

been due during the suspension period shall accrue or ever be due by Monsanto to MMI.

Page 10

 

          4. PAYMENTS; BOOKS AND RECORDS.

               4.1 Royalty Reports and Payments.

               4.1.1 After the first commercial sale, by Monsanto, an Affiliate or a Sublicensee, of a
Product, Monsanto shall deliver written reports to MMI for each calendar quarter within sixty
(60) days after the end of such quarter, stating in each such report the Meat Quality Revenues,
the Production Royalty Revenues, and all Licensing Costs, and the calculation of royalties due
thereon. With each such report, the royalties due for the reported quarter shall be paid.

               4.1.2 After the first commercial sale of a Product by MMI, an Affiliate or a Sublicensee, MMI
shall deliver written reports to Monsanto for each calendar quarter within sixty (60) days after
the end of such quarter, stating in each such report the MMI Sublicensing Revenues recognized by
MMI in the previous quarter, all Licensing Costs, and the calculation of royalties due thereon.
With each such report, the royalties due for the reported quarter shall be paid.

               4.1.3 Upon March 31, 2005, and upon each March 31 thereafter (until reports commence under
Section 4.1.1), Monsanto and MMI shall each calculate and report in detail (with back-up) to the
other the amount of Licensing Costs that have arisen on or before the immediately preceding
December 31.

          4.2 . Payment Method. All payments due under this Agreement shall be made by check or
by bank wire transfer in immediately available funds to a bank account designated by the payee.
All payments hereunder shall be made in U.S. dollars. If the due date of any payment is a
Saturday, Sunday or national holiday, such payment may be paid on the following business day.

          4.3 Late Payment Penalties. Interest shall accrue on any late payment owed hereunder
not made within ten (10) days of the date such payment is due, including late payments of access
fees, royalties, and underpayments to the extent such underpayment determinations are made by a
mediator or arbitrator pursuant to Section 11, at an interest rate equal to the lesser of the
Prime Rate plus two percent (2%) or the highest rate permissible by law, with such interest
accruing from the date the payment was originally due, and any late payment pursuant to this
Section shall be credited first to interest and then to any outstanding fees. This Section shall
in no way limit any other rights and remedies available to MMI or Monsanto, whether arising under
this Agreement or at law or in equity.

          4.4 Currency Conversions. If any currency conversion shall be required in connection
with the calculation of royalties hereunder, such conversion shall be made using the selling
exchange rate for conversion of the foreign currency into U.S. Dollars, quoted for current
transactions reported in Reuters for the second to last business day of the month prior to the
month in which Monsanto or MMI or a respective Affiliate, as applicable, received such payment.
Should royalties earned in certain countries not be eligible for payment from that country, the
party owing the royalties shall pay the other party the equivalent of such royalties due in U.S.
Dollars from other sources of funds.

Page 11

 

          4.5 Records and Inspection. Each party and its Affiliates and its
Licensees/Sublicensees shall keep complete, true and accurate books of account and records for
the purpose of determining the royalty amounts payable under this Agreement. Such books and
records shall be kept at the party’s principal place of business, for at least three (3) years
following the end of the six (6) month period to which they pertain. The books and records of
each party (and its Affiliates and Sublicensee) shall be open for inspection by the other party
during such three (3) year period by a public accounting firm for whom the party to be inspected
has no reasonable objection, solely for the purpose of verifying royalty statements hereunder.
Such inspections may be made no more than once each calendar year, at reasonable times and on
reasonable notice. Inspections conducted under this Section 4.5 shall be at the requesting
party’s expense and may not be conducted on a contingent fee basis; provided, however, if a
variation or error producing an increase exceeding five percent (5%) of the royalty amount stated
for any period covered by the inspection is established in the course of any such inspection,
then all reasonable costs relating to the inspection for such period and any unpaid amounts that
are discovered shall be paid promptly by the audited party to the requesting party, together with
interest thereon from the date such payments were due at the lesser of the Prime Rate plus two
percent (2%) or the highest rate permissible by law, and any payment pursuant to this Section 4.5
shall be credited first to interest and then to any outstanding royalties.

          4.6 Tax Matters. All royalty amounts and other payments required to be paid pursuant
to this Agreement shall be paid without deduction therefrom for withholding for or on account of
any sales tax, use tax, value-added tax or other tax or governmental charge.

