0001193125-13-374652.txt : 20140627 0001193125-13-374652.hdr.sgml : 20140627 20130923160813 ACCESSION NUMBER: 0001193125-13-374652 CONFORMED SUBMISSION TYPE: F-1 PUBLIC DOCUMENT COUNT: 31 FILED AS OF DATE: 20130923 DATE AS OF CHANGE: 20131122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Evogene Ltd. CENTRAL INDEX KEY: 0001574565 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 000000000 STATE OF INCORPORATION: L3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-191315 FILM NUMBER: 131110245 BUSINESS ADDRESS: STREET 1: 13 GAD FEINSTEIN STREET STREET 2: PARK REHOVOT P.O.B 2100 CITY: REHOVOT STATE: L3 ZIP: 76121 BUSINESS PHONE: 97289311900 MAIL ADDRESS: STREET 1: 13 GAD FEINSTEIN STREET STREET 2: PARK REHOVOT P.O.B 2100 CITY: REHOVOT STATE: L3 ZIP: 76121 F-1 1 d518283df1.htm FORM F-1 Form F-1
Table of Contents

As filed with the Securities and Exchange Commission on September 23, 2013

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form F-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

 

Evogene Ltd.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

State of Israel    2870    Not Applicable

(State or Other Jurisdiction of

Incorporation or Organization)

  

(Primary Standard Industrial

Classification Code Number)

   (I.R.S. Employer Identification No.)

Evogene Ltd.

13 Gad Feinstein Street

Park Rehovot P.O.B 2100

Rehovot 76121

Israel

+972-8-931-1900

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Joshua G. Kiernan, Esq.

Colin J. Diamond, Esq.

White & Case LLP

1155 Avenue of the Americas

New York, New York 10036

Tel: 212-819-8200

Fax: 212-354-8113

 

Dan Shamgar, Adv.

Mike Rimon, Adv.

Meitar Liquornik Geva Leshem

Tal

16 Abba Hillel Road

Ramat Gan 52506, Israel

Tel: +972-3-610-3100

Fax: +972-3-610-3111

 

Phyllis G. Korff, Esq.

Yossi Vebman, Esq.

Skadden, Arps, Slate, Meagher
& Flom LLP

4 Times Square

New York, New York 10036

Tel: 212-735-3000

Fax: 212-735-2000

   Aaron M. Lampert, Adv.
Goldfarb Seligman & Co.

98 Yigal Alon Street

Tel Aviv 67891, Israel

Tel: +972-3-608-9999

Fax: +972-3-608-9909

Approximate date of commencement of proposed sale to the public: As soon as practicable after effectiveness of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

Title of Each Class of

Securities to be Registered

 

Proposed

Maximum Aggregate

Offering Price(1)(2)

  Amount of
Registration Fee

Ordinary shares, par value NIS 0.02

  $60,000,000   $8,185

 

 

(1)   Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
(2)   Includes shares granted pursuant to the underwriters’ option to purchase additional shares.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 2013

PRELIMINARY PROSPECTUS

 

LOGO

             Shares

Evogene Ltd.

Ordinary Shares

$         per share

 

 

We are selling              ordinary shares. This is our initial public offering in the United States. We have applied to have the ordinary shares listed on the New York Stock Exchange under the symbol “EVGN.” Our ordinary shares are listed on the Tel Aviv Stock Exchange, or TASE, under the symbol “EVGN.” On September 18, 2013, the last reported sale price of our ordinary shares on the TASE was NIS 51.18, or $14.47, per share (based on the exchange rate reported by the Bank of Israel on such date, which was NIS 3.54 = $1.00), giving prospective effect to the 1-for-2 reverse share split of our ordinary shares, which is to be effected immediately prior to the completion of this offering. The estimated initial public offering price is between $         and $         per share.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act and will therefore be subject to reduced reporting requirements.

 

 

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 9.

None of the Securities and Exchange Commission, the Israeli Securities Authority or any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

      

Per Share

    

Total

Public offering price

     $                          $                    

Underwriting discounts and commissions(1)

     $                          $                    

Proceeds to us (before expenses)

     $                          $                    

 

(1) See “Underwriting” for a description of the compensation payable to the underwriters.

The underwriters expect to deliver the ordinary shares to purchasers on or about                     , 2013. We have granted the underwriters an option to purchase up to              additional ordinary shares to cover over-allotments.

 

Credit Suisse

Deutsche Bank Securities

 

 

 

Oppenheimer

Piper Jaffray

                , 2013


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LOGO


Table of Contents

 

TABLE OF CONTENTS

 

     Page  

SUMMARY

     1   

RISK FACTORS

     9   

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     31   

PRICE RANGE OF OUR ORDINARY SHARES

     32   

USE OF PROCEEDS

     33   

DIVIDEND POLICY

     34   

CAPITALIZATION

     35   

DILUTION

     36   

SELECTED CONSOLIDATED FINANCIAL DATA

     38   

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     40   

INDUSTRY OVERVIEW

     59   

BUSINESS

     69   
     Page  

MANAGEMENT

     106   

PRINCIPAL SHAREHOLDERS

     123   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     125   

DESCRIPTION OF SHARE CAPITAL

     126   

SHARES ELIGIBLE FOR FUTURE SALE

     132   

TAXATION AND GOVERNMENT PROGRAMS

     133   

UNDERWRITING

     144   

NOTICE TO CANADIAN RESIDENTS

     148   

LEGAL MATTERS

     150   

EXPERTS

     150   

ENFORCEABILITY OF CIVIL LIABILITIES

     150   

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     151   

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1   

 

Neither we nor the underwriters have authorized anyone to provide information different from that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take any responsibility for, and can provide no assurance as to the reliability of, any information other than the information in this prospectus and any free writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our ordinary shares means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy these ordinary shares in any circumstances under which such offer or solicitation is unlawful.

Unless derived from our financial statements or otherwise noted, New Israeli Shekel, or NIS, amounts presented in this prospectus are translated at the rate of $1.00 = NIS 3.54, the exchange rate reported by the Bank of Israel as of September 18, 2013.

 

 

Until                     , 2013 (25 days after the date of this prospectus), all dealers that buy, sell or trade our ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

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SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before deciding to invest in our ordinary shares. You should read the entire prospectus carefully, including “Risk Factors” and our consolidated financial statements and notes to those consolidated financial statements, before making an investment decision. In this prospectus, the terms “Evogene,” “we,” “us,” “our” and “the company” refer to Evogene Ltd. and its subsidiary, Evofuel Ltd.

Our Business

We are a plant genomics company that uses a comprehensive and integrated technology infrastructure to enhance seed traits underlying crop performance and productivity through biotechnology and advanced breeding methods. We have strategic collaborations with world-leading agricultural companies, primarily to develop traits for improved yield and abiotic stress tolerance (such as improved tolerance to drought, heat and salinity) and biotic stress resistance (such as resistance to disease, pests and insects). Our products are focused on essential crops, including corn, soybean, wheat, rice and cotton, which, according to Phillips McDougall’s 2011 Seed Industry Overview report, account for over 70% of the value of the global seeds market. We also apply our technology infrastructure to two additional fields: (i) agriculture chemicals (“ag-chemical”) and (ii) seeds focusing on second generation feedstock for biodiesel, both of which have not yet generated revenue and are in the development stage.

The field of plant genomics, or the science of understanding and analyzing plant genomes to identify and impact biological elements affecting trait performance, continues to evolve. Agricultural product innovation is increasingly driven by the ability to analyze data, in order to make direct discoveries and gain insights into key underlying biological phenomena of such products. The seed and ag-chemical industry has witnessed a dramatic increase in the availability of genomic data. This is primarily as a result of the introduction of new technologies that facilitate rapid generation of such data at a significantly lower cost. As a result, the key opportunity, and challenge, for plant trait improvement has shifted from data generation to data integration and analysis of large volumes of data.

We believe that our competitive advantage is based on our continuously enhanced proprietary discovery and development infrastructure. This infrastructure is capable of integrating and analyzing vast amounts of data, through the use of proprietary computational technologies comprised of advanced algorithms and predictive methodologies. Our computational technologies are a key part of our broad technology infrastructure that also integrates extensive scientific expertise, public and proprietary genomic data and plant validation systems. Our proprietary gene identification capabilities, which are scalable and adaptable to a large variety of crops and traits, together with our highly educated and experienced multidisciplinary team of scientists, are, we believe, unique in the industry.

We currently generate revenues primarily through research and development and milestone payments as traits move through development phases, and in the future we expect to receive royalty revenues upon commercialization of products containing traits that we help our collaborators to develop. To date, we have identified and filed patents for over 4,000 novel genes and genomic components for the improvement of key traits, hundreds of which are under development in our collaborators’ pipelines. We believe that the extension and renewal of some of our main collaboration agreements highlight the value ascribed to our performance, our capabilities and our proprietary technology infrastructure.

We have collaboration agreements with most of the world’s leading seed and ag-chemical companies, including subsidiaries or affiliates of Monsanto Company, or Monsanto, Bayer AG, or Bayer, E.I. du Pont de Nemours and Company, or DuPont, and Syngenta AG, or Syngenta. Our collaborations with these companies are

 

 

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aimed at introducing improved seed traits into key commercial crops. Among our collaborators, Monsanto and Bayer are also key shareholders in our company, holding approximately 8.7% and 4.6% of our ordinary shares as of June 30, 2013, respectively.

We also aim to apply our technology infrastructure to two additional fields: ag-chemical and seeds focusing on second generation feedstock for biodiesel. For the ag-chemical market, we are focusing on the discovery of new biologically significant proteins called “targets” based on genes we identify that enable the development of herbicides with novel mechanisms to mitigate weed resistance. We also intend to use our proprietary discovery and development infrastructure to develop chemical molecules as crop enhancers that, when applied to crops, would improve yield and abiotic stress tolerance. To date, we have not yet entered into any collaboration agreements in our ag-chemical operations. For the biodiesel market, we are focusing on the development of improved, high-yielding, non-edible castor bean seeds as an economically viable alternative feedstock for the production of biodiesel with a reduced environmental footprint.

As of June 30, 2013, we employed 188 employees, of which approximately 78% are involved in research and development and 48 hold a Ph.D. degree. Our multi-disciplinary team includes experts in biology, chemistry, plant genetics, agronomics, mathematics, computer science and other related fields.

We have been listed for trading on the Tel Aviv Stock Exchange, or TASE, since 2007, are headquartered in the agricultural and biotech hub of Rehovot, Israel, and have field testing activities in Israel, Brazil and Argentina.

Our Strengths

We believe we are strategically positioned to capitalize on the fundamental need to increase agricultural yields in highly attractive end-markets such as food, feed and biofuel. Our competitive strengths include:

A leading position in the field of plant genomics. Since our company’s formation in 2002, we have established a powerful integrated infrastructure that we believe is unique in our industry for understanding plant genomics, addressing some of the key challenges in agriculture productivity. The infrastructure combines our know-how in plant genomics with our proprietary technologies and processes that span data integration and analysis, field experiments and plant validation. This infrastructure allows us to identify, prioritize and validate over 1,000 genes per year.

Innovative proprietary computational technologies, capable of efficiently integrating and analyzing vast amounts of complex genomic data. Our proprietary computational technologies have demonstrated the capability of addressing the current focus of the seed industry – data analysis – by integrating and comprehensively analysing vast amounts of public and proprietary data, covering more than 200 plant species, enabling us to identify and prioritize genes and genomic components aimed at improving key plant traits.

A partner of choice for industry leaders. We have over ten collaborations with five of the seven leading global seed and ag-chemical companies, focusing on the development of traits involving yield and abiotic stress and biotic stress for key crops in their product portfolios such as corn, soybean and wheat. Under these existing collaborations, hundreds of genes we identified are currently undergoing early testing in our collaborators’ pipelines. Two of our key collaborators, Monsanto and Bayer, have made significant equity investments in our company and have entered into more than one collaboration agreement with us.

A balanced and scalable business model. We currently generate revenues primarily through research and development and milestone payments; in the long term, we expect to also receive significant revenues from sales royalties generated by our collaborators upon commercialization of products. However, because the development

 

 

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cycle of products is lengthy, any revenue from royalty payments may not be earned before six years, if at all. We benefit from a business model in which, pursuant to most of our existing collaboration agreements, a significant part of our operating costs are borne by our collaborators. We self-fund our initial research and development costs in selected projects, with the goal of capturing a larger share of our collaborators’ future revenues.

Diversified product portfolio and multiple paths of commercialization. Our innovative and adaptable technology infrastructure, scientific and computational expertise, and our close links to major companies in the seed and ag-chemical industry allow us to benefit from multiple business opportunities in the agriculture markets. Our more than ten different collaborations cover a portfolio of 20 products tailored to address specific traits and crops. In addition, our expertise in plant genomics and flexible computational technologies will allow us to address new commercial opportunities in the ag-chemical and biodiesel markets.

Broad intellectual property portfolio, claiming protection for thousands of key genes impacting valuable key traits. In the past ten years we have established a broad intellectual property portfolio that includes more than 20 patent families, over 180 national filings and over 30 granted patents covering thousands of key genes and genomic components impacting valuable key traits.

Industry Background

Improving Plant Performance

The seed and ag-chemical industry continues to seek sustainable and economically viable solutions to feed the world’s growing and increasingly prosperous population. While the demand for grain is increasing, production is constrained due to finite arable land and water resources, climate variability, increasingly resilient weeds and insects, depletion of soil nutrients and diseases that impair crop yields.

In order to address these growing challenges, farmers need solutions to increase and maintain crop productivity. A fundamental way to improve plant productivity and performance is through the use of plant genomics. Plant genomics is the science of understanding and analyzing plants to modify biological elements which are responsible for traits that govern plant yield, tolerance to abiotic stress factors (such as drought and heat) and biotic stress factors (such as pests and diseases). Through plant genomics, researchers can identify and influence target genes and other genomic components that affect trait performance, which are then used in the development of (i) enhanced seeds and (ii) novel crop protection ag-chemicals.

(i) Enhanced seeds

There are two primary methods to improve plant performance through the use of genomic technologies in the development of seeds:

Biotechnology or genetic modification. Use of genomic technologies for the development of seeds in which genes that impact specific traits are introduced to the plant through genetic insertion. Such seeds are referred to as genetically modified (“GM”), or biotech seeds.

Advanced breeding. Use of genomic technologies to identify specific DNA sequence variations (such as single-nucleotide polymorphisms, or SNPs), linked to a particular trait. This allows breeders to determine which parent plants with favorable characteristics should be crossed to enhance desired native traits in the next generation.

As of today, the two major traits commercially available for a limited number of crops in the biotech seeds market are herbicide tolerance and resistance to insects. Factors expected to drive future growth include the application of advanced breeding and biotechnology in additional crops, such as rice and wheat, introduction of new target traits, such as durability to abiotic stress, and adoption of biotechnology crops by additional countries.

 

 

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(ii) Crop protection ag-chemicals

The market for crop protection ag-chemicals has grown by approximately 40% since 2007 to an estimated $47 billion in 2012, according to Phillips McDougall’s 2013 Industry Presentation on the Global Agrochemical and Seed Markets. Crop protection ag-chemicals, which as a group are referred to as “pesticides” or “crop protection products,” include herbicides (to control weeds), fungicides (to prevent and treat fungal diseases) and insecticides (to minimize damage caused by insects). In recent years, the rate of introduction of novel ag-chemicals has been steadily declining largely due to higher development costs and strict regulation, which in turn has led to the further acceleration of pest resistance to existing ag-chemicals.

Farmers and ag-chemical companies have therefore been seeking new solutions to mitigate pest resistance. This includes the use of plant genomic data to identify and target essential biological processes and leveraging this data for the discovery and development of novel herbicides with new mechanisms to cope with the growing resistance of weeds.

The Market for Biofuels

Biofuel demand in ground, aviation and maritime transportation has been steadily growing in past years, representing a market opportunity of approximately $140 billion in 2011, according to Ken Research’s 2012 Global Biofuel Market Outlook. The market is mainly driven by a need for increasing energy independence, reducing susceptibility to fluctuating oil prices and environmental concerns. At present, production of biodiesel, an alternative to diesel fuel derived from plant oil, relies on edible crops, such as soybean and canola, considered first generation feedstocks. Rising commodity prices and concerns surrounding the long-term sustainability of diverting food feedstock for biodiesel use has hindered widespread adoption of these alternative fuels, setting the stage for the demand of second generation feedstock for biodiesel. There is an increasing need to identify feedstock sources which would be: (i) economically viable; (ii) scalable and (iii) sustainable.

Our Growth Strategy

Our goal is to extend our market experience in improving plant productivity and performance using plant genomics. To achieve that goal we intend to pursue the following strategies.

Expand our innovative technologies in plant genomics. We intend to enhance our competitive advantage by further investing in our technology infrastructure and research and development capabilities.

Continue to advance our existing collaborations in seed traits. We are focused on executing and advancing our existing collaborations in order to expedite our genes and genetic components towards commercialization with a view to generating significant milestone and royalty revenues.

Extend and expand our seed trait project portfolio. We plan to continue to leverage our scalable and adaptable infrastructure, plant genomics expertise and close relationships with agriculture industry leaders.

Capture an additional share of the value chain by increasing self-funded research and development. In the future, we intend to complement our revenue streams by selectively self-funding a larger portion of our direct initial research and development costs, with the goal of capturing a larger share of our collaborators’ future revenues.

Further develop and commercialize our ag-chemical operations. We are leveraging our know-how and computational technologies to position our company at the forefront of discovery and innovation in ag-chemicals.

 

 

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Further develop and commercialize the activities of our subsidiary Evofuel. We intend to further develop our castor bean seed operations as a second generation feedstock for biodiesel.

Risk Factors

Investing in our ordinary shares involves risks. You should carefully consider the risks described in “Risk Factors” beginning on page 9 before making a decision to invest in our ordinary shares. If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our ordinary shares would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:

 

   

We have a history of losses, and incurred operating losses of $(3.1 million), $(3.2 million) and $(2.0 million) for the years ended December 31, 2012, 2011 and 2010, respectively, and $(2.1 million) and $(1.1 million) in the six months ended June 30, 2013 and 2012, respectively. We may never achieve or maintain profitability.

 

   

We may not be successful in developing commercial products.

 

   

We derive substantially all of our current revenues from our strategic collaborations, most significantly with Monsanto and Bayer, and the termination or non-renewal of these collaborations would have a material adverse effect on our results of operations.

 

   

Our product development cycle is lengthy and uncertain, and it may take at least six years, if at all, before the first seeds containing our traits complete the development process and become commercially available.

 

   

Consumer and government resistance to genetically modified organisms may negatively affect our public image and reduce sales of plants containing our traits.

Corporate Information

Our principal executive offices are located at 13 Gad Feinstein Street, Park Rehovot P.O.B. 2100, Rehovot 76121 Israel, and our telephone number is +972 (8) 931-1900. Our website address is www.evogene.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. We have included our website address in this prospectus solely for informational purposes. We are a limited liability corporation, and we operate under the Israeli Companies Law 5759-1999. Our agent for service of process in the United States is              .

Throughout this prospectus, we refer to various trademarks, service marks and trade names that we use in our business. The “Evogene” design logo, “Evogene” and other trademarks or service marks of Evogene Ltd. appearing in this prospectus are the property of Evogene Ltd. We have several other registered trademarks, service marks and pending applications relating to our computational technologies. Other trademarks and service marks appearing in this prospectus are the property of their respective holders.

 

 

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THE OFFERING

 

Ordinary shares offered by us

             ordinary shares (or              if the underwriters exercise their option to purchase additional shares in full).

 

Ordinary shares to be outstanding after this offering

                ordinary shares (or              if the underwriters exercise their option to purchase additional shares in full).

 

Use of proceeds

We intend to allocate the net proceeds from this offering to our different areas of activity as follows:

1. Seed Traits:

 

  We estimate the total investment in our seed traits operation will be approximately 50% of our net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

2. Ag-Chemicals:

We estimate the total investment in our ag-chemical operation will be approximately 28% of our net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

  3. Evofuel:

We estimate the total investment in our Evofuel operation will be approximately 22% of our net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

  We will have broad discretion in the way that we use the net proceeds from this offering. See “Use of Proceeds”

 

Risk factors

See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.

 

Tel Aviv Stock Exchange symbol and proposed NYSE symbol

“EVGN.”