          5. INTELLECTUAL PROPERTY

          5.1 Inventorship and Title.

               5.1.1 Inventorship and rights of ownership and title to Improvements shall be determined in
accordance with applicable law and shall be promptly assigned to Monsanto.

               5.1.2 As between the parties, title to all Intellectual Property in existence prior to the
Effective Date shall remain in the name of the owner as of that date, unless transferred by a
separate act of assignment by that owner. Except for the obligation of Monsanto in Section 2.2.3
and of MMI in Section 5.1.1, nothing in this Agreement shall be construed as transferring title,
or an obligation to transfer title, to any Intellectual Property.

          5.2 Defense of Patent Rights. MMI shall Control and be solely responsible for all
matters including the costs related to the prosecution, maintenance, enforcement and defense of the
MMI Intellectual Property licensed to Monsanto hereunder. Monsanto shall Control and be solely
responsible for all matters including the costs related to the prosecution, maintenance,
enforcement and defense of the patent rights for Improvements, subject to the provisions of
Subsection 2.2.3. Neither MMI nor Monsanto shall have the right to enforce any patent right of the
other party or its Affiliates.

Page 12

 

          6. REPRESENTATIONS AND WARRANTIES; DISCLAIMERS.

          6.1 Representations and Warranties.

               6.1.1 By MMI. MMI warrants and represents to Monsanto that (i) it has the full right
and authority to enter into this Agreement and grant the rights and licenses granted herein; (ii)
as of the Effective Date and to the knowledge of MMI, there are no existing or threatened
actions, suits, or claims pending against it with respect to its right to enter into and perform
its obligations under this Agreement; and (iii) MMI has not previously granted, and shall not
grant any rights in or to the MMI Intellectual Property or the MMI Database to a third party in
conflict with the rights or licenses granted to Monsanto under this Agreement.

               6.1.2 By Monsanto. Monsanto warrants and represents to MMI that (i) it has the full
right and authority to enter into this Agreement, (ii) as of the Effective Date and to the
knowledge of Monsanto, there are no existing or threatened actions, suits or claims pending
against it with respect to either (a) its right to enter into and perform its obligations under
this Agreement or (b) its ability to utilize Monsanto’s issued patents in furtherance of its
Swine Business; and (iii) Monsanto has not previously granted, and shall not grant any right,
license or interest in or to Improvements, in conflict with the rights or licenses granted (or to
be granted) to MMI under this Agreement.

          6.2 Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 6.1, MMI AND
MONSANTO EACH EXPRESSLY DISCLAIM ANY WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY
WARRANTY THAT ANY PATENT LICENSED HEREUNDER SHALL BE VALID OR ENFORCEABLE. EACH PARTY
ACKNOWLEDGES THAT IT IS NOT RELYING ON ANY WARRANTIES OTHER THAN THOSE SET FORTH IN SECTION 6.1.
MONSANTO RECOGNIZES THAT CELERA HAS MADE NO WARRANTIES TO MMI.

          7. CONFIDENTIALITY.

          7.1 Confidential Information. Except as expressly provided in this Agreement, the
parties covenant and agree that, for so long as this Agreement is in effect and for five (5) years
thereafter, the receiving party shall keep completely confidential and shall not publish or
otherwise disclose and shall not use for any purpose except for the purposes contemplated by this
Agreement any Confidential Information furnished to it by the disclosing party hereto pursuant to
this Agreement. Without limitation upon any provision of this Agreement, each of the parties
hereto shall be responsible for the observance by its employees and others (to the extent
permitted under Section 7.2) of the confidentiality obligations set forth in this Section 7 and
this Agreement, generally.

          7.2 Permitted Disclosures. Except as otherwise limited by this Agreement, each party
hereto may disclose the other party’s Confidential Information and scientific data resulting from
the activities conducted under the this Agreement only (a) to its Affiliates, its Sublicensees
permitted under Section 2, or to its advisors, financial investors, third party service providers,
and other similarly situated third parties on a need to know basis, if such Affiliates,
Sublicensees,

Page 13

 

and other permitted recipients agree to be bound by the terms of this Section 7, and (b) to the
extent such disclosure is reasonably necessary in connection with prosecuting or defending
litigation, complying with applicable governmental regulations or otherwise
submitting information to tax or other governmental authorities or making a permitted sublicense
or otherwise exercising its here under provided that if a party is required to make any
such disclosure of another party’s Confidential Information, other than pursuant to a
confidentiality agreement, it shall give reasonable advance notice to the latter party of such
disclosure and shall cooperate with the original disclosing party in any effort by the original
disclosing party to secure a protective order blocking the disclosure of, or otherwise affording
confidential treatment to, such Confidential Information. It is expressly not permitted to
disclose Confidential Information of the other party as part of any patent application or its
prosecution without the express written consent of the disclosing party.