The number of ordinary shares to be outstanding after this offering is based on 18,879,987 ordinary shares outstanding as of June 30, 2013. The number of ordinary shares to be outstanding after this offering excludes 3,885,861 ordinary shares that were reserved for issuance under our equity incentive plans as of June 30, 2013, of which 2,653,759 shares were issuable upon exercise of options that had been granted and remained outstanding at a weighted average exercise price of $6.79 per share. See “Management—Option Plans.”

Unless otherwise indicated, this prospectus:

 

   

assumes an initial public offering price of $         per ordinary share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus;

 

   

gives effect to a 1-for-2 reverse share split of our ordinary shares that will be effected immediately prior to the completion of this offering; and

 

   

assumes no exercise of the underwriters’ option to purchase up to an additional              ordinary shares from us.

 

 

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables set forth our summary consolidated financial data. You should read the following summary consolidated financial and other data in conjunction with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected in the future. Our financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS.

The summary consolidated statements of comprehensive income data for each of the years in the three-year period ended December 31, 2012 are derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The summary consolidated statements of comprehensive income data for the six months ended June 30, 2012 and 2013 and the consolidated balance sheet data as of June 30, 2013 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. Results from interim periods are not necessarily indicative of results that may be expected for the entire year.

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2010     2011     2012     2012     2013  
                       (unaudited)  
     (in thousands, except per share and share data)        

Consolidated Statements of Comprehensive Income:

          

Revenues

   $ 12,563      $ 14,901      $ 17,072      $ 8,287      $ 8,934   

Cost of revenues

     5,811        8,247        9,552        4,483        4,688   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     6,752        6,654        7,520        3,804        4,246   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development

     5,544        6,384        7,252        3,308        4,666   

Business development

     1,062        1,136        1,159        544        532   

General and administrative

     2,123        2,317        2,235        1,069        1,197   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     8,729        9,837        10,646        4,921        6,395   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (1,977     (3,183     (3,126     (1,117     (2,149

Financial income

     724        5,023        972        510        776   

Financial expenses

     (5,717     (1,195     (294     (76     (989
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes on income

     (6,970     645        (2,448     (683     (2,362

Taxes on income

     —          —          74        52        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (6,970   $ 645      $ (2,522   $ (735   $ (2,362
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net income (loss) per share

   $ (0.48   $ 0.04      $ (0.14   $ (0.04   $ (0.12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing basic income (loss) per share(1)

     14,824,703        17,505,136        18,421,568        18,328,598        18,817,847   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing diluted income (loss) per share(1)

     14,824,703        18,731,118        18,421,568        18,328,598        18,817,847   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Basic net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted net income (loss) per share is computed based on the weighted

 

 

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average number of ordinary shares outstanding during each period plus dilutive potential equivalent ordinary shares considered outstanding during the period, in accordance with IAS 33, “Earnings per Share.”

 

     As of June 30, 2013  
     Actual      As Adjusted(1)  
            (unaudited)  
     (in thousands)  

Consolidated Balance Sheet Data:

     

Cash and cash equivalents

   $ 16,884       $                

Marketable securities

     33,657      

Trade receivables

     1,853      

Total assets

     62,004      

Deferred revenues and other advances

     6,507      

Total liabilities

     14,705      

Working capital(2)

     44,921      

Shareholders’ equity

     47,299      

 

(1) Adjusted amounts give effect to the issuance and sale of              ordinary shares by us in this offering at an assumed initial public offering price of $         per ordinary share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
(2) Working capital is defined as total current assets minus total current liabilities.

 

 

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RISK FACTORS

This offering and an investment in our ordinary shares involve a high degree of risk. You should consider carefully the risks described below and all other information contained in this prospectus, before you decide to buy our ordinary shares. If any of the following risks actually occurs, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment.

Risks Related to Our Business and Our Industry

We may not be successful in developing commercial products.

Our success depends in part on our ability to identify genes that will improve selected crop traits. These genes are licensed to our collaborators to develop and commercialize seeds that contain the genes. It may take at least six years, if at all, before the first seeds complete the development process and become commercially available. Certain of our agreements entitle us to annual research and development payments and milestone payments in the event that specified milestones are met. While we currently do not earn royalties from the sale of seeds containing our seed traits, our long-term growth strategy is based in part on the expectation that such royalties will comprise a significant portion of our revenues in the future. Pursuant to our collaboration agreements, we are usually entitled to receive royalties on any product that integrates a trait over which we hold a patent for either an agreed upon duration of time or until our patent on the trait expires. If seeds that contain our traits are never commercialized, we will not receive revenues from royalties on the products and may not earn a profit on the traits we develop, which could materially and adversely affect our results of operations and our long-term growth strategy.

Seeds containing the traits that we develop may never become commercialized for any of the following reasons:

 

   

our traits may not be successfully validated in the target plants;

 

   

our traits may not have the desired effect sought by our collaborators on the relevant crop;

 

   

we may fail to satisfy relevant milestones under the agreements with our collaborators;

 

   

our collaborators may be unable to obtain the requisite regulatory approvals for the seeds containing our traits;

 

   

our competitors may launch competing or more effective seed traits or seeds;

 

   

a market may not exist for seeds containing our traits or such seeds may not be commercially successful;

 

   

our collaborators may be unable to fully develop and commercialize products containing our seed traits or may decide, for whatever reason, not to commercialize such products; and

 

   

we may be unable to patent our traits in the necessary jurisdictions.

We derive substantially all of our current revenues from our strategic collaborations, most significantly with Monsanto and Bayer, and the termination or non-renewal of these collaborations would have a material adverse effect on our results of operations.

We have entered into multiple collaboration agreements and related arrangements, most significantly with Monsanto and Bayer, under which we currently generate revenues through research and development payments, up-front payments, milestone payments and revenues from shares purchased at a premium. Monsanto and Bayer are expected to continue to account for a substantial amount of our revenues for the next few years. In particular, revenues from Monsanto accounted for 70.1%, 70.6% and 74.3% of our total revenues in the years ended December 31, 2012, 2011 and 2010, respectively, and 65.8% and 73.3% of our total revenues in the six months ended June 30, 2013 and 2012, respectively. Revenues from Bayer accounted for 24.1%, 23.4% and 4.2% of

 

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our total revenues in the years ended December 31, 2012, 2011 and 2010, respectively and 31.9% and 25.9% in the six months ended June 30, 2013 and 2012, respectively. Our current agreement with Monsanto was signed in 2008 and was extended in November 2011, and the collaboration period of the extended agreement (i.e., the period of active computational discovery efforts, separate from validation efforts that may follow) is scheduled to expire in August 2014. Monsanto has an option to extend the collaboration period of the agreement for two additional years at its sole discretion. This option expires on February 1, 2014. We entered into two separate multi-year collaboration agreements with Bayer, the first covering rice in April 2009, the collaboration period under which expired in April 2012, and the second covering wheat in December 2010, the collaboration period under which is scheduled to expire in January 2016. In addition, as of June 30, 2013, Monsanto and Bayer held approximately 8.7% and 4.6% of our outstanding equity, respectively. See “Business—Key Collaborations.” We are substantially dependent on Monsanto and, to a lesser extent, on Bayer and our other collaborators to pay us annual research and development fees and milestone fees upon the occurrence of certain milestone events. The termination or non-renewal of our agreements with Monsanto and Bayer, including if Monsanto decides not to exercise its option to extend the collaboration period under our agreement with them by February 1, 2014 (and if Monsanto does not otherwise enter into a new collaboration agreement with us) would have a material adverse effect on our business, financial condition, results of operations and prospects.

There are only a few companies in our seed and ag-chemical market, and we rely on a limited number of collaborators to develop and commercialize products containing our seed traits.

The seed and ag-chemical market is highly consolidated and dominated by a relatively small number of large companies. For example, according to Phillips McDougall’s 2012 Industry Presentation on the Global Seed Market, in 2012, only five agricultural and seed companies, Monsanto, DuPont, Syngenta, Bayer and Limagrain, controlled more than 60% of market value in the global seed market. We are currently undertaking collaborations with these companies to develop improved seeds. Due to the small number of companies in our market, there are limited opportunities for us to grow our business with new collaborators. In addition, if we fail to develop or maintain our relationships with any of our current collaborators, we could not only lose our opportunity to work with that collaborator, but we could also suffer a reputational risk that could impact our relationships with other collaborators in what is a relatively small industry community.

We are currently working either with collaborators or on independent projects to research and develop 20 different seed traits. While we seek to expand our portfolio of traits in the future, the research and development required to discover and develop new traits is costly, time-intensive and requires significant infrastructure resources. Therefore, in order to discover and develop new traits, we must either enter into new collaborations with seed and ag-chemical companies or develop the traits ourselves, independent of any collaborators. If we are unable to enter into new collaborations, or if we do not have the resources to develop the capabilities necessary to discover and develop new seed traits independently, we may not be able to expand our portfolio of traits, which could have a material adverse effect on our business prospects.

Our product development cycle is lengthy and uncertain, and we may never earn royalties on the sale of products containing our seed traits.

Research and development in the seed and ag-chemical and larger agriculture industries is expensive and prolonged and entails considerable uncertainty. We may spend many years and dedicate significant financial and other resources, including the proceeds of this offering, developing products that will never be commercialized. Our process of discovering, developing and commercializing a seed trait through either genetic modification or advanced breeding involves several phases, and we estimate that it will take seven to thirteen years from discovery to commercialization of a product containing our seed trait.

We currently have 20 seed traits under development with our collaborators, most of which are in Discovery and Phase I, with one product in Phase II. See “Business—Product Development Cycle—Seed Trait Product Development Cycle” for a description of these phases. It may take at least six years, if at all, before the first

 

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products containing our seed traits complete the development process and become commercially available, however we have little to no certainty as to which, if any, of these products will eventually reach commercialization. Because of the long product development cycle and the complexities and uncertainties associated with chemical and biotechnological research, there is significant uncertainty as to whether we will ever generate significant royalties from the products that we are developing.

We or our collaborators may fail to perform obligations under the collaboration agreements.

We are obligated under our collaboration agreements to perform research activities over a particular period of time. If we fail to perform our obligations under these agreements, in some cases our collaborators may terminate our agreements with them and in other cases our collaborators’ obligations may be reduced and, as a result, our anticipated revenues may decrease. In addition, any of our collaborators may fail to perform their obligations, which may hinder development and commercialization of products containing the traits we develop and materially and adversely affect our future results of operations. Furthermore, the various payments we receive from our collaborators are our primary source of revenues. If our collaborators do not make these payments, either due to financial hardship, disagreement under the relevant collaboration agreement or for any other reason, our results of operations and business could be materially and adversely affected. If disagreements with a collaborator arise, any dispute with such collaborator may negatively affect our relationship with one or more of our other collaborators and may hinder our ability to enter into future collaboration agreements, each of which could negatively impact our business and results of operations.

Our collaborators have significant resources and development capabilities and may develop their own products that compete with or negatively impact the advancement or sale of products utilizing the traits we develop and license to them.

While we protect the traits we develop and license to our collaborators through both legal and contractual provisions, any of our collaborators could develop or pursue competing products and traits that may ultimately prove more commercially viable than the traits we develop. Our collaborators are significantly larger than us and may have substantially greater resources and development capabilities. The development or launch of a competing product by a collaborator may adversely affect the advancement and commercialization of any competing traits we develop and any associated research and development payments, milestone and royalty payments.

We are working to develop novel ag-chemical products, and our efforts to enter this market may be unsuccessful.

In addition to our seed trait business, we are currently developing solutions for crop protection and enhancement through chemistry, or ag-chemistry. We may use a significant portion of the proceeds of this offering to invest in the infrastructure and ongoing research needed for this operation. Although our computational technology PoinTar is designed to develop such ag-chemical products, and although we continue to develop additional technologies, we still need to compile the data that our technologies need to analyze in order to discover and develop new products. We are developing these products through a novel approach, focused on biologically significant proteins called “targets,” which is similar to certain approaches pharmaceutical companies undertake to develop new drugs. We currently do not have any collaborators for our ag-chemical products, and therefore are currently funding our data-collection and research and development efforts relating to our ag-chemical products ourselves. Our efforts to develop novel ag-chemical products may fail for a variety of reasons, including:

 

   

Our failure to compile a sufficient amount of data and to develop the technological tools necessary to discover and develop any ag-chemical products;

 

   

Our failure to enter into collaborations similar to those in our seed trait activity;

 

   

The failure of our relatively novel target-based approach to lead to an effective product; and

 

   

Our failure to obtain sufficient funding to fully execute our ag-chemical business plan.

 

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Furthermore, even if we are able to discover and develop an effective product, it may not be successful if we are unable to find collaborators to undertake the advanced stages of product development and to market and commercialize the product. If our efforts to develop ag-chemical products are unsuccessful, our results of operations could be negatively impacted.

Evofuel, our wholly owned subsidiary that develops seeds for biodiesel, may not be successful for a number of reasons.

Our wholly owned subsidiary Evofuel is currently developing improved, high-yield castor bean seeds to be used as a source of non-edible feedstock for the biodiesel market and other industries. We may use a significant portion of the proceeds of this offering to invest in the infrastructure needed for this operation, which has not yet generated revenues from seed sales. The renewable energy market in general and the biodiesel market more specifically are not well established and are evolving. Furthermore, the biodiesel market faces continuing competition from traditional petroleum-based fuels, and demand for biodiesel fluctuates with changing oil and gas prices. Although our castor bean development and production is targeted to produce biodiesel, biodiesel has historically been produced from soybean, rapeseed and corn. Accordingly, in order for us to be successful, we will need to demonstrate on a commercial scale that castor beans can reliably be used as a cost-efficient feedstock for biodiesel production. We will also need to show that the production cost and sales price of castor bean-based biodiesel are competitive with those of traditional oil and gas.

The success of these operations will largely depend on our ability to address several unique challenges, including:

 

   

the high cost of producing castor bean grains, requiring a potentially expensive investment across the entire castor bean value chain (e.g., sowing, cleaning and transporting);

 

   

the health and environmental risks posed by the castor bean seed, which contains a naturally occurring poison called ricin;

 

   

any regulatory concerns related to sales of castor beans, particularly related to the import of such beans and the potential effects of ricin;

 

   

the amount of suitable land available to grow the necessary quantity of castor bean plants;

 

   

the risk that farmers may decide not to grow “second season” replacement crops such as the castor bean;

 

   

the ability to produce castor bean in a high throughput mechanized manner; and

 

   

the sustainability of our production and the biodiesel end-product.

In addition, we have no prior experience operating as a seed company. We will therefore be operating in a new industry, with little knowledge of the dynamics involved in producing and selling seeds.

We are working to design improved castor bean seeds and address each of these issues so that we are able to grow a sufficient and sustainable amount of castor bean plants at a low cost. We have entered into strategic collaborations with SLC Agricola S.A., or SLC Agricola, one of Brazil’s largest producers of soybean, cotton and corn, and T6 Industrial S.A., or T6, a leading Argentinian biodiesel producer, which we expect will eventually facilitate commercialization of the castor beans we are currently developing. We are unable to foresee when significant sales will commence, and we do not expect to start selling seeds for at least three years. Furthermore, there can be no assurance that our collaborations with SLC Agricola or T6 will ultimately result in a commercialized castor bean seed. If we are unable to adequately address any of these issues, we may not find a market for our castor bean seeds and our results of operations could be materially and adversely affected.

Even if we are entitled to royalties from our collaborators, we may not actually receive these royalties, or we may experience difficulties in collecting the royalties that we believe we are entitled to.

After our collaborators launch commercial products containing our licensed genes, we will need to rely on the good faith of our collaborators to report to us the sales they earn from these products and to accurately

 

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calculate the royalties we are entitled to, a process that will involve complicated and difficult calculations. Although we seek to address these concerns in our collaboration agreements, such provisions may not be effective. Additionally, we may not be able to achieve our long-term goal of generating revenues from royalties, and in the coming years our revenues will be entirely dependent on fees we earn for our research and development services and milestone payments from our collaborators.

We depend on our key personnel and, if we are not able to attract and retain qualified scientific and business personnel, we may not be able to grow our business or develop and commercialize our products.

The vast majority of our workforce is involved in research and development. Our business is therefore dependent on our ability to recruit and maintain a highly skilled and educated workforce with expertise in a range of disciplines, including biology, chemistry, plant genetics, agronomics, mathematics, computer science and other subjects relevant to our operations. For example, approximately 25% of our staff holds a Ph.D. The number of qualified and highly educated personnel in Israel, where all of our operations are located, is limited and competition for the services of such persons is intense. Although we have employment agreements with all of our employees, most of these agreements may be terminated upon short notice. The failure to hire and retain skilled and highly educated personnel could limit our growth and hinder our research and development efforts.

We have recently begun to develop certain traits independent of our collaborators, and we may need to finance the cost of the initial development phase of such trait discovery ourselves.

Currently, our business plan is based primarily on the development of traits in collaboration with our collaborators through all six phases of the discovery-development-commercialization process. We have, however, recently begun to develop certain traits independent of our collaborators and are developing such traits on our own during the discovery phase, and may also undertake such independent discovery efforts during the Phase I or “proof of concept” phase, with a goal of making such traits available to collaborators during later phases, once we have identified what we believe to be promising traits. While we believe that this will allow us to negotiate more favorable license terms with respect to such traits, the up-front cost to us of developing traits without a collaborator (and therefore without external funding for the research and development expenditures we incur) in these early phases involves higher risks, since we need to fund the research and development of such traits ourselves. We intend to use a portion of the proceeds from this offering to fund such independent research and trait discovery projects. If we are unsuccessful in discovering promising traits after having invested significant funds, or if we are unable to find collaborators who are interested in such traits and willing to fund subsequent phases of development and commercialization, such failures could have a material and adverse effect on our business, financial condition and results of operations.

Our business is subject to various government regulations and, if we or our collaborators are unable to obtain the necessary regulatory approvals, we may not be able to continue our operations.

Our business is generally subject to two types of regulations: regulations that apply to how we operate and regulations that apply to products containing our seed traits. We apply for and maintain the regulatory approvals necessary for our operations, particularly those covering our field trials, while our collaborators apply for and maintain regulatory approvals necessary for the commercialization of products containing our seed traits. More recently, regulators have implemented delays in approving genetically engineered crops due to environmental concerns and negative publicity. Since our operations and the field trials for our seed traits currently only occur in Israel, only Israeli regulations govern our operations. We believe that our current activities are compliant with all currently applicable Israeli regulations, however we may become subject to new or revised regulations or approvals in the future. Furthermore, any violation of these regulations could expose us to criminal penalties.

The large-scale field trials that our collaborators conduct during advanced stages of product development are subject to regulations similar to those we are subject to. Pursuant to our collaboration agreements, our collaborators also apply for the requisite regulatory approvals prior to commercialization of products containing our seed traits. In most of our key target markets, including the United States and the European Union, regulatory approvals must be received prior to the importation of transgenic products. These regulatory regimes may be

 

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particularly onerous; for example, the U.S. federal government’s regulation of biotechnology is divided among the United States Environmental Protection Agency, which regulates activity related to the invention of plant pesticides and herbicides, the United States Department of Agriculture, which regulates the import, field testing and interstate movement of specific technologies that may be used in the creation of transgenic plants, and the United States Food and Drug Administration, which regulates foods derived from new plant varieties. None of our seed traits is currently being tested in large-scale field trial or is in the regulatory approval development stage. Once products containing our seed traits reach these stages, however, if our collaborators are unable to obtain the requisite regulatory approvals or there is a delay in obtaining such approvals as a result of negative market perception or heightened regulatory standards, such products will not be commercialized, which would negatively impact our business and results of operations.

Disruption to our IT system could adversely affect our reputation and have a material adverse effect on our business and results of operations.

Our computational technologies rely on our IT system to collect and analyze the genomic data we discover. We store significant amounts of data, and as of June 30, 2013, we had compiled over 500 terabytes of data. Although we are developing back-up storage for our stored data, there can be no assurance that our back-up storage arrangements will be effective if it becomes necessary to rely on them. Furthermore, we can provide no assurance that our current IT system is fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats.

As we continue to develop our computational technologies and expand our genomic datasets, we may need to update our IT system and storage capabilities. However, if our existing or future IT system does not function properly, or if the IT system proves incompatible with our new technologies, we could experience interruptions in data transmissions and slow response times, preventing us from completing routine research and business activities. Furthermore, disruption or failure of our IT system due to technical reasons, natural disaster or other unanticipated catastrophic events, including power interruptions, storms, fires, floods, earthquakes, terrorist attacks and wars could significantly impair our ability to deliver data related to our projects to our collaborators on schedule and materially and adversely affect the outcome of our collaborations, our relationships with our collaborators, our business and our results of operations.