          7.3 Employee Agreements. Each party shall obtain appropriate written confidentiality
and assignment of proprietary rights agreements from all of its respective employees and agents,
without limitation and executed as a condition of employment or agency, which agreements shall be
no less protective of Confidential Information and of the parties’ interests in proprietary
rights than the terms set forth in this Section 7.

          7.4 Press Releases. Neither party is permitted to make any public announcement or
press release unless the other party has agreed to the specific statements to be included in such
announcement or release, which agreement shall not be unreasonably withheld (particularly to the
extent that either party may consider itself compelled under applicable securities laws to make a
limited disclosure).

          8. INDEMNIFICATION.

          8.1 Indemnification of Monsanto. MMI shall indemnify, defend, and hold Monsanto and
its Affiliates, and their respective directors, officers, employees, agents, consultants, and
counsel, and the successors and assigns of the foregoing (the “Monsanto Indemnitees”) harmless
from and against any and all liabilities, damages, losses, costs or expenses (including
reasonable attorneys’ and professional fees and other expenses of litigation and arbitration)
resulting from a claim, suit or proceeding brought by a third party against a Monsanto
Indemnitee, arising from or occurring as a result of (i) any use by MMI, its Affiliates, or its
Sublicensees of the Improvements (including infringement of Intellectual Property and product
liability claims), except to the extent caused by the gross negligence or willful misconduct of
Monsanto, or (ii) breach of MMI’s representations and warranties set forth in Section 6.1.1.

          8.2 Indemnification of MMI. Monsanto shall indemnify, defend and hold MMI, its
Affiliates, Applera Corporation (itself or acting through its Celera Genomics Group) which is a
licensor of a portion of the MMI Intellectual Property, and their respective directors, officers,
employees, agents, consultants, and counsel and the successors and assigns of the foregoing (the
“MMI Indemnitees”) harmless from and against any and all liabilities, damages, losses, costs or
expenses (including reasonable attorneys’ and professional fees and other expenses of litigation
and arbitration) resulting from a claim, suit or proceeding brought by a third party against a MMI
Indemnitee, arising from or occurring as a result of (i) any practice by Monsanto, its Affiliates,
or Sublicensees of the licenses granted herein, (ii) the development, manufacture, use, license,

Page 14

 

importation, marketing, sale, and/or commercialization of any Product by Monsanto, its
Affiliates, or Sublicensees (including infringement of Intellectual Property and product
liability claims), except, in each case, to the extent caused by the gross negligence or willful
misconduct of MMI, or (iii) a breach by Monsanto of its representations and warranties set forth
in Section 6.1.2.

          8.3 Procedure. A party (the “Indemnitee”) that intends to claim indemnification under
this Section 8 shall promptly notify the other party (the “Indemnitor”) of any loss, claim,
damage, liability, or action in respect of which the Indemnitee intends to claim such
indemnification, and the Indemnitor shall have the right to participate in, and, to the extent the
Indemnitor so desires, to assume sole Control of the defense thereof with counsel mutually
satisfactory to the parties, including, the right to settle the action on behalf of the Indemnitee
on any terms the Indemnitor deems desirable in the exercise of its sole discretion, except that
the Indemnitor shall not, without the Indemnitee’s prior written consent, settle any such claim if
such settlement contains either (a) a stipulation to or admission or acknowledgment of any
liability or wrongdoing on the part of the Indemnitee, (b) imposes any obligation on the
Indemnitee other than a monetary obligation, and only to the extent the Indemnitor assumes
directly such obligation, or (c) a relinquishment or waiver of any right of the Indemnitee. Only a
party to this Agreement may invoke the indemnification provisions of Section 8.1, 8.2, and 8.3,
e.g., if an MMI consultant desires to seek contractual indemnification from Monsanto, MMI (not the
consultant) would have to make such claim under this Section 8.3. The failure to deliver written
notice to the Indemnitor within a reasonable time after the commencement of any such action shall
not impair Indemnitor’s duty to defend such action but shall relieve Indemnitor of any liability
to the Indemnitee to the extent the Indemnitor is prejudiced by the delay. At the Indemnitor’s
request, the Indemnitee shall cooperate fully with the Indemnitor and its legal representatives in
the investigation and defense of any action, claim, or liability covered by this indemnification
and provide full information with respect thereto. Subject to the Indemnitee’s fulfillment of its
obligations under this Section 8.3, the Indemnitor shall pay any damages, costs, or other amounts
awarded against the Indemnitee (or payable by the Indemnitee pursuant to a settlement agreement
entered into by the Indemnitor) in connection with such claim.

          9. EXCLUSION OF DAMAGES; LIMITATION OF LIABILITY

            In no event shall either party be liable under this Agreement to the other party for any
incidental, consequential, indirect, or exemplary damages, including damages from loss of profits
or opportunities, even if advised of the possibility of such damages. In no event shall MMI’s
liability to Monsanto arising out of or in connection with this Agreement, the MMI Intellectual
Property, the MMI Database, or Monsanto’s use or other exploitation thereof, whether in contract,
tort or any other theory of liability, exceed in the aggregate the amounts actually paid by
Monsanto to MMI during the one (1) year period before such liability first accrues. This Section
9 shall not apply to or limit any remedies for claims arising under Sections 7 and 8.

          10. TERM AND TERMINATION.

          10.1 Term. The term of this Agreement shall commence on the Effective Date and shall
continue until terminated as provided herein.

Page 15

 

          10.2 Termination by Monsanto. Prior to the development of any Improvement (but not
until at least after December 31, 2004), Monsanto may terminate this Agreement at any time upon
ninety (90) days prior written notice to MMI. Thereafter, Monsanto may terminate at any time by
giving written notice to MMI and disclosing and assigning all rights to Improvements to MMI.

          10.3 Termination for Cause. Either party may, upon written notice to the other
party, terminate this Agreement in its entirety or, at the option of the party providing notice
of termination, may terminate any license granted hereunder on a Product-by-Product basis, if the
other party has materially breached this Agreement and failed to cure such breach within forty
five (45) days after receiving written notice thereof from the party seeking to terminate. For
avoidance of doubt, termination pursuant to this Section 10.3 shall be effective only if the
party seeking to terminate provides notice of breach, such breach is not cured within forty five
(45) days, and such party then provides notice of termination upon expiration of such cure
period.

          10.4 Accrued Obligations. Termination of this Agreement or any license granted
hereunder for any reason shall not release any party hereto from any liability which, at the time
of such termination, has already accrued to the other party or which is attributable to a period
prior to such termination or the performance of which was due prior to such termination, nor
preclude either party from pursuing any rights and remedies it may have hereunder and at law and
in equity which accrued or are based upon any event occurring prior to such termination.

          10.5 Effect of Termination. Upon any termination of this Agreement (or any
termination or expiration without renewal of any license granted hereunder), the licensee shall
promptly cease any use under such license and shall, upon request of the licensor, promptly
destroy all related materials, including all Confidential Information received from the licensor
related to the terminated license (except one copy of which may, upon notice to the licensor, be
retained solely by legal counsel solely for archival purposes). The licensee shall certify in
writing its compliance with such request to destroy. Notwithstanding anything in this Section 10.5
to the contrary, (a) in the event of a termination for cause under Section 10.3, the nonbreaching
party shall continue to enjoy any license to it and (b) any termination by Monsanto under Section
10.2 shall not terminate any license already granted to MMI under Sections 2.2 and 2.3 nor MMI’s
obligation to pay royalties to Monsanto for that license.

          10.6 Termination for Failure to Pay Minimum Royalties. Notwithstanding the
provisions of Section 10.6, if pursuant to Section 3.2.1(c) Monsanto is required to make a
payment to cover a deficiency in earned royalties in order to pay a minimum amount to MMI in a
year and fails to make that payment, MMI may terminate the license granted in Section 2.1 except
to the extent required to allow Monsanto to continue to Commercially Exploit the Improvements
made as of the termination date. Thereafter, Sections 2.4 and 3.2.1(c) shall have no effect but
the remainder of the terms of this Agreement, and the rights and obligations of the parties
thereunder, shall continue, including the obligations to pay royalties under Sections 3.2.1(a)
and (b) and 3.2.2.

          10.7 Survival. Sections 1, 2 (but not 2.4), 3, 4, 5, 6, 7, 8, 9, 10.4, 11, and 12
shall survive the termination of this Agreement.