Development of our seed traits, particularly during our field trials, may be adversely affected by circumstances caused by us and those beyond our control.

The seed and ag-chemical industry is subject to various factors that make its operations relatively unpredictable from period to period. Our field tests may be adversely affected by circumstances both caused by us and those beyond our control. Factors caused by us include any failure by us or our collaborators to follow proper agronomic practice or suggested protocols for growing the model validation plants and crops for our field trials, and failure to identify and address diseases, insects and pests, such as birds that may eat the seeds we are evaluating. Factors beyond our control include weather and climatic variations, such as droughts or heat stress, or other factors we are unable to identify. For example, if there was prolonged or permanent disruption to the electricity, climate control or water supply operating systems in our greenhouses or laboratories, the plants on which we are testing our traits and the samples we store in freezers, both of which are essential to our research and development activities, would be severely damaged or destroyed, adversely affecting our research and development activities and thereby our business and results of operations. We have also experienced crop failures in the past for then-unknown reasons, causing delays in our achievement of milestones and delivery of results, and necessitating that we re-start the field trials. Any field test failure we may experience is not covered by our insurance policy, and therefore could result in increased cost of the field trials and development of our seed traits, which may negatively impact our business and results of operations.

 

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Consumer and government resistance to genetically modified organisms may negatively affect our public image and reduce sales of plants containing our traits.

We are active in the field of biotech research and development in seeds and crop protection, including genetically modified seeds. Foods made from such seeds are not accepted by many consumers and in certain countries production of certain GM crops is effectively prohibited, including throughout the European Union, due to concerns over such products’ effects on food safety and the environment. The high public profile of biotechnology in food production and lack of consumer acceptance of products to which we have devoted substantial resources could negatively affect our public image and results of operations. The prohibition on the production of certain GM crops in select countries and the current resistance from consumer groups, particularly in Europe, to GM crops not only limits our access to such markets but also has the potential to spread to and influence the acceptance of products developed through biotechnology in other regions of the world and may also influence regulators in other countries to limit or ban production of GM crops, which could limit the commercial opportunities to exploit biotechnology.

GM crops are grown principally in the United States, Brazil and Argentina where there are fewer restrictions on the production of GM crops. If these or other countries where GM crops are grown enact laws or regulations that ban the production of such crops or make regulations more stringent, we could experience a longer product development cycle for our products and may even have to abandon projects related to certain crops or geographies, both of which would negatively affect our business and results of operations. Furthermore, any changes in such laws and regulations or consumer acceptance of GM crops could negatively impact our collaborators, who in turn might terminate or reduce the scope of their collaborations with us or seek to alter the financial terms of our agreements with them.

We have a history of operating losses and negative cash flow, and we may never achieve or maintain profitability.

We have a history of losses, and incurred operating losses of $(3.1 million), $(3.2 million) and $(2.0 million) for the years ended December 31, 2012, 2011 and 2010, respectively, and $(2.1 million) and $(1.1 million) in the six months ended June 30, 2013 and 2012, respectively. Although we are currently developing 20 distinct seed traits, there can be no assurance that these traits will result in commercially successful products. We expect to continue to incur losses in future periods, until we begin earning royalties on the products we are currently developing and any new seed traits we develop in the future, which may not occur for at least six years, if at all. Because we will incur significant costs and expenses for these efforts before we obtain any incremental revenues from them, our losses in future periods could be significant. In addition, we may find that these efforts are more expensive than we anticipate or that they do not result in profitability in the time period we anticipate, which would further increase our losses. If we are unable to adequately control the costs associated with operating our business, including our costs of development and sales, our business, financial condition, operating results and prospects will suffer.

The licenses we grant to our collaborators to use the genes we discover for specified traits in certain crops are exclusive. This limits our opportunities to license the genes that target the same traits in the same crop to more than one collaborator.

The licenses we grant our collaborators to use the genes we discover and patent in certain crops are exclusive. That means that once genes are licensed to a collaborator in a specified crop or crops, we are generally prohibited from licensing those genes to any third party. For example, in the Bayer Wheat Agreement, as defined herein, we are broadly prohibited from collaborating on both GM trait discovery and advanced breeding for wheat, irrespective of the trait, with any party other than Bayer. The limitations imposed by these exclusive licenses could prevent us from expanding our business and increasing our exposure to new licensees, both of which could adversely affect our business and results of operations.

 

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Competition in seed traits and seeds is intense and requires continuous technological development. If we are unable to compete effectively, our financial results will suffer.

We currently face significant competition in the markets in which we operate. The markets for seed traits and ag-chemicals are intensely competitive and rapidly changing. Many companies engage in research and development of seed traits and ag-chemicals, and speed in getting a new product to market can be a significant competitive advantage. As an example, some of our competitors have enhanced research and development budgets allocated for seeds that are more significant than our budget. In most segments of the seed and ag-chemical market, the number of products available to the consumer is steadily increasing as new products are introduced. At the same time, an increasing number of products are coming off patent and are thus available to generic manufacturers for production. We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for products containing our traits. In addition, many of our competitors have substantially greater financial, marketing, sales, distribution and technical resources than us and some of our collaborators have more experience in research and development, regulatory matters, manufacturing and marketing. We anticipate increased competition in the future as new companies enter the market and new technologies become available. Our technology may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors, which will prevent or limit our ability to generate revenues from the commercialization of our technology.

We may be required to pay royalties to employees who develop inventions that have been or will be commercialized by us, even if the rights to such inventions have been assigned to us and the employees have waived their rights to royalties or other additional compensation.

Under the Israeli Patents Law, 5727-1967, if there is no agreement that prescribes whether, to what extent and on what conditions an employee is entitled to remuneration from commercialization of an invention developed by or with the contribution of such employee, then such matter is decided by a government-appointed compensation and royalties committee established under the Patents Law. In a decision issued in February 2010, the committee raised (but did not answer) the question whether the waiver by an employee of the right to receive remuneration from the commercialization of such invention is enforceable. The committee stated that such waiver is not necessarily enforceable, since the entitlement to royalties from future commercialization of such invention may be deemed a basic labor law protective right that may not be waived. A subsequent decision of the Israeli Supreme Court from August 2012 left this question unresolved. If such waiver is not enforceable, then an employee may be entitled to seek a determination by the committee that royalties from the commercialization of such invention are payable to the employee by the employer despite the waiver. A significant portion of our intellectual property (including our patents) has been developed by our employees in the course of their employment for us. All of our employees execute invention assignment agreements upon commencement of employment, in which they assign their rights to potential inventions and acknowledge that they will not be entitled to additional compensation or royalties from commercialization of inventions. However, given the foregoing uncertainty with respect to the enforceability of a waiver of the right to future royalties, we may be required to pay royalties to our employees who have invented intellectual property that we have commercialized, which in turn may have a material adverse effect on our results of operations.

Our success depends on our ability to protect our intellectual property and our proprietary technologies.

Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for our proprietary computational technologies, our traits and their uses, as well as our ability to operate without infringing upon the proprietary rights of others. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

 

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If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.

We treat our proprietary computational technologies, including unpatented know-how and other proprietary information, as trade secrets. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with any third parties who have access to them, such as our consultants, independent contractors, advisors, corporate collaborators and outside scientific collaborators. We also enter into confidentiality and invention or patent assignment agreements with employees and certain consultants. Any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, or if we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced and our business and competitive position could be harmed.

Changes in laws and regulations to which we are subject, or to which we may become subject in the future, may materially increase our costs of operation, decrease our operating revenues and disrupt our business.

Laws and regulatory standards and procedures that impact our business are continuously changing. Responding to these changes and meeting existing and new requirements may be costly and burdensome. Changes in laws and regulations may occur that could:

 

   

impair or eliminate our ability to research and develop our products, including validating our products through field trials;

 

   

increase our compliance and other costs of doing business through increases in the cost to patent or otherwise protect our intellectual property or increases in the cost to our collaborators to obtain the necessary regulatory approvals to commercialize and market the products we develop with them;

 

   

require significant product redesign or systems redevelopment;

 

   

render our products less profitable, obsolete or less attractive compared to competing products;

 

   

affect our collaborators’ willingness to do business with us;

 

   

reduce the amount of revenues we receive from our collaborators through milestone payments or royalties; and

 

   

discourage our collaborators from offering, and consumers from purchasing, products that incorporate our traits.

Any of these events could have a material adverse effect on our business, results of operations and financial condition. Legislators and regulators have increased their focus on plant biotechnology in recent years, with particular attention paid to GM crops. Because our current products are primarily in the initial discovery and proof of concept development phase, the only GM-related regulations that currently affect our business are related to our validation trials in Israel. We believe that we are currently in compliance with Israeli regulations related to growing GM crops in Israel; however, if these regulations change, our validation trials may become costly and burdensome and could require us to relocate our trials outside of Israel or even change our business model to have our collaborators perform validation trials.

While none of our products are currently available for sale, our future growth relies on the ability of our collaborators to commercialize and market our products, and any restrictions on such activities could materially and adversely impact our business and results of operations. Any changes in regulations in countries where GM crops are grown or exported into could result in our collaborators being unable or unwilling to develop,

 

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commercialize or sell products that incorporate our traits. In addition, we rely on patents and other forms of intellectual property protection. Legislation and jurisprudence on patent protection in the key target markets where we seek patent protection, such as the United States and the European Union, is evolving and changes in laws could affect our ability to obtain or maintain patent protection for our products. Any changes to these existing laws and regulations may materially increase our costs of operation, decrease our operating revenues and disrupt our business. See “Business—Regulation.”

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

As is the case with other biotech companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing biotech patents involves technological and legal complexity, and is costly, time consuming, and inherently uncertain. In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that may weaken or undermine our ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States are less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we are unable to prevent third parties from using our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the jurisdictions in which we do not have patent protection. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and we may be unable to prevent such competitors from importing those infringing products into territories where we have patent protection but enforcement is not as strong as in the United States. These products may compete with our product candidates and our patents and other intellectual property rights may not be effective or sufficient to prevent them from competing in those jurisdictions. Moreover, farmers or others in the chain of commerce may raise legal challenges against our intellectual property rights or may infringe upon our intellectual property rights, including through means that may be difficult to prevent or detect. For example, the practice by some farmers of saving seeds from non-hybrid crops (such as soybeans, canola and cotton) containing our biotechnological traits has prevented and may continue to prevent us from realizing the full value of our intellectual property in countries outside of the United States.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions, including China, where we have filed patent applications. The legal systems of certain countries, including China, have not historically favored the enforcement of patents or other intellectual property rights, which could hinder us from preventing the infringement of our patents or other intellectual property rights and result in substantial risks to us. Proceedings to enforce our patent rights in the United States or foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert patent infringement or other claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license from third parties.

 

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If we or one of our collaborators are sued for infringing the intellectual property rights of a third party, such litigation could be costly and time consuming and could prevent us or our collaborators from developing or commercializing our products.

Our ability to generate significant revenues from our products depends on our and our collaborators’ ability to develop, market and sell our products and utilize our proprietary technology without infringing the intellectual property and other rights of any third parties. In the United States and abroad there are numerous third party patents and patent applications that may be applied toward our proprietary technology, business processes or developed traits, some of which may be construed as containing claims that cover the subject matter of our products or intellectual property. Because of the rapid pace of technological change, the confidentiality of patent applications in some jurisdictions, and the fact that patent applications can take many years to issue, there may be currently pending applications that are unknown to us that may later result in issued patents upon which our product candidates or proprietary technologies infringe. Similarly, there may be issued patents relevant to our product candidates of which we are not aware. These patents could reduce the value of the traits we develop or the genetically modified plants containing our traits or, to the extent they cover key technologies on which we have unknowingly relied, require that we seek to obtain licenses or cease using the technology, no matter how valuable to our business. We may not be able to obtain such a license on commercially reasonable terms. There is a substantial amount of litigation involving patent and other intellectual property rights in the biotech industry generally. If any third party patent or patent application covers our intellectual property or proprietary rights and we are not able to obtain a license to it, we and our collaborators may be prevented from commercializing products containing our traits.

As the agricultural biotech industry continues to develop, we may become party to, or threatened with, litigation or other adverse proceedings regarding intellectual property or proprietary rights in our technology, processes or developed traits. Third parties may assert claims based on existing or future intellectual property rights and the outcome of any proceedings is subject to uncertainties that cannot be adequately quantified in advance. Any litigation proceedings could be costly and time consuming and negative outcomes could result in liability for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. There is also no guarantee that we would be able to obtain a license under such infringed intellectual property on commercially reasonable terms or at all. A finding of infringement could prevent us or our collaborators from developing, marketing or selling a product or force us to cease some or all of our business operations. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel may be diverted as a result of these proceedings, which could have a material adverse effect on us. Claims that we have misappropriated the confidential information or trade secrets of third parties could similarly have a negative impact on our business.

We and our collaborators may disagree over our right to receive payments under our collaboration agreements, potentially resulting in costly litigation and loss of reputation.

Our ability to generate royalty payments from our collaboration agreements depends on our ability to clearly delineate our intellectual property rights under those agreements. We often license patented genes or other intellectual property to our collaborators, who use or will use such intellectual property to develop and commercialize seeds with improved traits. However, a collaborator may use our intellectual property without our permission, dispute our ownership of certain intellectual property rights or argue that our intellectual property does not cover their marketed product. If a dispute arises, it may result in costly litigation, and our collaborator may refuse to pay us royalty payments while the dispute is ongoing. Furthermore, regardless of any resort to legal action, a dispute with a collaborator over intellectual property rights may damage our relationship with that collaborator, and may also harm our reputation in the industry.

We have not yet registered our trademarks. Failure to secure those registrations could adversely affect our business.

We have not yet filed applications to register our trademarks and those applications may be rejected or not be allowed for registration, and registered trademarks may not be successfully obtained, maintained or enforced.

 

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We are given an opportunity to respond to those rejections, but we may not be able to overcome such rejections. In addition, in the U.S. Patent and Trademark Office and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would, which could adversely affect our business.

We may be required to pay substantial damages as a result of product liability claims for which insurance coverage is not available.

Once products integrating our seed traits reach commercialization, product liability claims will be a commercial risk for our business, particularly as we are involved in the supply of biotechnological products, some of which can be harmful to humans and the environment. Courts have levied substantial damages in the United States and elsewhere against a number of companies in the agriculture industry in past years based upon claims for injuries allegedly caused by the use of their products. Product liability claims against us or our collaborators selling products that contain our seed traits or allegations of product liability relating to seeds containing traits developed by us could damage our reputation, harm our relationships with our collaborators and materially and adversely affect our business, results of operations, financial condition and prospects. We do not have product liability insurance coverage. Furthermore, while our collaboration agreements typically require that our collaborators indemnify us for the cost of product liability claims brought against us, such indemnification provisions may not always be enforced, and we may receive no indemnification if our own misconduct led to the claims.

Our employment agreements with our employees and other agreements with our collaborators and third parties may not adequately prevent disclosure of trade secrets, know-how and other proprietary information.

A substantial portion of our technologies and intellectual property is protected by trade secret laws. We rely on a combination of patent and other intellectual property laws as well as our employment agreements with our employees and other agreements with our collaborators and third parties to protect and otherwise seek to control access to, and distribution of, our proprietary information. These measures may not prevent disclosure, infringement or misappropriation of our confidential information. Our confidentiality, nondisclosure and assignment agreements or covenants may be breached, and we may not have adequate remedies for such a breach that would effectively prevent the further dissemination of our confidential information. We have limited control over the protection of trade secrets used by our collaborators and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, others may independently discover our trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Laws regarding trade secret rights in certain markets where we operate may afford little or no protection of our trade secrets. Failure to obtain or maintain trade secret protection could adversely affect our business, sales and competitive position.

We may be adversely affected by the current economic environment.

Our ability to obtain financing, invest in and grow our business, and meet our financial obligations depends on our operating and financial performance, which in turn is subject to numerous factors. In addition to factors specific to our business, prevailing economic conditions and financial, business and other factors beyond our control can also affect our business and ability to raise capital. We cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

 

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We may not be able to fully enforce covenants not to compete with our key employees, and therefore we may be unable to prevent our competitors from benefiting from the expertise of such employees.

Our employment agreements with key employees, which include executive officers, contain non-compete provisions. These provisions prohibit our key employees, if they cease working for us, from competing directly with us or working for our competitors for one year. Under applicable U.S. and Israeli laws, we may be unable to enforce these provisions. If we cannot enforce the non-compete provisions with our key employees, we may be unable to prevent our competitors from benefiting from the expertise of such employees. Even if these provisions are enforceable, they may not adequately protect our interests. The defection of one or more of our employees to a competitor could materially adversely affect our business, results of operations and ability to capitalize on our proprietary information.

Our operations are subject to various health and environmental risks associated with our use, handling and disposal of potentially toxic materials.

As part of our seed trait operations, we assist in the development of GM crops by inserting new genes into the genomes of certain plants. Though we introduce these genes in order to improve plant traits, we cannot always predict the effect that these genes may have on the plant. In some cases, the genes may render the plant poisonous or toxic, or they may cause the plant to develop other dangerous characteristics that could harm the plant’s surrounding environment. Furthermore, while we comply with relevant environmental laws and regulations, there is a risk that, when testing genetically modified plants, the seeds of these plants may escape the greenhouse or field in which they are being tested and contaminate nearby fields. Poisonous or toxic plants may therefore be inadvertently introduced into the wild, or possibly enter the food production system, harming the people and animals who come in contact with them.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”

Following the completion of this offering, we will be required to comply with various regulatory and reporting requirements, including those required by the Securities and Exchange Commission, or the SEC. Complying with these reporting and regulatory requirements will be time consuming, result in increased costs to us and could have a negative effect on our business, results of operations and financial condition.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the requirements of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

As an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the “JOBS Act,” we may take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (and the rules and regulations of the SEC thereunder). These exemptions will cease to apply by no later than the last day of our fiscal year following the fifth anniversary of the completion of this offering, and we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

 

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Risks Related to Our Ordinary Shares and the Offering

An active, liquid and orderly trading market for our ordinary shares may not develop in the United States, the price of our ordinary shares may be volatile, and you could lose all or part of your investment.

Prior to this offering, there has been no public market in the United States for our ordinary shares. The initial public offering price of our ordinary shares in this offering will be based, in part, on the price of our ordinary shares on the Tel Aviv Stock Exchange, or the TASE, and determined by negotiation among us and the representatives of the underwriters. This price may not reflect the market price of our ordinary shares following this offering and the price of our ordinary shares may decline. In addition, the market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, including:

 

   

actual or anticipated fluctuations in our results of operations;

 

   

variance in our financial performance from the expectations of market analysts;

 

   

announcements by us or our competitors of significant business developments, changes in relationships with our collaborators, acquisitions or expansion plans;

 

   

our involvement in litigation;

 

   

our sale, or the sale by our significant shareholders, of ordinary shares or other securities in the future;

 

   

failure to publish research or the publishing of inaccurate or unfavorable research;

 

   

market conditions in our industry and changes in estimates of the future size and growth rate of our markets;

 

   

changes in key personnel;

 

   

the trading volume of our ordinary shares; and

 

   

general economic and market conditions.

An active trading market on the New York Stock Exchange, or NYSE, for our ordinary shares may never develop or may not be sustained following this offering. If an active market for our ordinary shares does not develop, it may be difficult to sell your ordinary shares in the United States.

In addition, the stock markets have recently experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation we could incur substantial costs and our management’s attention and resources could be diverted.

As a foreign private issuer whose shares are listed on the Tel Aviv Stock Exchange, we intend to follow certain home country corporate governance practices instead of certain NYSE corporate governance requirements.