Page 16

 

          11. DISPUTE RESOLUTION.

          11.1 Informal Negotiation; Mediation. If a dispute arises out of or relates to this
Agreement or a breach thereof, the parties shall first try to resolve their dispute through
informal and good faith negotiation between the Chief Executive Officer of MMI and the Executive
Vice President of Technology of Monsanto. If said officers cannot resolve the dispute within
three (3) business days, then the parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration Association, before
resorting to arbitration, litigation, or some other dispute resolution procedure.

          11.2 Arbitration. Any dispute under this Agreement that is not settled by mutual
consent shall be finally settled by binding arbitration, conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by three (3) independent,
neutral arbitrators appointed in accordance with said rules (at least one of which shall have
substantial experience in the biotech or agbio industry). (In the event, however, any third party
is materially necessary to the resolution of the dispute, e.g., a co-claimant, a co-defendant, or
a third-party claimant or defendant, then arbitration shall not be so mandatory unless such third
party agrees unconditionally to participate or both MMI and Monsanto waive all objection to
proceeding.) The arbitration shall be held in Washington, D.C. The arbitrators shall determine
what discovery shall be permitted, consistent with the goal of limiting the cost and time which
the parties must expend for discovery; provided the arbitrators shall permit such discovery as
they deem necessary to permit an equitable resolution of the dispute. Any written evidence
originally in a language other than English shall be submitted in English translation accompanied
by the original or a true copy thereof. Except as otherwise expressly provided in this Agreement,
the costs of the arbitration, including administrative and arbitrator(s)’ fees, shall be shared
equally by the parties and each party shall bear its own costs and attorneys’ and witness’ fees
incurred in connection with the arbitration. A disputed performance or suspended performances
pending the resolution of the arbitration must be completed within a reasonable time period
following the final decision of the arbitrator(s). Any arbitration subject to this Article shall
be completed within one (1) year from the filing of notice of a request for such arbitration. The
arbitration proceedings and the decision shall not be made public without the joint consent of the
parties and each party shall maintain the confidentiality of such proceedings and decision unless
otherwise permitted by the other party. Any decision which requires a monetary payment shall
require such payment to be payable in United States dollars, free of any tax or other deduction.
The parties agree that the decision shall be the sole, exclusive and binding remedy between them
regarding any and all disputes, controversies, claims and counterclaims presented to the
arbitrators. Any award may be entered in a court of competent jurisdiction for a judicial
recognition of the decision and an order of enforcement.

          11.3 Infringement and Breach of Confidentiality Claims. Notwithstanding anything in
this Section 11 to the contrary, claims for infringement or misappropriation of MMI Intellectual
Property or Improvements by the other party, as the case may be, will not be subject to mediation
or arbitration, and the party alleging such infringement or misappropriation, or defending said
allegation, expressly reserves the right to submit any such claim, including any factual or legal
issues relating to such a claim, to a court of competent jurisdiction, and to pursue without
limitation all rights and remedies available under this Agreement and at law and in equity. In
addition, either party, notwithstanding anything in this Section 11 to the contrary, may seek

Page 17

 

injunctive relief in the courts to protect its interests under Section 7 in the even of a
material breach or reasonably anticipated material breach of Section 7.

          12. MISCELLANEOUS

          12.1 Governing Law. This Agreement and any dispute arising from the performance or
breach hereof shall be governed by and construed in accordance with the internal laws of the
State of Delaware applicable to contracts entered into and performed in Delaware by residents
thereof (without application of law governing the conflict of laws).

          12.2 Waiver. Neither party may waive or release any of its rights or interests in
this Agreement except in writing, including the applicability of this Section 12.2. The failure of
either party to assert a right hereunder or to insist upon compliance with any term or condition
of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent
failure to perform any such term or condition.

          12.3 Amendment. This Agreement may be modified or amended only pursuant to a writing
executed by both parties, including any modification or amendment of this Section 12.3.