As a foreign private issuer, in reliance on NYSE’s corporate governance rules, which permits a foreign private issuer to follow the corporate governance practices of its home country, we will be permitted to follow certain Israeli corporate governance practices instead of those otherwise required under the NYSE corporate governance standards for U.S. domestic issuers. As of the consummation of this offering, we intend to follow the NYSE corporate governance standards for domestic issuers, except with respect to the matters described in this risk factor. Our articles of association provide that the quorum for any meeting of shareholders shall be the presence of at least two shareholders present in person, by proxy or by a voting instrument, who hold at least 25% of the voting power of our shares. As permitted under the Israeli Companies Law, or the Companies Law, for an adjourned meeting at which a quorum is not present at the end of half an hour following the time fixed for the

 

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meeting, the meeting may generally proceed so long as at least one shareholder is present, regardless of the voting power held by him, her or it. We also intend to follow certain home country practices in Israel in lieu of complying with certain other NYSE corporate governance requirements, including separate executive sessions of independent directors and non-management directors and the requirement to obtain shareholder approval for certain dilutive events (such as for the establishment or amendment of certain equity-based compensation plans, issuances that will result in a change of control of the company and issuances of more than 1% of our outstanding shares or voting power to our affiliates). Accordingly, our shareholders will not be afforded the same protection as provided under NYSE corporate governance rules. Following our home country governance practices as opposed to the requirements that would otherwise apply to a United States company listed on NYSE may provide less protection than is accorded to investors of domestic issuers. See “Management—NYSE Listed Company Manual and Home Country Practices.”

Our ordinary shares will be traded on more than one market and this may result in price variations.

Our ordinary shares have been traded on the TASE since 2007, and we intend to apply to have our ordinary shares listed on NYSE. Trading in our ordinary shares on these markets will take place in different currencies (U.S. dollars on NYSE and NIS on the TASE), and at different times (resulting from different time zones, trading days and public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the TASE could cause a decrease in the trading price of our ordinary shares on NYSE.

As a foreign private issuer we will not be subject to U.S. proxy rules and will be exempt from filing certain Exchange Act reports.

As a foreign private issuer, we will be exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act, and we will generally be exempt from filing quarterly reports with the SEC under the Exchange Act.

In addition, we would lose our foreign private issuer status if a majority of our directors or executive officers are U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

We may be subject to parallel reporting obligations in Israel and the United States, which may impose on us more stringent disclosure obligations than is customary for foreign private issuers whose securities are listed only in the United States.

As an Israeli public company with ordinary shares that are traded on the TASE, we have filed Hebrew language periodic and immediate reports with, and have furnished information to, the TASE and the Israeli Securities Authority, or the ISA, since the consummation of the initial public offering of our shares on the TASE in 2007. Prior to the commencement of this offering, we intend to convene a special meeting of our shareholders to be held shortly prior to completion of this offering, in order to solicit, among other things, the approval of our

 

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shareholders for a transition solely to U.S. reporting standards upon listing on the NYSE in accordance with an applicable exemption under the Israeli Securities Law, 5728-1968, and the regulations promulgated thereunder, or the Israeli Securities Law.

To the extent that we do not receive such approval of our shareholders, upon consummation of this offering we will become subject to separate reporting schemes of the Israel Securities Law and the Exchange Act. While similar in many respects, certain differences between these reporting schemes may impose on us disclosure obligations that are more stringent than those generally applied to foreign private issuers whose securities are listed only in the United States. For example, while the execution of a term sheet for a material transaction is generally not reportable by a foreign private issuer under the Exchange Act, such an event must be immediately reported to the TASE. Such disclose requirements might hamper our ability to freely conduct our operations, compared to other foreign private issuers whose securities are listed only in the United States. In addition, if we wish to engage in a capital market or another material transaction in which we are required to disclose certain information in one jurisdiction (whether Israel or the United States) that we are not required or willing to disclose under the securities laws of the other jurisdiction at the same time or at all, we may need to change the timing or form of such capital raising or other material transaction. Because we will be listed in different jurisdictions and operate in different geographic markets, we may sometimes not present information regarding our operations on a uniform basis. Accordingly, we may not present certain data under one set of securities laws that is typically presented under the other set of securities laws, thereby leading to a disparity of information between investors and shareholders in the two jurisdictions, which could cause a disparity of share prices and thereby present the opportunity for arbitrage in trading in our ordinary shares. Finally, if we do not receive the shareholders’ approval described above, the requirement to comply with the separate reporting obligations under U.S. and Israeli securities laws will require management attention and will burden us with additional costs.

Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company.

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of the average quarterly value of our assets (which may be determined in part by the market value of our ordinary shares, which is subject to change) are held for the production of, or produce, passive income, we could be characterized as a passive foreign investment company, or PFIC, for United States federal income tax purposes. According to these rules, a publicly traded non-U.S. corporation may treat the aggregate fair market value of its assets as being equal to the sum of the aggregate value of its outstanding shares (“Market Capitalization”) and the total amount of its liabilities. We intend to take the position that the excess of our Market Capitalization plus liabilities over the book value of all of our assets (“Goodwill”) may generally be treated as a non-passive asset to the extent attributable to our non-passive activities. Based on certain estimates of our gross income and gross assets, our intended use of proceeds of this offering, and the nature of our business, we do not expect that we will be classified as a PFIC for the taxable year ending December 31, 2013; however, because we currently hold, and expect to continue to hold, a substantial amount of cash and cash equivalents and other passive assets used in our business, and because the value of our gross assets is likely to be determined in large party by reference to the market prices of our securities, we could be classified as a PFIC for a given taxable year if our Market Capitalization were to decrease significantly.

If we are characterized as a PFIC, our United States shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than a capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. Holders (as defined in “Taxation and Government Programs—United States Federal Income Taxation”), and having interest charges apply to distributions by us and the proceeds of share sales. If we are characterized as a PFIC, certain elections may be available that would alleviate some of the adverse consequences of PFIC status and result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares; however, we do not intend to provide the information necessary for U.S. holders to make qualified electing fund elections if we are classified as a PFIC. See “Taxation and Government Programs—United States Federal Income Taxation—Passive Foreign Investment Company Considerations.”

 

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We are an “emerging growth company” and we cannot be certain whether the reduced requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements that are applicable to other public companies that are not “emerging growth companies.” For so long as we remain an “emerging growth company,” we will not be subject to the provision of Section 404(b) of the Sarbanes-Oxley Act that requires that our independent registered public accounting firm to provide an attestation report on the effectiveness of our internal control over financial reporting. This may increase the risk that we will fail to detect and remedy any weaknesses or deficiencies in our internal control over financial reporting. We have also elected to include three years of audited financial statements and selected financial data. In general, these reduced reporting requirements may allow us to refrain from disclosing information that you may find important. We have irrevocably elected not to avail ourselves of the election to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Nevertheless, as a foreign private issuer that is an emerging growth company, we will not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for up to five fiscal years after the date of this offering. We will remain an emerging growth company until the earliest of: (a) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act. We cannot predict if investors will find our ordinary shares less attractive as a result of our reliance on exemptions under the JOBS Act. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

The market price of our ordinary shares could be negatively affected by future sales of our ordinary shares.

After this offering, we will have              ordinary shares outstanding. If we or our shareholders sell substantial amounts of our ordinary shares, either on the TASE or on NYSE, or if there is a public perception that these sales may occur in the future, the market price of our ordinary shares may decline. We, together with our directors, officers and our significant shareholders, in the aggregate beneficially owning     % of our outstanding ordinary shares as of June 30, 2013, have agreed with the underwriters of this offering not to sell any ordinary shares, other than the shares offered through this prospectus, for a period of 180 days following the date of this prospectus.

The ordinary shares we are offering for sale in this offering and the 18,879,987 ordinary shares that are outstanding as of June 30, 2013, will be freely tradable in the United States immediately following this offering. As a result, except for the 3,813,113 ordinary shares that are the subject of lock-up agreements entered into by the holders thereof in connection with this offering, all of our outstanding shares are available for sale on the TASE and NYSE without restriction.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

We intend to allocate the net proceeds from this offering to our different areas of activity, including by implementing computational platforms that will shorten development time and time-to-market for particular traits in our seed traits operation, investing in chemical screening and handling capabilities and additional facilities under our ag-chemical operation, and establishing seed manufacturing facilities for worldwide commercialization under our Evofuel operation. Our management may not apply the net proceeds in ways that ultimately increase the value of your investment. They will have broad discretion in the application of the use of proceeds from this offering, and you will be relying on the judgment of our management regarding the

 

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application of these proceeds. If we do not invest or apply the net proceeds from this offering in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause the price of our ordinary shares to decline. See “Use of Proceeds.”

We have not yet determined whether our existing internal controls over financial reporting systems are compliant with Section 404 of the Sarbanes-Oxley Act, and we cannot provide any assurance that there are no material weaknesses or significant deficiencies in our existing internal controls.

Pursuant to Section 404 of the Sarbanes-Oxley Act and the related rules adopted by the SEC and the Public Company Accounting Oversight Board, starting with the second annual report that we file with the SEC after the consummation of this offering, our management will be required to report on the effectiveness of our internal control over financial reporting. In addition, once we no longer qualify as an “emerging growth company” under the JOBS Act and lose the ability to rely on the exemptions related thereto discussed above, our independent registered public accounting firm will also need to attest to the effectiveness of our internal control over financial reporting under Section 404. We have not yet commenced the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing internal controls. This process will require the investment of substantial time and resources, including by our Chief Financial Officer and other members of our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, we cannot predict the outcome of this determination and whether we will need to implement remedial actions in order to implement effective control over financial reporting. The determination and any remedial actions required could result in us incurring additional costs that we did not anticipate. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial reporting and/or results of operations and could result in an adverse opinion on internal controls from our independent auditors.

We will incur increased costs as a result of registering our ordinary shares under the Exchange Act and our management will be required to devote substantial time to compliance and new compliance initiatives.

As a public company in the United States, we will incur additional significant accounting, legal and other expenses that we did not incur before this offering. We also anticipate that we will incur costs associated with the requirements under Section 404 and other provisions of the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce new costs, such as additional stock exchange listing fees and shareholder reporting, and to take a significant amount of management’s time. The implementation and testing of such processes and systems may require us to hire outside consultants and incur other significant costs.

In addition, changing laws, regulations and standards, in the United States or Israel, relating to corporate governance and public disclosure and other matters, may be implemented in the future, which may increase our legal and financial compliance costs, make some activities more time consuming and divert management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that being a publicly traded company in the United States and being subject to U.S. rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

 

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Risks Relating to Our Incorporation and Location in Israel

Conditions in Israel could adversely affect our business.

We are incorporated under Israeli law and our principal offices and research and development facilities are located in Israel. Accordingly, political, economic and military conditions in Israel directly affect our business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, there has been an increase in unrest and terrorist activity, which began in September 2000 and has continued with varying levels of severity into 2013. In mid-2006, Israel was engaged in an armed conflict with Hezbollah in Lebanon, resulting in thousands of rockets being fired from Lebanon and disrupting most day-to-day civilian activity in northern Israel. Starting in December 2008, for approximately three weeks, Israel engaged in an armed conflict with Hamas in the Gaza Strip, which involved missile strikes against civilian targets in various parts of Israel and negatively affected business conditions in Israel. A similar conflict arose due to Hamas missile attacks against Israeli civilian targets in November 2012. Our principal place of business is located in Rehovot, Israel, which is approximately 30 miles from the nearest point of the border with the Gaza Strip. There can be no assurance that attacks launched from the Gaza Strip will not reach our facilities, or that hostilities will not otherwise cause a significant disruption to our operations, such as preventing our employees from reaching our facilities and limiting our ability to monitor and otherwise conduct the crop and other experiments we conduct at the facilities.

Several countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictions may limit materially our ability to sell our products to companies in these countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturn in the economic or financial condition of Israel, could adversely affect our operations and research and development, cause our revenues to decrease and adversely affect the share price of publicly traded companies having operations in Israel, such as us.

In addition, our business insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business and financial condition.

Our operations may be disrupted by the obligations of personnel to perform military service.

As of June 30, 2013, we had 188 full-time and 73 part-time employees, all of whom were based in Israel. Our employees in Israel, including executive officers, may be called upon to perform up to 36 days (and in some cases more) of annual military reserve duty until they reach the age of 45 (and in some cases, up to 49) and, in emergency circumstances, could be called to active duty. In response to increased tension and hostilities, since September 2000 there have been occasional call-ups of military reservists, including in connection with the mid-2006 war in Lebanon and the December 2008 and November 2012 conflicts with Hamas, and it is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence of a significant number of our male employees related to military service or the absence for extended periods of one or more of our key employees for military service. Such disruption could materially adversely affect our operations, business and results of operations.

The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.

Our Israeli facilities have the status of an “Approved Enterprise” and “Beneficiary Enterprise” under the Israeli Law for the Encouragement of Capital Investments, 1959, or the Investment Law, which makes us eligible

 

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for certain tax benefits under that law. For example, we are exempt from corporate tax for a period of two years and are subject to a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year.

In order to remain eligible for the tax benefits of an Approved Enterprise and Beneficiary Enterprise, we must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended, and in a tax ruling we received in October 2010, or the Tax Ruling. If we do not meet these requirements, we may not be eligible to receive tax benefits and we could be required to refund any tax benefits that we may receive in the future, in whole or in part, with interest. Further, the tax benefits available under the Investment Law may be terminated or reduced in the future. If these tax benefits are terminated, our Israeli taxable income would be subject to regular Israeli corporate tax rates. The standard corporate tax rate for Israeli companies in 2012 and 2013 is 25% (was previously 24% in 2011 and 25% in 2010), rising to 26.5% for the 2014 tax year and thereafter. See “Taxation and Government Programs—Israeli Tax Considerations and Government Programs—General Corporate Tax Structure in Israel.”

Additionally, if we increase our activities outside of Israel (for example, through acquisitions) our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs. Finally, in the event of a distribution of a dividend from the income that will be tax exempt under the Investment Law, in addition to withholding tax at a rate of 20% (or a reduced rate under an applicable double tax treaty), we will be subject to tax at the corporate tax rate applicable to our Approved Enterprise’s and Beneficiary Enterprise’s income on the amount distributed in accordance with the reduced corporate tax applicable to such profits. See “Taxation and Government Programs—Israeli Tax Considerations and Government Programs—Law for the Encouragement of Capital Investments, 5719-1959.”

Exchange rate fluctuations between the U.S. dollar and the NIS may negatively affect our earnings and we have not hedged against such fluctuations.

Most of our revenues are denominated in U.S. dollars. The percentage of our revenues denominated in U.S. dollars accounted for 72%, 71% and 78% of our revenues in 2012, 2011 and 2010, respectively, and 68% and 74% in the six months ended June 30, 2013 and 2012, respectively. We incur expenses primarily in NIS, however, and our expenses in NIS accounted for 90%, 90% and 89% of our expenses in 2012, 2011 and 2010, respectively, and 91% of our expenses in each of the six months ended June 30, 2013 and 2012. As a result, any appreciation of the NIS relative to the U.S. dollar would adversely impact our profitability due to the portion of our expenses that are incurred in NIS. As of June 30, 2013, we did not have any hedging arrangements in place to protect our exposure to foreign currency fluctuations. If we choose to do so in the future, we may be unsuccessful in protecting against currency exchange rate fluctuations. Future currency exchange rate fluctuations could adversely affect our profitability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosure About Market Risk—Foreign Currency Risk.”

We have received Israeli government grants for certain of our research and development activities. The terms of these grants may require us to satisfy specified conditions in order to develop and transfer technologies supported by such grants outside of Israel. In addition, in some circumstances, we may be required to pay penalties in addition to repaying the grants.

Our research and development operations have been partly financed through certain governmental grants, which impose certain restrictions on the transfer outside of Israel of the underlying know-how and the manufacturing or manufacturing rights of the underlying products and technologies. As of June 30, 2013, we had received approximately $4.1 million (approximately NIS 14.8 million) of such grants, on which interest of approximately $0.8 million (approximately NIS 2.9 million) had accrued as of such date. We may not receive the required approvals should we wish to transfer this know-how, technology or manufacturing rights outside of Israel in the future or, if we receive such required approvals, they may be subject to certain conditions and payment obligations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Government Grants.”

 

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It may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this prospectus in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these experts.

We are incorporated in Israel. None of our directors and executive officers is a resident of the United States, and the Israeli experts named in this prospectus are located in Israel. The majority of our assets are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or Israeli court, or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. See “Enforceability of Civil Liabilities.”

Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.

Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association to be effective following this offering, or our “articles of association,” and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in the company has a duty to act in fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. See “Management—Approval of Related Party Transactions Under Israeli Law—Shareholder Duties.” Since Israeli corporate law underwent extensive revisions approximately 12 years ago, the parameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.

Provisions of Israeli law may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.

Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased. Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no actual disposition of the shares has occurred. See “Description of Share Capital—Acquisitions Under Israeli Law.”

 

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Under Israeli law, our two external directors have terms of office of three years. In addition, according to the provisions of our articles of association, any amendment to the number of members appointed to our board of directors will require at least 75% of the votes cast. Additionally, the election of members to our board of directors will be staggered, meaning that every year only a portion of the members of our board of directors are subject to election. See “Management—Board of Directors.”

Furthermore, under the Encouragement of Industrial, Research and Development Law, 5744-1984, to which we are subject due to our receipt of grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor, or OCS, a recipient of OCS grants such as us must report to the applicable authority of the OCS any change in the holding of the means of control of our company which transforms any non-Israeli citizen or resident into a direct interested party in our company. The OCS Guidelines interpretation issued by the OCS provides that prior OCS approval is required for such change in the holding of the means of control.

These provisions of Israeli law and our articles of association could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. The statements we make regarding the following matters are forward-looking by their nature:

 

   

our expectation regarding the future growth of the seed and ag-chemical market and larger agriculture market;

 

   

our ability to adapt to continuous technological change in our industry;

 

   

our ability to maintain our collaboration agreements with our current collaborators;

 

   

our ability to enter into new collaboration agreements and expand our research and development to new traits and crops;

 

   

our ability to pursue a new business model in which we pay for our own research and development costs and enter into collaboration agreements only in the later stages of product development;

 

   

our expectation regarding the commercial trait value of our key products in yield and abiotic stress and biotic stress;

 

   

our expectation regarding regulatory approval of products developed by our collaborators;

 

   

our expectation that products containing our seed traits will be commercialized and we will earn royalties from the sales of such products;

 

   

our ability to successfully develop our ag-chemical operations, enter into collaboration agreements to develop ag-chemical products and eventually commercialize ag-chemical products;

 

   

our ability to successfully develop improved castor bean seed varieties that serve as a viable alternative second generation feedstock for biodiesel;

 

   

our ability to maintain and recruit knowledgeable or specialized personnel to perform our research and development work;

 

   

our ability to assemble, store, integrate, and analyze significant amounts of public and proprietary genomic data;

 

   

our ability to improve our existing computational technologies and plant validation systems and to develop and launch new computational technologies and validation systems, including PoinTar; and

 

   

our ability to patent the genes that we identify and to protect our trade secrets and proprietary know-how.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the risks provided under “Risk Factors” in this prospectus.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus or to conform these statements to actual results or to changes in our expectations.

 

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PRICE RANGE OF OUR ORDINARY SHARES

Our ordinary shares have been trading on the TASE under the symbol “EVGN” since 2007. No trading market currently exists for our ordinary shares in the United States. We intend to apply to have our ordinary shares listed on the NYSE under the symbol “EVGN.”

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE in NIS and U.S. dollars (giving prospective effect to the 1-for-2 reverse share split of our ordinary shares, which is to be effected immediately prior to the completion of this offering).

 

     NIS    $
     Price Per Ordinary Share    Price Per Ordinary Share
           High                Low                High                Low      

Annual:

                   

2013 (through September 18, 2013)

       51.18          36.34          14.47          9.73  

2012

       39.00          29.58          10.31          7.43  

2011

       42.40          25.20          12.02          7.10  

2010

       40.80          25.40          11.46          6.55  

2009

       31.40          12.86          8.45          3.31  

2008

       24.38          7.85          6.73          2.06  

Quarterly:

                   

Third Quarter (through September 18, 2013)

       51.18          41.44          14.47          11.41  

Second Quarter 2013

       46.24          37.52          12.54          10.51  

First Quarter 2013

       41.42          36.34          11.13          9.73  

Fourth Quarter 2012

       39.00          31.82          10.31          8.20  

Third Quarter 2012

       35.16          29.58          8.97          7.43  

Second Quarter 2012

       35.96          31.84          9.13          8.20  

First Quarter 2012

       34.48          29.60          9.28          7.82  

Fourth Quarter 2011

       33.68          27.66          8.88          7.28  

Third Quarter 2011

       33.62          25.20          9.86          7.10  

Second Quarter 2011

       38.90          31.56          11.23          9.06  

First Quarter 2011

       42.40          35.10          12.02          9.86  

Fourth Quarter 2010

       40.80          33.82          11.46          9.35  

Third Quarter 2010

       35.80          25.60          9.63          6.59  

Second Quarter 2010

       38.48          25.40          10.39          6.55  

First Quarter 2010

       40.38          27.94          10.66          7.40  

Fourth Quarter 2009

       31.40          24.50          8.38          6.48  

Third Quarter 2009

       28.84          23.08          7.41          6.06  

Most Recent Six Months:

                   

September 2013 (through September 18, 2013)

       51.18          47.12          14.47          13.22  

August 2013

       47.86          42.22          13.18          11.86  

July 2013

       44.42          41.44          12.31          11.61  

June 2013

       46.24          42.44          12.54          11.78  

May 2013

       42.22          37.52          11.47          10.51  

April 2013

       40.10          38.06          11.07          10.51  

March 2013

       41.42          37.76          11.13          10.22  

On September 18, 2013, the last reported sale price of our ordinary shares on the TASE was NIS 51.18 per share, or $14.47 per share (based on the exchange rate reported by the Bank of Israel on such date, which was NIS 3.54= $1.00).