          12.4 Assignment. Except as otherwise provided herein, this Agreement and the licenses
granted herein shall not be assignable by either party to any third party hereto without the
written consent of the other party hereto; provided, however, that (subject to Section 12.5)
either party may assign this Agreement, without such consent (but provided that advance written
notice is given and any successor acknowledges in writing the applicability and enforceability of
this Agreement (particularly the “field of use” and confidentiality provisions) upon such

successor), to an Affiliate of such party (provided that such original party remains liable
hereunder) or in connection with the reorganization, consolidation, spin-off, sale or transfer of
substantially all of the stock or assets related to that portion of its business pertaining to the
subject matter of this Agreement, either alone or in conjunction with other businesses as part of
an overall reorganization. The terms and conditions of this Agreement shall be binding on and
inure to the benefit of such permitted successors and assigns of the parties. In the event that
Monsanto (or its successor) desires to assign this Agreement and the licenses granted herein to a
competitor of an MMI licensee in cattle (i.e., Cargill, Incorporated), poultry, fish, or other
domestically raised livestock, and dogs and other domesticated pets, such assignee, as a part of
the assigning agreement required by this Section 12.4, shall provide that persons having access to
the MMI Database or MMI Intellectual Property or Improvements shall not disclose or allow to be
disclosed any information embodying the same to any person involved in said competing business to
protect MMI’s interests in same.

          12.5 Sale of Monsanto’s Swine Business. In the event that Monsanto decides to sell or
otherwise transfer Control of the Swine Business to an unrelated entity, Monsanto shall notify MMI
before it notifies any prospective third party purchaser (or the public) and shall give MMI a
reasonable opportunity to make an offer to purchase the Swine Business from Monsanto.

          12.6 Notices. All notices, requests, and other communications hereunder shall be in
writing and shall be personally delivered or sent by international express delivery service, or by
registered or certified mail, return receipt requested, postage prepaid, in each case to the

Page 18

 

respective address specified below, or such other address as may be specified in writing to the
other parties hereto:

	 	 	 	 	 
	

	 	Monsanto:
	 	Monsanto Company
	

	 	 	 	800 N. Lindbergh Blvd. St.
	

	 	 	 	Louis, Missouri 63167 Attn.:
	

	 	 	 	Dr. Michael Stern
	 
	 	 	 	 
	

	 	with a copy to:
	 	General Patent Counsel
	

	 	 	 	Monsanto Company
	

	 	 	 	800 N. Lindbergh Boulevard St.
	

	 	 	 	Louis, Missouri 63167
	 
	 	 	 	 
	

	 	MMI:
	 	MetaMorphix, Inc.
	

	 	 	 	8510A Corridor Rd.
	 
	 	 	 	 
	Savage, MD 20763
	Attn: Edwin C. Quattlebaum, Ph.D., President and CEO
	 
	 	 	 	 
	

	 	with a copy to:
	 	Shapiro Sher Guinot & Sandler
	

	 	 	 	36 S. Charles Street, Suite 2000
	

	 	 	 	Baltimore, Maryland 21201 Attn:
	

	 	 	 	William E. Carlson, Esq.

Except for a notice of a change of address, which shall be effective only upon receipt thereof, all
such notices, requests, demands, waivers and communications properly addressed shall be effective:
(i) if sent by U.S. mail (or if internationally, by air mail), three (3) business days after
deposit in the U.S. mail or air mail, postage prepaid; and (ii) if sent by Federal Express or other
overnight delivery service, one (1) business day after delivery to such service.

          12.7 Performance Warranty. Monsanto and MMI hereby warrant and guarantee the
performance of any and all rights and obligations of this Agreement by their Affiliate(s) and
Sublicensees.

          12.8 Force Majeure. Neither party shall be liable to the other for failure or delay in
the performance of any of its obligations under this Agreement (other than obligations to pay
money) for the time and to the extent such failure or delay is caused by earthquake, riot, civil
commotion, war, hostilities between nations, governmental law, order or regulation, embargo, action
by the government or any agency thereof, act of God, storm, fire, accident, labor dispute or
strike, sabotage, explosion or other similar or different contingencies, in each case, beyond the
reasonable control of such party. The party affected by Force Majeure shall provide the other party
with full particulars thereof as soon as it becomes aware of the same (including its best estimate
of the likely extent and duration of the interference with its activities), and shall use its best
endeavors to overcome the difficulties created thereby and to resume performance of its obligations
as soon as practicable. If the performance of any obligation under this Agreement is delayed owing
to a force majeure for any continuous period of more than six (6) months, the parties hereto shall
consult with respect to an equitable solution, including the possible termination of this
Agreement.

Page 19

 

          12.9 Independent Contractors. Nothing contained in this Agreement is intended
implicitly, or is to be construed, to constitute Monsanto or MMI as partners in the legal sense.
No party hereto shall have any express or implied right or authority to assume or create any
obligations on behalf of or in the name of any other party or to bind any other party to any
contract, agreement or undertaking with any third party.