As of September 18, 2013, we had two holders of record of our ordinary shares in the United States. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, as the shares of all shareholders who hold shares on the TASE are recorded in the name of our Israeli share registrar, Bank Leumi Le’Israel Registration Company Ltd.

 

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USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $             million, or approximately $             million if the underwriters exercise in full their option to purchase additional ordinary shares, based upon an assumed initial public offering price of $         per ordinary share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed public offering price would increase (decrease) the net proceeds we receive from this offering by $             million.

Proceeds are planned to be allocated to our different areas of activity as follows:

 

  1. Seed Traits:

 

  a. Expedite time to market: we intend to invest in the implementation of our computational platforms in order to shorten the development time for particular traits, and ultimately the time to market.

 

  b. Extend and expand our seed trait project portfolio and technological capabilities: we intend to expand our seed traits project portfolio into new traits and new crops and thus increase the potential for significant collaborations generating potentially significant revenues. In addition, we intend to establish new validation and data generation capabilities, primarily for biotic stress traits.

 

  c. Capture an additional share of the value chain by increasing self-funded research and development: we intend to complement our revenue streams by selectively self-funding a larger portion of our direct initial research and development costs.

 

  d. Establishing technology infrastructure in new territories, in addition to our existing infrastructure in Israel: we intend to diversify and broaden our data generation activities, research capabilities and personnel in new geographic sites.

We estimate the total investment in our seed traits operation will be approximately 50% of our net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

  2. Ag-Chemicals:

Develop and expand our ag-chemical operations: We intend to establish capabilities and facilities in order to be at the forefront of discovery and innovation in ag-chemicals, such as herbicides and crop enhancers. This includes investment in new computational discovery platforms, plant validation systems and infrastructure for chemical screening and handling. We estimate the total investment in our ag-chemical operation will be approximately 28% of our net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

  3. Evofuel:

Further develop and commercialize our Evofuel activities: We intend to invest in up-scaling our field trial activities towards commercialization of castor seeds, including establishment of seed production and marketing capabilities. Under these efforts, we intend to pursue new territories and markets. In addition, we intend to expand our research and development relating to the next generation of castor seeds. We estimate the total investment in our Evofuel operation will be approximately 22% of our net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We may also use a portion of the net proceeds to make acquisitions or investments in complementary companies or technologies, although we do not have any agreement or understanding with respect to any such acquisition or investment at this time. We will have broad discretion in the way that we use the net proceeds from this offering.

 

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DIVIDEND POLICY

Since our inception, we have not declared or paid any cash or other form of dividends on our ordinary shares. We currently intend to retain any earnings for use in our business and do not currently intend to pay cash dividends on our ordinary shares. Dividends, if any, on our outstanding ordinary shares will be declared by and subject to the discretion of our board of directors. Even if our board of directors decides to distribute dividends, the form, frequency and amount of such dividends will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors our board of directors may deem relevant.

In addition, the distribution of dividends may be limited by Israeli law, which permits the distribution of dividends only out of distributable profits. See “Description of Share Capital—Articles of Association—Dividend and Liquidation Rights.” In addition, if we pay a dividend out of income derived during the tax exemption period from the portion of the Company’s facilities that have been granted Approved Enterprise status, we may be required to recapture the deferred corporate tax with respect to the amount distributed. See “Taxation and Government Programs—Israeli Tax Considerations and Government Programs—Law for the Encouragement of Capital Investments, 5719-1959.”

 

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CAPITALIZATION

The following table sets forth our total capitalization, together with our cash, cash equivalents and marketable securities, as of June 30, 2013, as follows:

 

   

on an actual basis; and

 

   

on an as adjusted basis to reflect the issuance and sale of ordinary shares in this offering at an assumed initial public offering price of $         per ordinary share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us and a 1-for-2 reverse share split of our ordinary shares that will be effected immediately prior to the completion of this offering.

You should read this information in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

 

     As of June 30, 2013  
     Actual     As adjusted  
           (unaudited)  
     (in thousands)  

Cash, cash equivalents and marketable securities

   $ 50,541      $                
  

 

 

   

 

 

 

Liability to the Office of the Chief Scientist

   $ 3,629      $     

Ordinary shares, par value NIS 0.02 per share; 150,000,000 shares authorized, actual and as adjusted; 18,879,987 shares issued and outstanding, actual;          shares issued and outstanding, as adjusted

     103     

Additional paid-in capital

     92,147     

Put option

     (7,764  

Reserve—transaction with a former controlling shareholder

     1,156     

Accumulated deficit

     (38,343  
  

 

 

   

 

 

 

Total shareholders’ equity

     47,299     
  

 

 

   

 

 

 

Total capitalization

   $ 50,928      $     
  

 

 

   

 

 

 

A $1.00 increase (decrease) in the assumed initial public offering price of $         per ordinary share, would increase (decrease) the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total equity and total capitalization by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

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DILUTION

If you invest in our ordinary shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the net tangible book value per ordinary share after this offering. Our net tangible book value as of June 30, 2013 was $2.51 per ordinary share.

After giving effect to the sale of ordinary shares that we are offering at an assumed initial public offering price of $             per share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value on an adjusted basis as of June 30, 2013 would have been $             per ordinary share. This amount represents an immediate decrease in net tangible book value of $             per ordinary share to our existing shareholders and an immediate increase in net tangible book value of $             per ordinary share to new investors purchasing ordinary shares in this offering. We determine dilution by subtracting the as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for an ordinary share.

The following table illustrates this dilution:

 

Assumed initial public offering price per share

      $                

Net tangible book value per share as of June 30, 2013

   $ 2.51      

Increase per share attributable to this offering

     
  

 

 

    

As adjusted net tangible book value per share after this offering

     
     

 

 

 

Dilution per share to new investors in this offering.

      $     
     

 

 

 

A $1.00 increase (decrease) in the assumed initial public offering price of $             per ordinary share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, would increase (decrease) the as adjusted amount of each of cash, cash equivalents and short-term investments, share capital, share premium, additional paid-in capital, total equity and total capitalization by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional ordinary shares in full in this offering, the as adjusted net tangible book value after the offering would be $             per share, the decrease in net tangible book value per share to existing shareholders would be $             and the increase in net tangible book value per share to new investors would be $             per share, in each case assuming an initial public offering price of $             per ordinary share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus.

The following table summarizes, as of June 30, 2013, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that directors or senior management and their respective affiliates paid during the past five years, on the one hand, and new investors are paying in this offering, on the other hand. The calculation below is based on an assumed initial public offering price of $             per share before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

     Shares Purchased     Total Consideration     Average Price
Per Share
 
     Number    Percent     Amount      Percent    

Directors and senior management and their respective affiliates

               $                             $                

New investors

            
  

 

  

 

 

   

 

 

    

 

 

   

Total

        100        100  
  

 

  

 

 

   

 

 

    

 

 

   

 

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The foregoing tables and calculations exclude 3,885,860 ordinary shares reserved for issuance under our equity incentive plans as of June 30, 2013 of which 2,653,759 exercisable and outstanding options to purchase ordinary shares had been granted at a weighted average exercise price of $6.79 per share.

To the extent any of these outstanding options is exercised, there will be further dilution to new investors. To the extent all of such outstanding options had been exercised as of June 30, 2013, the as adjusted net tangible book value per share after this offering would be $            , and total dilution per share to new investors would be $            .

If the underwriters exercise their option to purchase additional shares in full:

 

   

the percentage of ordinary shares held by existing shareholders will decrease to approximately     % of the total number of our ordinary shares outstanding after this offering; and

 

   

the number of shares held by new investors will increase to             , or approximately     % of the total number of our ordinary shares outstanding after this offering.

 

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SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth our selected consolidated financial data. You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected in the future. Our financial statements have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board.

The selected consolidated statements of comprehensive income data for each of the years in the three-year period ended December 31, 2012 are derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The selected consolidated statements of comprehensive income data for the six months ended June 30, 2012 and 2013 and the consolidated balance sheet data as of June 30, 2012 and 2013 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. Results from interim periods are not necessarily indicative of results that may be expected for the entire year.

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2010     2011     2012     2012     2013  
                       (unaudited)  
     (in thousands, except per share and share data)  

Consolidated Statements of Comprehensive Income:

          

Revenues

   $ 12,563      $ 14,901      $ 17,072      $ 8,287      $ 8,934   

Cost of revenues

     5,811        8,247        9,552        4,483        4,688   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     6,752        6,654        7,520        3,804        4,246   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development

     5,544        6,384        7,252        3,308        4,666   

Business development

     1,062        1,136        1,159        544        532   

General and administrative

     2,123        2,317        2,235        1,069        1,197   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     8,729        9,837        10,646        4,921        6,395   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (1,977     (3,183     (3,126     (1,117     (2,149

Financial income

     724        5,023        972        510        776   

Financial expenses

     (5,717     (1,195     (294     (76     (989
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes on income

  

 

(6,970

 

 

645

  

 

 

(2,448

 

 

(683

 

 

(2,362

Taxes on income

     —         —         74        52        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (6,970   $ 645      $ (2,522   $ (735   $ (2,362
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net income (loss) per share

  

 

$

 

(0.48

 

  $ 0.04      $ (0.14   $ (0.04   $ (0.12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing basic income (loss) per share(1)

  

 

14,824,703

  

 

 

17,505,136

  

 

 

18,421,568

  

   
18,328,598
  
 

 

18,817,847

  

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing diluted income (loss) per share(1)

     14,824,703        18,731,118        18,421,568        18,328,598        18,817,847   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Basic net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period plus dilutive potential equivalent ordinary shares considered outstanding during the period, in accordance with IAS 33, “Earnings per Share.”

 

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     As of June 30,  
     2012      2013  
     (unaudited)  
     (in thousands)  

Consolidated Balance Sheet Data:

     

Cash and cash equivalents

   $ 11,558       $ 16,884   

Marketable securities

     30,643         33,657   

Short-term deposits

     10,600         —     

Trade receivables

     3,911         1,853   

Total current assets

     57,393         53,967   

Deferred revenues and other advances

     10,401         6,507   

Total liabilities

     17,015         14,705   

Working capital(1)

     49,361         44,921   

Shareholders’ equity

     48,361         47,299   

 

(1) Working capital is defined as total current assets less total current liabilities.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” and elsewhere in this prospectus. You should read the following discussion in conjunction with “Special note regarding forward-looking statements” and “Risk Factors.” We have prepared our financial statements in accordance with IFRS, as issued by the International Accounting Standards Board.

Company Overview

We are a plant genomics company that uses a comprehensive and integrated technology infrastructure to enhance seed traits underlying crop performance and productivity through biotechnology and advanced breeding methods. We have strategic collaborations with world-leading agricultural companies, primarily to develop traits for improved yield and abiotic stress tolerance (such as improved tolerance to drought, heat and salinity) and biotic stress resistance (such as resistance to disease, pests and insects). Our products are focused on essential crops, including corn, soybean, wheat, rice and cotton, which, according to Phillips McDougall’s 2011 Seed Industry Overview report, account for over 70% of the value of the global seeds market. We also apply our technology infrastructure to two additional fields: (i) ag-chemical and (ii) seeds focusing on second generation feedstock for biodiesel, both of which have not yet generated revenues and are in the development stage.

We were founded in 2000 as a division of Compugen Ltd., or Compugen and spun-off as an independent company in January 2002. The following are the key milestones in our technological, business and financial development as a plant genomics company:

 

   

In March 2003, we completed the first closing of our initial private placement, raising $2.0 million.

 

   

In 2006, we launched our initial computational technology for gene identification and prioritization, the ATHLETE version 1.0.

 

   

In 2006 and 2007, we started licensing the genes we identify to leading seed companies, which include:

 

   

Biogemma, with which we began a collaboration focused on developing drought tolerance corn in July 2006;

 

   

Bayer, which in June 2007 we entered into a collaboration agreement focused on increasing productivity in rice;

 

   

Monsanto, entering into a collaboration in September 2007 to improve nitrogen use efficiency in corn, soybean, cotton and canola; and

 

   

Pioneer Hi-Bred International, a subsidiary of DuPont, with which we commenced a collaboration in October 2007 to improve yield and tolerance to abiotic stress in corn and soybean.

 

   

In June 2007, we completed an initial public offering in Israel and listed our ordinary shares on the Tel Aviv Stock Exchange.

 

   

In August 2008, we entered into our first broad, multi-year collaboration agreement, with a five-year collaboration period, with Monsanto focusing on improving yield, nitrogen use efficiency and abiotic stress tolerance in corn, soybean, cotton and canola.

 

   

In June 2009, we entered into a collaboration agreement with Syngenta Biotechnology, Inc., or Syngenta, to address the key biotic trait of resistance to soybean cyst nematodes.

 

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In November 2009, we completed a substantial increase of our research and development and administrative facilities and personnel, adding 15 greenhouses for our validation systems and expanding our computational and laboratory facilities, supporting our growing cooperative activities.

 

   

In December 2010, we entered into our broad, multi-year collaboration agreement with Bayer to develop improved wheat varieties, focusing on increased yield, drought tolerance and fertilizer use efficiency.

 

   

In January 2011, our first genes were advanced to Phase II development as part of our collaboration with Biogemma, commenced in 2006, for improving yield and drought tolerance in corn.

 

   

In mid-2011, we launched EvoBreed, our computational technology for discovery of certain DNA sequences (such as genetic markers and single-nucleotide polymorphisms or SNPs) to enhance plant breeding.

 

   

In November 2011, we entered into a collaboration with DuPont aimed at improving soybean rust resistance. This was our first collaboration that includes self-funding of our research and development activities, with higher potential royalties.

 

   

In November 2011, we extended our 2008 collaboration agreement with Monsanto one additional year and expanded it to add our Gene2Product computational technology to our research and development efforts.

 

   

In January 2012, we established Evofuel Ltd., our wholly owned subsidiary incorporated in Israel, to focus on developing improved castor bean seeds that can be used as advanced second generation feedstock for biodiesel. Evofuel has pre-commercial collaborations with SLC Agricola in Brazil and T6 in Argentina to develop its products for these markets.

 

   

In January 2013, we launched Gene2Product, our computational technology for improving trait efficacy in developing biotech seed products.

Our business focuses on three distinct operations: seed traits, ag-chemicals and seeds focusing on second generation feedstock for biodiesel. We currently generate all of our revenues from our seed trait business, and these revenues are principally derived from our collaboration agreements and related arrangements with our collaborators. Our products are currently in the development stage, and we may use a significant portion of the proceeds of this offering to invest in the infrastructure and ongoing research needed for these operations.

We currently participate in more than ten collaboration agreements that cover 20 different products in various stages of development. Through these collaborations with some of the world’s leading agricultural companies, such as Monsanto, Bayer, DuPont and Syngenta, we have developed a balanced and scalable business model. We currently generate revenues from our collaboration agreements through both research and development services payments covering the costs of our gene identification and validation efforts, and milestone payments received upon achieving certain specified results. Our collaboration agreements with these companies also usually provide that we are entitled to receive milestone payments and royalties on any seeds that our collaborators commercialize that integrate a trait we have licensed to our collaborators. While we currently do not earn royalties from the sale of any such seeds, we expect to begin earning revenues from royalties in at least six years, and our long-term growth strategy is based in part on the expectation that such royalties will comprise a significant portion of our future revenues. The termination or non-renewal of our agreements with Monsanto and Bayer, including if Monsanto decides not to exercise its option to extend the collaboration period under our agreement with them by February 1, 2014 (and if Monsanto does not otherwise enter into a new collaboration agreement with us), would have a material adverse effect on our business, financial condition, results of operations and prospects.

 

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Components of Statements of Comprehensive Income

Revenues

Our revenues are principally derived from our collaboration agreements and related arrangements with our collaborators. A substantial majority of our current collaboration agreements focus on developing traits to be integrated into seeds through genetic modification (“GM”); our GM projects therefore generate the majority of our revenues from research and development services. The other component of our seed trait operations, advanced breeding, generates only a small portion of our revenues from research and development services. Revenues from our major collaborators, Monsanto and Bayer, accounted together for 94% of our revenues for the year ended December 31, 2012, of which Monsanto accounted for 70% and Bayer accounted for 24% of our total revenues. Monsanto and Bayer accounted together for 98% of our revenues for the six months ended June 30, 2013 of which Monsanto accounted for 66% and Bayer accounted for 32% of our total revenues. See “Business—Key Collaborations.” Under our collaboration agreements and related arrangements, our revenues are paid to us in the following four different forms of payments:

Periodic Payments for Research and Development Services

Periodic payments for research and development services are payments we receive primarily on a quarterly basis from our collaborators as consideration for the research and development services we provide them. Revenues from periodic payments for research and development services performed under our collaboration agreements amounted to $12.6 million and accounted for 70.1% of our total revenues for the year ended December 31, 2012, and $6.8 million, or 76.2%, in the six months ended June 30, 2013. As we have not yet entered into any collaborations for our operations in ag-chemical or seeds focusing on second generation feedstock for biodiesel, we have yet to generate any revenues from these operations.

Up-front Payments

We also derive a portion of our revenues from up-front payments made under our agreements with Monsanto and Bayer. Up-front payments primarily represent payments we receive upon entering into collaboration agreements for research and development services. These up-front payments are recognized as revenues over the duration of the relevant contract based on the proportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration. Revenues derived from up-front payments under our agreements with Monsanto and Bayer amounted to approximately $1.0 million and accounted for approximately 5.6% of our total revenues for the year ended December 31, 2012, and $0.5 million, or 5.7%, in the six months ended June 30, 2013.

Share Purchases

We also entered into share purchase agreements with Monsanto and Bayer, which were signed in contemplation of our collaboration agreements with them. We attribute the proceeds from arrangements under these agreements to the value of our ordinary shares issued to Monsanto and Bayer at the time of the investments as well as to the services we perform under the collaboration agreements. As a result, we recognize as revenues the excess payment, which is the consideration investors paid for our ordinary shares over the market value of our ordinary shares traded on the TASE at the time of the investment. This excess payment is recognized as revenues beginning on the date of the investment, for the duration of the contract based on the proportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration. We also recorded revenues with respect to Monsanto’s put option. We recognized as revenues the fair value of the put option with Monsanto throughout the term of the agreement, based on the proportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration. See “Business—Share Purchase Agreements.” Total revenues from the excess amounts on the purchase of our ordinary shares by Monsanto and Bayer as well as the Monsanto put option amounted to $3.2 million and accounted for approximately 18.5% of our total revenues for the year ended December 31, 2012, and $1.6 million, or 18.1%, in the six months ended June 30, 2013.

 

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Milestone Payments

We also derive, to a lesser extent at this stage of our business, a portion of our revenues from milestone payments paid by our collaborators upon the occurrence of certain specified events pursuant to the agreements with our collaborators. These milestone payments accounted for approximately 5.8% of our total revenues for the year ended December 31, 2012, but for none of our revenues for the six months ended June 30, 2013.

Our agreements with collaborators also provide for royalty payments based on the sales or transfer of products our collaborators develop that contain the traits we discover and license to them. The calculation of royalties varies by collaboration, and is typically based on the value that the trait we provide adds to the end product. For example, the royalties we expect to be entitled to receive pursuant to our collaborations with Monsanto and Bayer will be a percentage of the commercial value conferred by the trait we provide on the end product Monsanto or Bayer sells. Pursuant to our collaboration with Rasi Seeds, however, our royalties will be a percentage of the commercial value conferred by the trait we provide on the end product in addition to a percentage of the net revenues of the end product. We have not yet generated revenues from such royalties, and may not commence generating significant royalties for at least six years.

Cost of Revenues

Cost of revenues primarily consists of development costs incurred in conjunction with our collaborations, which include salaries and related personnel costs (including share-based compensation) for our research and development employees working on the collaborations, payments to third party suppliers that assist us in producing genomic data and the cost of disposable materials (such as seeds, laboratory supplies, fertilizer, water and soil). Cost of revenues also includes the depreciation of our plant, property and equipment, operational overhead costs (which include costs related to leasing and operating our office and laboratory facilities and greenhouses) and expenses related to retaining advisors, which primarily consist of biological experts.

Operating Expenses

Research and Development Expenses: Research and development expenses consist of costs related to our internal or independent research and development activities, as opposed to development costs incurred in connection with our collaborations (which are included in cost of revenues). These activities include developing and improving our computational, scientific and validation technologies, know-how and capabilities used by our various divisions as well as research and development focused on developing our ag-chemical and seeds focusing on second generation feedstock for biodiesel operations. Research and development costs include salaries and related personnel costs (including share-based compensation), operational overhead costs, which include costs related to leasing and operating our office, laboratory facilities and greenhouses, and depreciation of plant, property and equipment. Expenses related to our intellectual property, such as legal and other costs associated with patent applications, are also included as research and development expenses. We expect that our research and development expenses will continue to increase on an absolute basis as we develop our ag-chemical and seeds focusing on second generation feedstock for biodiesel operations and expand our independent research and development projects.

Business Development Expenses: Business development expenses consist of costs primarily related to maintaining our relationships with our collaborators and establishing new collaborations. These costs include salaries and related personnel costs (including share-based compensation), expenses incident to foreign business travel and legal expenses related to our collaborations. We expect our business development expenses will continue to increase on an absolute basis as we develop our ag-chemical and seeds focusing on second generation feedstock for biodiesel operations and seek collaboration opportunities for those projects.

General and Administrative Expenses: General and administrative expenses include salaries and related personnel costs (including share-based compensation) for our general and administrative employees, consulting,

 

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legal and professional services related to our general and administrative operations and expenses related to HR activities and employee benefits. We expect to incur additional general and administrative costs associated with being a public company in the United States, including compliance under the Sarbanes-Oxley Act and rules promulgated by the SEC.

Financial Income and Expenses

Financial income consists primarily of interest income on our cash bank deposits and securities, foreign currency exchange income and income related to a revaluation of the marketable securities we hold, which consist of corporate bonds and Israeli government treasury notes. Financial expenses consist primarily of expenses related to bank charges, foreign currency exchange expense and associated fees and expenses related to a revaluation of the marketable securities we hold. The interest due on grants received from the OCS is also considered a financial expense, and is recognized beginning on the date we receive the grant until the date on which the grant is expected to be repaid through royalties paid to the OCS. Financial income and expenses also include non-cash financial income and expenses related to revaluations of then-outstanding publicly traded warrants granted upon our initial public offering on the TASE in 2007 based on the change in market price of our ordinary shares. Substantially all of these warrants were exercised and the remainder expired in May 2011.

Taxes on Income

We do not generate taxable income in Israel, as we have historically incurred operating losses resulting in carryforward tax losses totaling $(15.3 million) as of June 30, 2013, to be carried forward indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carryforward tax losses. However, in 2012, we recognized $74 thousand in taxes on income resulting from withholding taxes our collaborators were obligated to withhold from the research and development payments they paid us.

Segment Data

Starting January 1, 2012, following the establishment of our Evofuel subsidiary, we split our operations into two operating segments: Evogene and Evofuel. The two segments perform the following operations:

 

   

Evogene: Our Evogene segment develops technologies to improve plant performance through seed traits and ag-chemicals. Our seed trait operation utilizes our expertise in plant genomics to address yield and abiotic stress and biotic stress traits through the genetic modification or advanced breeding of seeds. Our ag-chemical operation utilizes this expertise to develop novel crop protection and crop enhancement products, including herbicides.

 

   

Evofuel: Our Evofuel segment develops improved species of the castor bean plant for second generation feedstock intended for use in the alternative fuel industry, specifically biodiesel and biojet.

The following table presents our revenues and operating loss by segment for the period presented:

 

     Evogene     Evofuel     Total  
     (in thousands)  

Year ended December 31, 2012:

      

Revenues

   $ 17,072      $ —        $ 17,072   

Operating loss

     (1,993     (1,133     (3,126

Six months ended June 30, 2013 (unaudited):

      

Revenues

   $ 8,934      $ —        $ 8,934   

Operating loss

     (1,588     (561     (2,149

Our revenues for the year ended December 31, 2012 and the six months ended June 30, 2013 were generated entirely from the Evogene segment. Our Evogene segment includes revenues generated from our seed

 

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trait operations and costs associated with both our seed trait and ag-chemical operations. We do not currently generate revenues in the Evofuel segment, as Evofuel is still in the development stage. Both of these operating segments recorded losses in 2012 and the six months ended June 30, 2013. The primary drivers of loss for Evofuel in 2012 and the six months ended June 30, 2013 were research and development and business development expenses. We do not expect Evofuel to start generating significant revenues in the near term.

Comparison of Period to Period Results of Operations

The period to period discussions for the year ended December 31, 2012 and the six months ended June 30, 2013 present our results of operations for both operating segments. A period to period comparison is not presented for Evofuel for any period prior to 2012 due to the lack of comparative results.

The following tables set forth our results of operations in dollars and as a percentage of revenues for the periods indicated:

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2010     2011     2012     2012     2013  
                       (unaudited)  
     (in thousands)  

Consolidated Statements of Comprehensive Income:

          

Revenues

   $ 12,563      $ 14,901      $ 17,072      $ 8,287      $ 8,934   

Cost of revenues

     5,811        8,247        9,552        4,483        4,688   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     6,752        6,654        7,520        3,804        4,246   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development

     5,544        6,384        7,252        3,308        4,666   

Business development

     1,062        1,136        1,159        544        532   

General and administrative

     2,123        2,317        2,235        1,069        1,197   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     8,729        9,837        10,646        4,921        6,395   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (1,977     (3,183     (3,126     (1,117     (2,149

Financial income

     724        5,023        972        510        776   

Financial expenses

     (5,717     (1,195     (294     (76     (989
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes on income

     (6,970     645        (2,448     (683     (2,362

Taxes on income

     —          —          74        52       —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (6,970   $ 645      $ (2,522   $ (735   $ (2,362
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     Year Ended December 31,     Six Months Ended
June 30,
 
     2010     2011     2012     2012     2013  
                       (unaudited)  
     (as a percentage of revenues)  

Consolidated Statements of Comprehensive Income:

          

Cost of revenues

     46.3     55.3     56     54.1     52.5

Gross profit

     53.7        44.7        44        45.9        47.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development

     44.1        42.8        42.5        39.9        52.2   

Business development

     8.5        7.6        6.8        6.6        6   

General and administrative

     16.9        15.5        13.1        12.9        13.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     69.5        65.9        62.4        59.4        71.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (15.7     (21.2     (18.3     (13.5     (24.1

Financial income

     5.8        33.7        5.7        6.2        8.7   

Financial expenses

     (45.5     (8.0     (1.7     (0.9     (11.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes on income

     (55.5     4.5        (14.3     8.2        (26.4

Taxes on income

     0        0        0.4        0.6        0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (55.5 )%      4.5     (14.7 )%      (8.8 )%      (26.4 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2013

The following table shows our operating results for the six months ended June 30, 2012 compared to the six months ended June 30, 2013

 

     Six Months Ended
June 30,
 
     2012     2013  
     (unaudited)  
     (in thousands)  

Consolidated Statements of Comprehensive Income:

    

Revenues

   $ 8,287      $ 8,934   

Cost of revenues

     4,483        4,688   
  

 

 

   

 

 

 

Gross profit

     3,804        4,246   
  

 

 

   

 

 

 

Research and development

     3,308        4,666   

Business development

     544        532   

General and administrative

     1,069        1,197   
  

 

 

   

 

 

 

Total operating expenses

     4,921        6,395   
  

 

 

   

 

 

 

Operating loss

     (1,117     (2,149
  

 

 

   

 

 

 

Financial income

     510        776   

Financial expenses

     (76     (989
  

 

 

   

 

 

 

Income (loss) before taxes on income

     (683     (2,362

Taxes on income

     52        —    
  

 

 

   

 

 

 

Net income (loss)

   $ (735   $ (2,362
  

 

 

   

 

 

 

Revenues. Our revenues increased by $0.6 million, or 7.8%, to $8.9 million for the six months ended June 30, 2013 from $8.3 million for the six months ended June 30, 2012. The increase in revenues is mainly attributable to an increase in revenues under the Bayer Wheat Agreement in the six months ended June 30, 2013 as compared to the six months ended June 30, 2012.

 

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Cost of Revenues. Cost of revenues increased by $0.2 million, or 4.6%, to $4.7 million for the six months ended June 30, 2013 from $4.5 million for the six months ended June 30, 2012. This increase is primarily attributable to an increase in salaries and benefits as a result of additional personnel we hired to support the increase in revenues.

Gross Profit. Gross profit increased by $0.4 million, or 11.6%, to $4.2 million for the six months ended June 30, 2013 from $3.8 million for the six months ended June 30, 2012. This increase is primarily a result of the increase in revenues offset by the cost of revenues, each as described above.

Operating Expenses.

Research and Development Expenses. Research and development expenses increased by $1.4 million, or 41%, to $4.7 million for the six months ended June 30, 2013 from $3.3 million for the six months ended June 30, 2012. This increase is primarily attributable to an increase in salaries and benefits as a result of additional employees in the research and development department hired to support our additional independent research and development programs.

Business Development Expenses. Business development expenses decreased by $12 thousand, or 2.2%, to $532 thousand for the six months ended June 30, 2013 from $544 thousand for the six months ended June 30, 2012, primarily due to a decrease in the cost of share-based compensation.

General and Administrative Expenses. General and administrative expenses increased by $0.1 million, or 12%, to $1.2 million for the six months ended June 30, 2013 from $1.1 million for the six months ended June 30, 2012, primarily due to an increase in salaries and benefits and an increase in payments to consultants.

Financial (Income) Expenses, Net. Financial (income) expenses, net increased by $0.6 million, or 149%, to financial expenses, net, of $0.2 million for the six months ended June 30, 2013 from financial income, net, of $(0.4) million for the six months ended June 30, 2012.

Financial Income. Financial income increased by $0.3 million, or 52%, to $0.8 million for the six months ended June 30, 2013 from $0.5 million for the six months ended June 30, 2012. This increase resulted mainly from an increase in interest income on marketable securities.

Financial Expense. Financial expense increased by $0.9 million to $1 million for the six months ended June 30, 2013 from $0.1 million for the six months ended June 30, 2012. The increase resulted mainly from a decrease in the fair market value of marketable securities we hold.

 

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Year Ended December 31, 2011 Compared to Year Ended December 31, 2012

The following table shows our operating results for the year ended December 31, 2011 compared to the year ended December 31, 2012.

 

     Year Ended December 31,  
         2012             2011      
     (in thousands)  

Consolidated Statements of Comprehensive Income:

    

Revenues

   $ 17,072      $ 14,901   

Cost of revenues

     9,552        8,247   
  

 

 

   

 

 

 

Gross profit

     7,520        6,654   
  

 

 

   

 

 

 

Research and development

     7,252        6,384   

Business development

     1,159        1,136   

General and administrative

     2,235        2,317   
  

 

 

   

 

 

 

Total operating expenses

     10,646        9,837   
  

 

 

   

 

 

 

Operating loss

     (3,126     (3,183
  

 

 

   

 

 

 

Financial income

     972        5,023   

Financial expenses

     (294     (1,195
  

 

 

   

 

 

 

Income (loss) before taxes on income

     (2,448     645   

Taxes on income

     74        —     
  

 

 

   

 

 

 

Net income (loss)

   $ (2,522   $ 645   
  

 

 

   

 

 

 

Revenues. Our revenues increased by $2.2 million, or 14.6%, to $17.1 million for the year ended December 31, 2012 from $14.9 million for the year ended December 31, 2011. The increase in revenues resulted primarily from an increase in revenues from Monsanto, which increased by $1.5 million, or 13.7%, to $12.0 million for the year ended December 31, 2012 from $10.5 million for the year ended December 31, 2011, as a result of the extension of our collaboration agreement with Monsanto in November 2011. The increase in revenues was also attributable to an increase in revenues under the Bayer Wheat Agreement in 2012 as compared to 2011.

Cost of Revenues. Cost of revenues increased by $1.3 million, or 15.8%, to $9.5 million for the year ended December 31, 2012 from $8.2 million for the year ended December 31, 2011. This increase is primarily attributable to an increase in salaries and benefits resulting from the hiring of additional employees and payments to additional suppliers and consultants hired in 2012, both due to our increased staffing needs as a result of additional projects with Monsanto, Bayer and DuPont during 2012, and an increase in depreciation expenses, partially off-set by a decrease in the cost of share-based compensation.

Gross Profit. Gross profit increased by $0.9 million, or 13.0%, to $7.5 million for the year ended December 31, 2012 from $6.7 million for the year ended December 31, 2011. This increase is primarily a result of an increase in revenues partially off-set by an increase in the cost of revenues, each as described above.

Operating Expenses.

Research and Development Expenses. Research and development expenses increased by $0.9 million, or 13.6%, to $7.3 million for the year ended December 31, 2012 from $6.4 million for the year ended December 31, 2011. This increase is primarily attributable to an increase in salaries and benefits as a result of additional research and development employees hired in 2012 compared to 2011 to support our additional research and development programs in 2012, partially off-set by a decrease in the cost of share-based compensation.

 

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Business Development Expenses. Business development expenses increased by $23 thousand, or 2.0%, to $1.2 million for the year ended December 31, 2012 from $1.1 million for the year ended December 31, 2011. This increase is primarily attributable to an increase in salaries and benefits for two additional business development employees in 2012, partially off-set by a decrease in the cost of share-based compensation and a decrease in fees paid to legal consultations.

General and Administrative Expenses. General and administrative expenses decreased by less than $100,000, or 3.5%, to $2.2 million for the year ended December 31, 2012 from $2.3 million for the year ended December 31, 2011. General and administrative expenses decreased primarily due to a decrease in the cost of share-based compensation, partially off-set by an increase in salaries and benefits paid to additional employees hired during the course of 2012.

Financial Income, Net. Financial income, net decreased by $3.2 million, or 82.2%, to $0.7 million for the year ended December 31, 2012 from $3.8 million for the year ended December 31, 2011.

Financial Income. Financial income decreased by $4.0 million, or 80.6%, to $1.0 million for the year ended December 31, 2012 from $5.0 million for the year ended December 31, 2011. This decrease is primarily attributable to a decrease of $3.7 million in financial income on revaluation of warrants. For the year ended December 31, 2011, we recorded $3.7 million of non-cash financial income related to an accounting revaluation of outstanding publicly traded warrants granted upon our initial public offering on the TASE in 2007 based on the change in market price of our ordinary shares. For the year ended December 31, 2012, we did not record any financial income related to revaluation of warrants as substantially all of these warrants were exercised and the remainder expired in May 2011. The decrease in financial income also derives from a decrease in the net change in the fair value of marketable securities we hold, which consist of corporate bonds and Israeli government treasury notes, and a decrease in interest income due to a decrease in interest rates.

Financial Expense. Financial expense decreased by $0.9 million, or 75.4%, to $0.3 million for the year ended December 31, 2012 from $1.2 million for the year ended December 31, 2011. Financing expense decreased primarily as a result of a decrease in expenses in respect of a change in foreign currency exchange rates in 2011.

Taxes on Income. Although we did not pay any taxes in Israel on our income for the years ended December 31, 2012 and 2011 as a result of our loss carryforwards, we recorded taxes on income in the amount of $74 thousand for the year ended December 31, 2012 as a result of taxes our collaborators were obligated to withhold from the payments we received from them during 2012.

 

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Year Ended December 31, 2010 Compared to Year Ended December 31, 2011

The following table shows our operating results for the year ended December 31, 2010 compared to the year ended December 31, 2011.

 

     Year Ended December 31,  
         2011             2010      
     (in thousands)  

Consolidated Statements of Comprehensive Income:

    

Revenues

   $ 14,901      $ 12,563   

Cost of revenues

     8,247        5,811   
  

 

 

   

 

 

 

Gross profit

     6,654        6,752   
  

 

 

   

 

 

 

Research and development

     6,384        5,544   

Business development

     1,136        1,062   

General and administrative

     2,317        2,123   
  

 

 

   

 

 

 

Total operating expenses

     9,837        8,729   
  

 

 

   

 

 

 

Operating loss

     (3,183     (1,977

Financial income

     5,023        724   

Financial expenses

     (1,195     (5,717
  

 

 

   

 

 

 

Net income (loss)

   $ 645      $ (6,970
  

 

 

   

 

 

 

Revenues. Our revenues increased by $2.3 million, or 18.6%, to $14.9 million for the year ended December 31, 2011 from $12.6 million for the year ended December 31, 2010. The increase in revenues resulted mainly from an increase in payments from Bayer, due to the execution of the Bayer Wheat Agreement in December 2010, which increased by $3.0 million, or 587%, to $3.5 million for the year ended December 31, 2011 from $0.5 million for the year ended December 31, 2010. The increase also resulted from an increase in revenues from Monsanto, which increased by $1.2 million, or 12.8%, to $10.5 million for the year ended December 31, 2011 from $9.3 million for the year ended December 31, 2010. This increase resulted from an extension to our collaboration with Monsanto in November 2011. These increases are partially off-set by a decrease of $1.5 million in revenues from Biogemma derived from one-time research and development services payments received in 2010 to cover our prior research and development efforts, to $0.7 million for the year ended December 31, 2011 from $2.1 million for the year ended December 31, 2010.

Cost of Revenues. Cost of revenues increased by $2.4 million, or 41.9%, to $8.2 million for the year ended December 31, 2011 from $5.8 million for the year ended December 31, 2010. Cost of revenues primarily increased as a result of an increase in salaries and benefits due to the hiring of additional personnel and payments to suppliers and consultants relating to an increase in projects with collaborators. Excluding the one-time revenues from Biogemma in 2010 against which there were no corresponding costs, the increase in cost of revenues was in line with the increase in revenues for the same period.

Gross Profit. Gross profit decreased by $0.1 million, or 1.5%, to $6.7 million for the year ended December 31, 2011 from $6.8 million for the year ended December 31, 2010. This decrease is primarily a result of the increase in revenues and cost of revenues, as described above.

Operating Expenses.

Research and Development Expenses. Research and development expenses increased by $0.8 million, or 15.2%, to $6.4 million for the year ended December 31, 2011 from $5.6 million for the year ended December 31, 2010. This increase is primarily attributable to an increase in salaries and benefits for research and development employees due to the hiring of additional research and development personnel and an increase in depreciation

 

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expenses, partially off-set by a decrease in expenses paid for suppliers hired by our research and development department and the cost of share-based compensation related to research and development employees.

Business Development Expenses. Business development expenses increased by $74 thousand, or 7.0%, to $1.14 million for the year ended December 31, 2011 from $1.06 million for the year ended December 31, 2010. This increase is primarily attributable to an increase in salaries and benefits for business development employees due to the hiring of additional business development personnel, partially off-set by a decrease in the cost of share-based compensation related to business development employees.

General and Administrative Expenses. General and administrative expenses increased by $0.2 million, or 9.1%, to $2.3 million for the year ended December 31, 2011 from $2.1 million for the year ended December 31, 2010. This increase is primarily attributable to an increase in salaries and benefits paid to management and other general and administrative employees due to the hiring of additional general and administrative personnel, partially off-set by a decrease in the expenses related to share-based compensation for management and other general and administrative employees.

Financial Income and Expenses, Net. Financial income and expenses, net increased by $8.8 million, or 176.7%, to income of $3.8 million for the year ended December 31, 2011 from an expense of $5.0 million for the year ended December 31, 2010.

Financial Income. Financial income increased by $4.3 million, or 593.8%, to $5.0 million for the year ended December 31, 2011 from $0.7 million for the year ended December 31, 2010. This increase is primarily attributable to an increase of $3.7 million in financial income on revaluation of warrants. For the year ended December 31, 2011, we recorded $3.7 million of non-cash financial income related to revaluation of outstanding publicly traded warrants granted upon our initial public offering on the TASE in 2007 based on the change in market price of our ordinary shares. For the year ended December 31, 2010, we recorded $5.4 million of non-cash financial expense related to revaluation of these warrants. The change derived from the change of the market price of our ordinary shares on the TASE. The increase in financial income also derives from an increase in the net change in the fair value of marketable securities we hold, partially off-set by a decrease in income derived from currency revaluations.