          12.10 Advice of Counsel. MMI and Monsanto have each consulted counsel of their choice
regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed
to have been drafted by one party or another and shall be construed accordingly.

          12.11 Other Obligations. Except as expressly provided in this Agreement or as
separately agreed upon in writing between MMI and Monsanto, each party shall bear its own costs
incurred in connection with the implementation of the obligations under this Agreement.

          12.12 Severability. If any provisions of this Agreement are determined to be invalid
or unenforceable by an arbitrator or court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect without said provision. The parties shall in good
faith negotiate a substitute clause for any provision declared invalid or unenforceable, which
shall most nearly approximate the intent of the parties in entering this Agreement; provided, if
the parties are unable to agree on such a substitute clause and the deletion of the provision held
invalid or unenforceable would produce material adverse financial consequences for one party, such
party shall have the right to terminate this Agreement with one hundred eighty (180) days notice.

          12.13 Further Assurances. At any time or from time to time on and after the date of
this Agreement, either party shall at the request of the other party (i) deliver to the requesting
party such records, data or other documents consistent with the provisions of this Agreement, (ii)
execute, and deliver or cause to be delivered, all such consents, documents or further instruments
of assignment, transfer or license, and (iii) take or cause to be taken all such actions, as the
requesting party may reasonably deem necessary or desirable in order for the requesting party to
obtain the full benefits of this Agreement and the transactions contemplated hereby.

          12.14 Entire Agreement. This Agreement constitutes the entire agreement, both written
and oral, with respect to the subject matter hereof, and supersedes all prior or contemporaneous
understandings or agreements, whether written or oral, between Monsanto and MMI with respect to
such subject matter, except that the “Confidentiality and Non-Disclosure Agreement” of August 3,
2001 (as amended by that “Modification to Disclosure Agreement” of January 21, 2004, and that
“Modification to Disclosure Agreement” of February 2004), shall continue to have effect for
matters between the parties prior to the Effective Date.

          12.15 Headings. The headings to the Sections hereof are not a part of this Agreement,
but are included merely for convenience of reference only and shall not affect its meaning or
interpretation.

          12.16 Construction. Whenever examples are used in this Agreement with the words
“including,” “for example,” “e.g.,” “such as,” “etc.” or any derivation of such words, such
examples are intended to be illustrative and not limiting.

Page 20

 

          12.17 Counterparts. This Agreement may be executed in two counterparts, each of which
shall be deemed an original and which together shall constitute one instrument.

          IN WITNESS WHEREOF, the parties hereto have caused this Swine Improvement Agreement to be duly
executed by their authorized representatives effective as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 
	MONSANTO COMPANY	 	METAMORPHIX, INC
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	/s/ Michael K. Stern	 	By:	 	/s/ Edwin C. Quattlebaum	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	Michael K. Stern
	 	 	 	Edwin C. Quattlebaum, Ph.D.	 	 	 	 
	

	 	Director of Chemistry and Animal Ag
Technology
	 	 	 	President and CEO	 	 	 	 

Page 21

 

ATTACHMENT A

Production Royalty Revenue

	a.  	Total the following income amounts:

	 	i.  	Royalties calculated on weaned pigs
	 
	 	ii.  	Royalties for semen transferred or retained in customer systems with no future
fees calculated on weaned pigs
	 
	 	iii.  	Royalties for boars retained in customer systems with no future fees calculated on
weaned pigs
	 
	 	iv.  	Royalties for gilts transferred or retained in customer systems with no future
fees calculated on weaned pigs;

	b.  	Deduct any rebates, returns, or adjustments to customer payments

Base Year Revenue

	a.  	Total the Production Royalty Revenue from the twelve month period preceding the month in
which the first sale of a Product which represents an Improvement in Production Trait(s)
occurs.
	 
	   	Divide the total by four to use in the calculation of royalties due under Section 4.1.1 as
calculated in Section 3.2.1(a)(ii).
	 
	b.  	In the event Monsanto acquires by purchase a business entity or other assets that generate
Production Royalty Revenue, adjust the Base Year Revenue, as of the date of closing for the
purchase, by adding the annual revenue, generated by the acquired entity or assets that would
qualify as Production Royalty Revenue, to the previous 12-month Base Year Revenue value.
	 
	   	Divide the new total by four to use in the calculation of royalties due under Section 4.1.1
as calculated in Section 3.2.1(a)(ii).

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