Financial Expense. Financial expense decreased by $4.5 million to $1.2 million for the year ended December 31, 2011 from $5.7 million for the year ended December 31, 2010. Financial expense decreased primarily due to a decrease of $5.4 million in non-cash financial expense related to revaluation of outstanding publicly traded warrants granted upon our initial public offering on the TASE in 2007 based on the change in market price of our ordinary shares. For the year ended December 31, 2011, we recorded $3.7 million of non-cash financial income related to revaluation of these warrants, whereas for the year ended December 31, 2010, we recorded $5.4 million of non-cash financial expense related to revaluation of these warrants. The change derived from the change of the market price of our ordinary shares at TASE. The decrease was partially offset by an increase in expenses derived from currency revaluations.

Liquidity and Capital Resources

Our working capital has generally been provided by cash raised from our investors, payments from our collaborators and grants received from OCS and the Canada-Israel Industrial Research and Development Foundation, or CIIRDF. As of June 30, 2013, we had cash and cash equivalents and marketable securities of $50.5 million and working capital of $44.9 million, which is calculated by subtracting our current liabilities from our current assets. As of June 30, 2013, we had $3.6 million of outstanding indebtedness related to the grants received from the OCS. Our principal uses of cash are to fund our operations, the largest component of which is cost of revenues associated with the research and development expenses related to our collaborations. We believe that our existing cash and cash equivalents and the net proceeds to us from this offering will be sufficient to fund our operations for at least the next 12 months. We also expect to continue receiving grants from OCS and CIIRDF in the future.

 

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Cash Flows

The following table presents the major components of net cash flows used in and provided by operating, investing and financing activities for the periods presented:

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2010     2011     2012     2012     2013  
           (unaudited)  
     (in thousands)        

Net cash provided by (used in) operating activities

   $ (2,840   $ 2,133      $ (1,888   $ (3,721   $ (3,302

Net cash provided by (used in) investing activities

     (14,497     (30,582     18,485        8,745        (4,271

Net cash provided by (used in) financing activities

     1,353        25,576        1,111        (1     178   

Exchange rate differences—cash and cash equivalents

     (111     (782     89        70        17   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   $ (16,095   $ (3,655   $ 17,797      $ 5,093      $ (7,378
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Provided by (Used in) Operating Activities

Cash provided by (used in) operating activities consists primarily of net income or loss adjusted for certain non-cash items. Adjustments to net income or loss for non-cash items include depreciation and amortization, cost of share-based compensation and financing expenses. In addition, operating cash flows are impacted by changes in operating assets and liabilities, principally deferred revenues, prepayments, trade receivables, other receivables, trade payables and other payables.

Cash flows used in operating activities for the six months ended June 30, 2013 were $3.3 million and resulted primarily from ($2.4 million) in net loss, a decrease of $2.2 million in deferred revenues, decreases of $0.8 million in trade payables and other payables and an increase in trade receivables by $0.3 million, primarily offset by $1.0 million in depreciation and amortization expenses, $0.6 million in share based compensation expenses and by $0.6 million in interest received during the six months ended June 30, 2013.

Cash flows used in operating activities for the year ended December 31, 2012 were $1.9 million and resulted primarily from ($2.5 million) in net loss reduced by $1.8 million in depreciation and amortization expenses, $1.2 million of share-based compensation, $1.2 million in increases in trade payables and other payables and $0.9 million in interest received, and primarily offset by a decrease of $3.3 million in deferred revenues and by a $0.7 million increase in trade receivables.

Cash provided by operating activities decreased by $4.0 million from 2011 to 2012. Net cash provided by operating activities was $2.1 million for the year ended December 31, 2011 and were generated primarily from $0.6 million in net income adjusted up by $1.4 million in depreciation and amortization expenses, $2.1 million in expenses related to share-based compensation, a $1.3 million decrease in trade receivables and $1.1 million in interest received, and adjusted down by $3.8 million in net financing income and $0.9 million in deferred revenues.

Cash Provided by (Used in) Investing Activities

Cash provided by investing activities was $8.8 million for the six months ended June 30, 2012 and cash used in investing activities was $4.3 million for the six months ended June 30, 2013. The change from cash provided by investing activities in the six months ended June 30, 2012 to cash used in investing activities in the six months ended June 30, 2013 primarily resulted from a decrease in proceeds from bank deposits and an increase in net acquisitions of marketable securities.

The majority of our investment activities have historically been related to the acquisition of property, plant and equipment and the purchase and sale of marketable securities. Cash used in investing activities was

 

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$14.5 million and $30.6 million for the years ended December 31, 2010 and December 31, 2011, respectively, and cash provided by investing activities was $18.5 million for the year ended December 31, 2012. The change from cash used in investing activities in 2010 and 2011 to cash generated by investing activities in 2012 derives primarily from an increase in proceeds from bank deposits and an increase in net proceeds from the sale of marketable securities.

Cash Provided by Financing Activities

Cash provided by financing activities was $0.2 million for the six months ended June 30, 2013 and cash used in financing activities was $1.0 thousand for the six months ended June 30, 2012. Cash provided by financing activities derives primarily from payments related to the exercise of options.

Cash provided by financing activities was $1.1 million, $25.6 million and $1.4 million for the year ended December 31, 2012, 2011 and 2010, respectively, and primarily resulted from payments related to the issuance of shares in 2011 and exercise of options in 2012, 2011 and 2010.

Government Grants

Our research and development efforts are financed, in part, through grants from the OCS, the Israel-U.S. Binational Industrial Research and Development Foundation, or BIRD, and CIIRDF. From our inception through 2012, we received grants totaling $4.8 million from the OCS and repaid royalties on sales of products derived from the research financed by such grants of $1.4 million, grants totaling $0.7 million from BIRD, out of which we repaid $0.4 million in 2012 and grants totaling $0.2 million from CIIRDF, which we have not yet paid any royalties on. As of December 31, 2012, we had seven active research grants under which we were receiving funding: five from the OCS, one from BIRD and one from the CIIRDF. We have applied to receive additional grants to support our research and development activities in 2013, none of which has been approved yet.

Under the Israeli R&D Law, royalties on the revenues derived from sales of products or services developed in whole or in part using grants from the OCS are due to the Israeli government, generally at a rate between 3.0% and 5.0%. The rate of the royalties payable to the Israeli government varies by the length of time a product has generated sales revenues. During the first three years of sales of products developed as a result of the OCS grants, we are required to pay royalties of 3.0% of the sales of such products, and from the fourth year on, we are required to pay royalties of 3.5% of such sales, in all cases, up to 100% of the amount of grants received by us from the OCS plus interest at the London Interbank Offered Rate, or LIBOR. In addition to paying any royalty due, we must abide by other restrictions associated with receiving such grants under the R&D Law. These restrictions may impair our ability to outsource development of products containing our traits, engage in change of control transactions or otherwise transfer our know-how outside Israel and may require us to obtain the approval from the OCS for certain actions and transactions and pay additional royalties and other amounts to the OCS.

Our BIRD grant is a joint development with DuPont to research and develop improvements to soybean rust resistance. Under the BIRD program, the grant will be repaid either (a) within 66 months from the original grant date, provided we do not generate royalties from the project and DuPont decides to continue the project or (b) through royalties at a rate of 5% of revenues of the products developed through the project or 30% of the revenues generated by the advanced technology developed through the project, in an amount of up to 150% of the total grant received. Should we choose to abandon the project, we will not be obligated to repay the grant, however we will also not be permitted to use the intellectual property developed during the project.

The CIIRDF grant was also provided as part of a joint project with Saskatchewan Wheat Pool Inc., operating under the name of Viterra, to develop canola with improved yield and abiotic stress tolerance. This grant will be repaid from income resulting from the commercialization of a product developed pursuant to the grant project, at a rate of 2.5% of royalties on sales of such product, in an amount up to 100% of the total grant

 

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received. Alternatively, we may repay the grant as royalties of 2.5% of the income we receive from licensing the product developed pursuant to the grant. Payment of such royalties is not required if commercial revenues are not generated as a result of the project.

See “Risk Factors—Risks Relating to Our Incorporation and Location in Israel—We have received Israeli government grants for certain of our research and development activities. The terms of these grants may require us to satisfy specified conditions in order to manufacture products and transfer technologies supported by such grants outside of Israel. We may be required to pay penalties in addition to repayment of the grants.”

Contractual Commitments and Contingencies

Our significant contractual obligations and commitments as of December 31, 2012 are summarized in the following table:

 

     Payments Due by Period  
     2013      2014      2015      2016      2017      2018      Total  
     (in thousands, unaudited)  

Trade payables

   $ 1,416       $ —         $ —         $ —         $ —         $ —         $ 1,416   

Other payables(1)

     3,139         —           —           —           —           —           3,139   

Liabilities in respect of grants from the Chief Scientist(2) (undiscounted)

     745         501         605         511         525         1,175         4,062   

Non-cancellable operating leases(3)

     467         431         383         22         —           —           1,303   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,767       $ 932       $ 988       $ 533       $ 525       $ 1,175       $ 9,920   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Consists of liabilities to employees for salaries and related personnel costs and accrued expenses to suppliers. Approximately $2.5 million of this amount was paid at the beginning of 2013.
(2) Consists of the projected royalty payments of 3-3.5% on revenues derived from research and development projects that were funded in part by grants received from the OCS.
(3) Consists of non-cancelable operating leases for the Company’s office space and motor vehicles.

Off-Balance Sheet Arrangements

We do not currently engage in off-balance sheet financing arrangements. In addition, we do not have any interest in entities referred to as variable interest entities, which includes special purpose entities and other structured finance entities.

Application of Critical Accounting Policies and Estimates

Our accounting policies affecting our financial condition and results of operations are more fully described in our consolidated financial statements included elsewhere in this prospectus. The preparation of our financial statements requires management to make judgments, estimates and assumptions that affect the amounts reflected in the consolidated financial statements and accompanying notes, and related disclosure of contingent assets and liabilities. We base our estimates upon various factors, including past experience, where applicable, external sources and on other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and could have a material adverse effect on our reported results.

In many cases, the accounting treatment of a particular transaction, event or activity is specifically dictated by accounting principles and does not require management’s judgment in its application, while in other cases,

 

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management’s judgment is required in the selection of the most appropriate alternative among the available accounting principles, that allow different accounting treatment for similar transactions.

We believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.

Revenue Recognition

We recognize revenues when such revenues and the costs incurred or to be incurred in respect of the transaction can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to us.

We have entered into collaboration agreements under which we grant to our collaborators an exclusive license to intellectual property rights for the development and commercialization of our proprietary products. The agreements contain multiple elements, including funding from periodic payments for research and development services, up-front payments, payments based on achievement of specified milestones and royalties on sales of products sold by our collaborators that include the licensed traits.

We assess the criteria for recognition of revenue related to up-front payments and multiple components of revenue as outlined by IAS 18, Revenue. Judgment is necessary to determine the period over which we will satisfy our obligations related to up-front payments, when revenue components can be recognized separately and how to allocate the related consideration for each revenue component.

Revenues from periodic payments for research and development services are recognized throughout the services period based on the proportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration, subject to the enforceable rights. Up-front payments received upon entering into the license and collaboration agreements, in exchange for the transfer of our patented genes to licensees, are also recognized as revenues over the duration of the relevant contract based on the proportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration.

Revenues from milestone events, which are contingent upon the occurrence of certain events specified in the collaboration agreement, are recognized as revenues when the milestones, as defined in the particular agreement, are achieved.

Share-Based Compensation

We account for share-based compensation in accordance with the fair value recognition provision of IFRS guidance on share-based compensation. Under these provisions, share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award.

We selected the binomial option pricing model as the most appropriate method for determining the estimated fair value of our share-based compensation. The resulting cost of an equity incentive award is recognized as an expense over the requisite service period of the award, which is usually the vesting period. We recognize compensation expense over the vesting period using the graded vesting attribution method, which results in an accelerated recognition of compensation costs, and we classify these amounts in the consolidated statements of comprehensive income based on the department to which the related employee reports.

 

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The determination of the grant date fair value of options using an option pricing model is affected by estimates and assumptions regarding a number of complex and subjective variables. These variables include the estimated period of time that we expect employees to hold their options, the expected volatility of our share price over the expected term of the options, share option exercise and cancellation behaviors, risk-free interest rates and expected dividend yields, which are estimated as follows:

 

   

Expected term. The expected term was estimated using historical data from prior years, including historical forfeiture rates.

 

   

Share price volatility. The expected share price volatility was based on the average historical price volatility of our shares on the TASE.

 

   

Risk-free interest rate. The risk-free interest rate is based on the yields of non-index-linked Bank of Israel treasury bonds with maturities similar to the expected term of the options for each option group.

 

   

Dividend yield. We have historically not paid and do not intend to pay dividends on our ordinary shares. We have therefore assumed a dividend yield of zero.

If any of the assumptions used in the binomial model changes significantly, share-based compensation for future awards may differ materially compared with the awards granted previously.

The following table presents the weighted-average assumptions used to estimate the fair value of options granted during the periods presented:

 

    Year Ended December 31,     Six Months Ended June 30,
    2010     2011     2012     2012    

2013

                     

(unaudited)

Expected volatility of the share prices

    25-65%        33-69%        25-65%        32-65%     

—  %

Expected term of options (in years)

    4.12           4.27           4.12           4.27         —     

Risk-free interest rate

    1.87-6.81%        3.01-6.93%        1.87-6.81%        2.26-6.81%     

—  %

Dividend yield

    0%        0%        0%       
0%
  
 

—  %

Weighted average share price

    NIS 17.99 / $4.67           NIS 15.82 / $4.14           NIS 17.99 / $4.67           NIS 17.41 / $4.44        

NIS —     

Government Grants

Government grants are recognized when there is reasonable assurance that we will receive the grants and that we will comply with the attached conditions. Research and development grants received from the OCS, BIRD and CIIRDF are recognized upon receipt as a liability if future economic benefits are expected from the project that will result in royalty-bearing sales.

A liability for the grant is first measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grant received and the fair value of the liability is accounted for as a government grant and recognized as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Royalty payments we make to repay the grant are treated as a reduction of the liability. If no economic benefits are expected from the research activity, the grant receipts are recognized as a reduction of the related research and development expenses, in which case, the royalty obligation is treated as a contingent liability.

There is uncertainty regarding the estimates of future cash flows and the estimate of the capitalization rate that is used for determining the amount of the liability recognized. At the end of each reporting period, we evaluate whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid

 

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(since we will not be required to pay royalties) based on the best estimate of future sales, and if so, the appropriate amount of the liability is reduced with a corresponding reduction in research and development expenses.

Quantitative and Qualitative Disclosure About Market Risk

Foreign Currency Risk

Most of our revenues are denominated in U.S. dollars. The percentage of our revenues denominated in U.S. dollars accounted for 72.1%, 72.2% and 77.8%, of our revenues in the year ended December 31, 2012, 2011 and 2010, respectively, and 68.0% and 73.9% of our revenues in the six months ended June 30, 2013 and 2012, respectively. We incur expenses primarily in NIS, however, and our expenses in NIS accounted for 89.8%, 90.3%, and 89.0%, of our expenses in the year ended December 31, 2012, 2011 and 2010, respectively, and 91.1% and 91.5% of our expenses in the six months ended June 30, 2013 and 2012, respectively. As a result, any appreciation of the NIS relative to the U.S. dollar would adversely impact our profitability due to the portion of our expenses that are incurred in NIS. As of June 30, 2013, we did not have any hedge arrangements in place to protect our exposure to foreign currency fluctuations.

The following table presents information about the changes in the exchange rates of the NIS against the U.S. dollar:

 

Period

   Change in Average Exchange Rate of the NIS against
the U.S. dollar (%)
 

Six months ended June 30, 2013

     (3.5

2012

     7.8   

2011

     (4.1

2010

     (4.9

Our exposure related to exchange rate changes on our net asset position denominated in currencies other than USD varies with changes in our net asset position. Net asset position refers to financial assets, such as trade receivables and cash, less financial liabilities, such as trade payable and other payables. The impact of any such transaction gains or losses is reflected in finance expenses. Our most significant exposure relates to a potential change in the exchange rates of the U.S. dollar and the NIS. Assuming a 10% decrease in the U.S. dollar relative to the NIS, and assuming no other change, our finance expenses would have increased by $0.3 million in each of 2010 and 2011, decreased by $37,000 in 2012, and increased by $61,000 in the six months ended June 30, 2013 due to our positive current net asset position denominated in U.S. dollars in 2010 and 2011, and the six months ended June 30, 2013 and our negative current net asset position denominated in U.S. dollars in 2012.

Our results of operations are also impacted by currency translation gains and losses on monetary assets and liabilities, primarily cash deposits, denominated in currencies other than the U.S. dollar. Such gains or losses only impact the dollar value of our non-dollar denominated cash deposits and result from changes in reported values due to exchange rate fluctuations between the beginning and the end of reporting periods. Due to the limited amount of non-dollar denominated cash deposits, the amount of finance expenses recorded has been relatively insignificant.

Commodity Price Risk

Operating in the agribusiness sector, changes in certain commodity prices may affect our reported operating results and cash flows. We currently are not exposed to commodity price risks, however the prospects of our wholly owned subsidiary Evofuel will depend on biofuel and oil and natural gas prices, and the royalties we may receive from our collaborators on the sales and transfers of GM seeds containing the traits we develop could be affected by fluctuations in seed commodity prices. As of June 30, 2013, we did not have any hedge arrangements in place to protect our exposure to commodity price fluctuations.

 

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New and Revised Financial Accounting Standards

The JOBS Act permits emerging growth companies such as us to delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

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INDUSTRY OVERVIEW

We are a plant genomics company using proprietary computational tools to develop solutions that improve crop productivity. Our company operates principally in the seed and ag-chemical industry through the analysis of genomic data to identify and develop seed traits associated with increased productivity utilizing both biotechnology and advanced breeding methods. In addition, we intend to use these tools to enable the development of novel ag-chemicals for crop protection and enhancement, and we are also developing high-yielding castor bean seeds as a second generation feedstock for biodiesel. We believe that these markets represent large revenue opportunities, driven by a variety of macro trends and technological developments in the agriculture industry.

 

   

The market for seeds was estimated to be $37.6 billion in 2012, of which biotech seeds represented 49%, or $18.5 billion, according to Phillips McDougall’s March 2013 Seed Insight newsletter.

 

   

The market for crop protection ag-chemicals was estimated to be $47.3 billion in 2012, according to Phillips McDougall’s 2013 Industry Presentation on the Global Agrochemical and Seed Markets.

 

   

Global biodiesel consumption was estimated at 422.4 thousand barrels per day in 2011, according to Ken Research’s 2012 Global Biofuel Market Outlook.

We believe these market trends and the industry trends described below have enabled us to expand our relationships with our existing collaborators, which in turn has increased our revenues from $12.6 million in the year ended December 31, 2010 to $17.1 million in the year ended December 31, 2012. The growth in the market for seeds and crop protection has also enabled us to enter into new collaborations with companies in the seed and ag-chemical industry that are seeking to improve crop productivity. We have not yet entered into any collaboration agreements in our ag-chemical operations. Because we are in the developmental stages, we have incurred operating losses of $(3.1 million), $(3.2 million) and $(2.0 million) for the years ended December 31, 2012, 2011 and 2010, respectively, and $(2.1 million) and $(1.1 million) in the six months ended June 30, 2013 and 2012, respectively. While we expect to continue to incur operating losses in the near term, we expect that these market trends will continue to drive the growth of our business and increase revenue in the long term. We expect that the market and industry trends will enable our growth, both by potentially expanding our relationships with existing collaborators and by creating opportunities to enter into new collaborations. However, we cannot provide any assurance that these market trends will continue or that we will be successful in taking advantage of these trends. See “Risk Factors.”

Agriculture Industry Trends

The agriculture industry continues to seek sustainable and economically viable solutions to feed the world’s growing and increasingly prosperous population. Population growth and prosperity are fueling increased demand for grain, however production is constrained in meeting that demand due to finite arable land and water resources, climate variability, increasingly resilient weeds and insects, depletion of soil nutrients and diseases that impair crop yields.

In order to address these growing challenges, farmers need solutions to increase and maintain crop productivity. Seed and ag-chemical companies are therefore increasingly seeking innovative agricultural technologies such as development of high-yield seeds and more effective crop protection ag-chemicals. Such technologies are expected to continue to play a significant role in maintaining the supply-demand balance.

 

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Growing Global Demand for Grain

The global demand for major grains (corn, soybean, wheat, rice and barley) is expected to continue to rise steadily, driven by population growth and increasing demand for more protein-rich diets. According to a 2013 Global Commodities Forecast from Business Monitor International, global demand is estimated to have increased 23% from 2000 to 2011, reaching 2.3 billion tons, and is expected to reach approximately 2.7 billion tons in 2017 representing a further increase of 14%.

Global demand for major grains

 

 

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Source: Business Monitor International Global Commodities Forecast (April 2013)

Increasing population. The global population is projected to rise from approximately 7.0 billion people in 2012, to 9.4 billion people by 2050, according to the United States Census Bureau’s Demographic Overview Report. Most of this growth is expected to occur in developing countries, whose populations are expected to reach nearly 8.1 billion people by 2050. Population growth is the primary cause of increased grain demand.

Changing diets. In addition, rising levels of income, particularly in emerging markets, are expected to drive demand for higher protein diets, such as meat and dairy. For example, increased consumption of meat has a major effect on the demand for grains as the production of one kilogram of beef, pork or poultry requires multiple kilograms of grain feed. Global demand for meat is expected to increase by 1.1% per annum from 2005/2007 to 2050, according to the 2012 report, “World agriculture towards 2030/2050” by the Food and Agricultural Organisation of the United Nations (“FAO”), in comparison to approximately 0.8% of annual population growth, according to the United States Census Bureau.

 

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Limited Grain Supply

Finite land available for agriculture. Despite rising demand for grain, there is limited growth potential in arable land available for cultivation. According to the FAO’s 2012 report, “World agriculture towards 2030/2050”, within approximately 13.3 billion hectares of global dry land area, 4.5 billion hectares is suitable for agriculture. According to the same report, in 2005 to 2007 more than 1.5 billion hectares were cultivated. In addition, according to the 2011 Organisation for Economic Co-operation and Development (“OECD”)-FAO Agricultural Outlook, the cultivated land per capita declined at 1.5% p.a. from 1970 to 2008.

Hectares per capita, global

 

 

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Source: OECD-FAO Agricultural Outlook (2011)

Climate variability and limited water supply. Farmers must also manage risks associated with climate variability and detrimental natural events. These include both cyclical weather fluctuations, such as mild to moderate changes in temperature and precipitation, and major natural events such as droughts and storms. For example, according to a 2012 news release by the United States Department of Agriculture, or USDA, in 2012 the United States experienced the most severe and extensive drought in at least 25 years with 80% of agricultural land affected.

Weeds, insects and disease. The presence of weeds, insects and diseases also harms crop yields. According to a 2009 Media Centre release by the FAO, $95 billion worth of global food production is lost annually to weeds, $46 billion to insects and $85 billion to diseases. Weeds reduce yield by competing with crops for water, light and nutrients, and can interfere with harvest operations and increase production costs, while insects and disease can severely affect crop yield and quality.

 

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The Supply—Demand Gap

Over the last five decades, demand for food has been largely met by increasing crop yield as a result of innovations in agricultural technology, such as ag-chemicals and enhanced seeds, as well as a gradual increase in cultivated land. However, along with the decline in arable land per capita, the rate of yield improvement provided by current agricultural technologies is slowing and may not be sufficient to provide future food security.

 

Indexed area and production trends(a)

  

10-year rolling average change in yield(b)

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   LOGO

 

(a)    Reflects yield of corn, wheat, rice and barley crops. Yield defined as metric ton of crop produced per hectare.

  

 

(b)    Reflects 10 year rolling average yield of corn, wheat, rice and barley crops.

Source: USDA, Foreign Agricultural Service’s Production, Supply and Distribution Database (2013)    Source: USDA, Foreign Agricultural Service’s Production, Supply and Distribution Database (2013)

Enhancing and accelerating agricultural productivity in a sustainable manner is a central component of achieving global food and nutrition security. According to the Global Harvest Initiative’s 2010 Global Agricultural Productivity Report, Total Factor Productivity (TFP), which represents the ratio of agricultural outputs (gross crop and livestock output) per input (land, labor, livestock, fertilizer and machinery) will need to grow at an annual rate of 1.75% per year to meet the global demand for agricultural output in 2050. This will need to be addressed by continued improvements in technology and productivity.

Improving Plant Productivity

In order to address the supply-demand gap, farmers need to rely on innovative technologies that are aimed at improving plant productivity and field performance. Plant performance is impacted by various plant characteristics and traits that can be divided into three major categories:

 

   

Yield and abiotic stress tolerance traits govern plant yield per unit area, yield stability over varying environmental conditions and tolerance to environmental stress factors, such as drought and fertilizer utilization;

 

   

Biotic stress tolerance traits govern plant resistance to living organisms such as insects, diseases and fungi, as well as herbicides;

 

   

Quality traits govern the plant’s taste, shelf life, oil quality and nutrient content.

A fundamental way to improve plant productivity and performance is through the use of plant genomics. Plant genomics is the science of understanding and analyzing plants to modify biological elements which are responsible for traits. Through plant genomics, researchers can identify and influence target genes and other genomic components that affect trait performance, which are then used in the development of (i) enhanced seeds and (ii) novel crop protection ag-chemicals.

 

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(i) Enhanced Seeds

There are two primary methods to improve plant performance through the use of genomic technologies in the development of seeds.

Biotechnology or genetic modification. Use of genomic technologies for the development of seeds in which genes that impact specific traits are introduced to the plant through genetic insertion. These genes are identified and sourced from either the same plant, other plants or another organism and are introduced to the plant through the gene insertion into the plant’s DNA. Such seeds are referred to as genetically modified (“GM”) or biotech seeds. Biotechnology provides for a wider range of traits in a plant and usually results in more substantial seed trait improvement compared to advanced breeding.

Advanced breeding. Breeding is the enhancement of desired native traits by pairing between two plant lines from the same plant species. Advanced breeding is the use of genomic technologies to identify specific genomic markers, such as single-nucleotide polymorphisms (or SNPs), linked to a particular trait. This allows breeders to determine which parent plants with favorable characteristics should be crossed to enhance desired traits in the next generation. Seeds produced from advanced breeding are referred to as conventional seeds.

The global seed market grew at 7.8% CAGR since 2001 to reach $37.6 billion in 2012, with the biotech seeds market the major driver, growing at an 18.8% CAGR in the same period to reach $18.5 billion in 2012, accounting for 49% of the total seeds market, according to Phillips McDougall’s March 2013 Seed Insight newsletter. As of today, the two major traits which are commercially available in the biotech seeds market are herbicide tolerance and resistance to insects. However, the seeds companies are investing substantial resources to develop additional traits. According to estimates from the 2012 Global Status of Commercialized Biotech/GM Crops report, prepared by the International Services for the Acquisition of Agri-Biotech Applications (“ISAAA”), the savings and added economic value for farmers globally since the initial adoption of biotech applications in plants between 1996 and 2011 was estimated at approximately $98 billion.

 

Global value of seed market ($bn) & penetration of biotech seeds (%)

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Source: Phillips McDougall, Seed Insight, March 2013

 

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To date, the two main commercial biotech crops are corn and soybean, which together accounted for 60% of the global seeds market in 2012.

 

Total seed market, by crop (2011)

  

Biotech seed market, by crop (2011)

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Source: Phillips McDougall 2011 Seed Industry Overview (June 2012)    Source: Phillips McDougall 2011 Seed Industry Overview (June 2012)

Biotech seeds comprise a global industry, with 28 countries growing biotech crops in 2012 and a further 31 allowing imports, according to the ISAAA’s 2012 Global Status of Commercialized Biotech/GM Crops report. To date, the United States, Brazil and Argentina have accounted for the majority of volume with 106.1m hectares out of 170.3m hectares utilized for biotech crops in 2012, while the cultivation of biotech crops in the European Union has not been widely accepted due to regulation and negative public market perception.

 

Area of total crops, by country (2012)

  

Area of biotech crops, by country (2012)

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Source: USDA, Foreign Agricultural Service’s Production, Supply and Distribution Database (2013)    Source: ISAAA Global Status of Commercialized Biotech/GM Crops (2012)

Factors expected to drive future growth include the application of advanced breeding and biotechnology in additional crops such as rice and wheat, introduction of new target traits, such as durability to abiotic stress, and adoption of biotechnology crops by additional countries.

Product development for enhanced seeds

Biotech seeds. Producing biotech seeds requires trait development and commercial plant biotechnology, in addition to significant research and development capital, intellectual property protection and regulatory testing. The research and development process for biotech crops is complex and time consuming, requiring extensive application of technology in data analysis and field trials. The process of identification and development can take eight to 13 years before commercialization, depending on both the complexity of the trait and the type of crop involved. Total development costs on average typically reach approximately $140 million per gene addressing a specific trait in a specific crop, according to a Consultancy Study for Crop Life International conducted by Phillips McDougall in 2011.

 

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Conventional seeds. The product development process of enhancing desired native traits through advanced breeding includes identification of SNPs, validation in field trials and commercial launch of a seed product containing the trait. This process primarily differs from the development of biotech seeds in later phases of development wherein the process involved in receiving regulatory approval is far more comprehensive and lengthy in biotech seeds than in conventional seeds.

Major seed companies have declared their goal to significantly increase crop yield to meet the growing needs of the world population. For instance, Monsanto has indicated that it plans to double the yield in its core crops by 2030. These companies are increasingly focused on developing seeds with new target traits to improve yield and durability to abiotic stress, such as drought and heat. For example, Monsanto expects to commercially launch the first biotech drought tolerance trait in corn seed in 2013. In addition, these companies invest significant resources to broaden technological solutions for resistance to biotic stress such as nematodes, fungi and different plant diseases, in order to address the increasing resistance of pests to existing products, as reported by farmers. Such solutions include introducing seed traits with innovative mechanisms to cope with these pests, as well as new products to cope with different kinds of living organisms, such as nematodes, diseases and fungi.

According to Phillips McDougall’s 2013 Industry Presentation on the Global Agrochemical and Seed Markets, the total investment in seeds and traits by the major seed companies (Monsanto, DuPont, Syngenta, BASF, Dow and Bayer) was more than $3 billion in 2011. These companies often collaborate with specialized research and development companies that have complementary technological capabilities and expertise. Gene identification and early stage trials are often performed by such research and development companies on behalf of, and prior to, further development and commercialization by seed companies.

(ii) Crop Protection Ag-chemicals

The market for crop protection ag-chemicals has grown by approximately 40% since 2007 to an estimated $47 billion in 2012, according to Phillips McDougall’s 2013 Industry Presentation on the Global Agrochemical and Seed Markets. Ag-chemical products contain formulations of one or more chemicals designed to target an essential biological process within pests and prevent them from affecting agricultural crops. Crop protection ag-chemicals, which as a group are referred to as “pesticides” or “crop protection products,” include herbicides (to control weeds), fungicides (to prevent and treat fungal diseases) and insecticides (to minimize damage caused by insects).

 

Crop protection ag-chemicals

market size ($bn) and growth (%)

  

Crop protection ag-chemical

market breakdown (2011)

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Source: Phillips McDougall Industry Presentation on the Global Agrochemical and Seed Markets (January 2013)    Source: Phillips McDougall Industry Presentation on the Global Agrochemical and Seed Markets (May 2013)

 

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Historically, the market was driven by the introduction of new chemicals which addressed many of the challenges faced by crop growers in handling pests. However, in recent years, the industry has faced a number of challenges including:

 

   

The rate of introduction of novel ag-chemicals has been steadily declining due to high development costs and strict regulation, according to Phillips McDougall’s 2013 Industry Presentation on the Global Agrochemical and Seed Markets. The most extreme example of this is in the herbicides sector, in which there are only approximately 20 existing mechanisms to eradicate weeds, and the last product based on a new mechanism was launched over 20 years ago.

 

   

As a result, farmers are required to use the same product, or a combination of a number of products, repeatedly and in larger quantities and concentrations, against pests. This in turn leads to further acceleration in the development of pest resistance to existing chemicals and results in higher costs to the farmers, limiting the solutions available for the farmer as well in addition to having negative environmental impacts.

We believe that the decline in new mechanisms for eradicating weeds combined with an increase in weed resistance will further drive the growth in the market for crop protection ag-chemicals.

Number of New Pesticide Products Launched Annually

 

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Source: Phillips McDougall, The Global Agrochemical and Seed Markets Industry Developments, January 2013

Number of Species of Weed with Multiple Resistance

 

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Source: Weed Science Society of America, Herbicide Resistance Management Lesson 2011

 

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Farmers and ag-chemical companies have therefore been seeking new solutions to mitigate pest resistance. Accordingly, the science of crop protection is expanding beyond traditional agriculture chemicals to include new technologies to develop more effective ag-chemicals, such as more effective herbicides.

Product development for crop protection ag-chemicals

The process of developing a new crop protection ag-chemical is lengthy and costly, and typically spans ten years and costs on average $260 million to bring a new product to market, according to a 2010 Consultancy Study for Crop Life America and the European Crop Protection Association conducted by Phillips McDougall. Most producers have traditionally relied on a process of trial-and-error which involves screening thousands of chemicals against weeds, insects or any other kind of pests until they find a chemical that is able to eradicate or severely damage the pest. The decrease in the rate of introduction of new crop protection products to the market indicates that this costly approach is becoming less effective to identify and develop new products.

An alternative approach, less employed by the major ag-chemical companies today, involves rational design similar to that utilized in the pharmaceutical industry, which combines elements of both chemistry and biology. This consists of the use of plant genomic data to identify and target essential biological processes and leveraging this data for the discovery and development of complementary crop protection ag-chemicals, thereby potentially increasing the probability of success in identifying and developing novel herbicides with new mechanisms to cope with the growing resistance of weeds.

While the majority of current crop protection ag-chemicals are focused on providing solutions to biotic stresses, as described above, the industry is increasingly expanding into additional application areas such as crop enhancement ag-chemicals. These solutions are focused on developing ag-chemicals which if sprayed on crops, would affect important biological processes and thereby enable those crops to improve yields and resistance to abiotic stresses.

The Market for Biofuels

Biofuel demand in ground, aviation and maritime transportation has been steadily growing in past years, representing a market opportunity of approximately $140 billion in 2011, according to Ken Research’s 2012 Global Biofuel Market Outlook, with new markets, such as biojet fuels for commercial airlines and the US military continuing to emerge and attract new investments in the industry. Similar to traditional fuels, the two main types of biofuels in broad use are bioethanols (based on sugars such as corn and sugar cane) and biodiesels (based on oil based feedstock such as soybean and canola). The market is mainly driven by a need for increasing energy independence, reducing susceptibility to fluctuating oil prices and environmental concerns. Global production of biodiesel reached over 368 thousand barrels per day in 2011.

 

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Source: OECD-FAO Agricultural Outlook (2011)

 

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According to the 2007 McKinsey Quarterly (No. 2), feedstock accounts for the majority of biodiesel production costs. At present, production of biodiesel, an alternative to diesel fuel derived from plant oil, relies on edible crops, such as soybean and canola, considered first generation feedstocks. Rising commodity prices and concerns surrounding the long-term sustainability of diverting food feedstock for biodiesel use has hindered widespread adoption of these alternative fuels, setting the stage for the demand of second generation feedstock for biodiesel. Efforts are being undertaken worldwide to introduce second generation feedstock that will be: (i) economically viable, (ii) scalable and (iii) sustainable (e.g., achieving high productivity, with low input requirements and without competing with food crops). While there have been numerous attempts to develop a second generation feedstock (e.g., based on jatropha and algae), thus far the commercial success has been limited.

The castor bean plant has unique characteristics which make it a highly suitable potential second generation feedstock for biodiesels. Castor bean is a non-edible, high oil-yielding crop (oil comprises nearly 50% of the castor bean seed), and exhibits high tolerance to harsh environmental conditions, such heat and drought tolerance. Today castor beans are primarily grown in India, China and Brazil in a traditional manner and are mainly used in the biopolymer and lubricant markets. There is a need for advances in castor oil production as the castor market has exhibited unstable supply and price in the past, and has lacked an application of high-quality plant genetics and agronomics. While no commercial attempts have been made to develop castor bean seeds as a feedstock for biodiesel, by applying advanced seed technologies and modern agricultural practices, castor beans could be developed to bear the characteristics of an economically viable and sustainable second generation feedstock for biodiesel.

 

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BUSINESS

Our Business

We are a plant genomics company that uses a comprehensive and integrated technology infrastructure to enhance seed traits underlying crop performance and productivity through biotechnology and advanced breeding methods. We have strategic collaborations with world-leading agricultural companies, primarily to develop traits for improved yield and abiotic stress tolerance (such as improved tolerance to drought, heat and salinity) and biotic stress resistance (such as resistance to disease, pests and insects). Our products are focused on essential crops, including corn, soybean, wheat, rice and cotton, which, according to Phillips McDougall’s 2011 Seed Industry Overview report, account for over 70% of the value of the global seeds market. We also apply our technology infrastructure to two additional fields: (i) ag-chemical and (ii) seeds focusing on second generation feedstock for biodiesel, both of which have not yet generated revenue and are in the development stage.

The field of plant genomics, or the science of understanding and analyzing plant genomes to identify and impact biological elements affecting trait performance, continues to evolve. Agricultural product innovation is increasingly driven by the ability to analyze data, in order to make direct discoveries and gain insights into key underlying biological phenomena of such products. The seed and ag-chemical industry has witnessed a dramatic increase in the availability of genomic data. This is primarily as a result of the introduction of new technologies that facilitate rapid generation of such data at a significantly lower cost. As a result, the key opportunity, and challenge, for plant trait improvement has shifted from data generation to data integration and analysis of large volumes of data.

We believe that our competitive advantage is based on our continuously enhanced proprietary discovery and development infrastructure. This infrastructure is capable of integrating and analyzing vast amounts of data, through the use of proprietary computational technologies comprised of advanced algorithms and predictive methodologies. Our computational technologies are a key part of our broad technology infrastructure that also integrates extensive scientific expertise, public and proprietary genomic data and plant validation systems. Our proprietary gene identification capabilities, which are scalable and adaptable to a large variety of crops and traits, together with our highly educated and experienced multidisciplinary team of scientists, are, we believe, unique in the industry.

We currently generate revenues primarily through research and development and milestone payments as traits move through development phases, and in the future we expect to receive royalty revenues upon commercialization of products containing traits that we help our collaborators to develop. To date, we have identified and filed patent applications for over 4,000 novel genes and genomic components for the improvement of key traits, hundreds of which are under development in our collaborators’ pipelines. We believe that the extension and renewal of some of our main collaboration agreements highlight the value ascribed to our performance, our capabilities and our proprietary technology infrastructure. However, we are still in the development stages, and it may take at least six years, if at all, before the first seeds containing our traits complete the development process and become commercially viable. We have a history of losses and incurred operating losses of $(3.1 million), $(3.2 million) and $(2.0 million) for the years ended December 31, 2012, 2011 and 2010, respectively, and $(2.1 million) and $(1.1 million) for the six months ended June 30, 2013 and 2012, respectively.

We have collaboration agreements with most of the world’s leading seed and ag-chemical companies, including subsidiaries or affiliates of Monsanto, Bayer, DuPont, and Syngenta. Our collaborations with these companies are aimed at introducing improved seed traits into key commercial crops. Among our collaborators, Monsanto and Bayer are also key shareholders in our company, holding approximately 8.7% and 4.6% of our ordinary shares as of June 30, 2013, respectively.

We also aim to apply our technology infrastructure to two additional fields: ag-chemical and seeds focusing on second generation feedstock for biodiesel. For the ag-chemical market, we are focusing on the discovery of

 

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new biologically significant proteins called “targets” based on genes we identify that enable the development of herbicides with novel mechanisms to mitigate weed resistance. We also intend to use our proprietary discovery and development plant infrastructure to develop chemical molecules as crop enhancers that, when applied to crops, would improve yield and abiotic stress tolerance. Although we have not yet entered into collaboration agreements in this area, we currently expect to complete the development of our computational technologies for ag-chemical operations in the next 12 to 18 months, which we believe will increase the likelihood of entering into new collaborations. However, we cannot provide any assurance that we will be successful in developing these computational technologies or in entering into collaborations during this timeframe, if at all.

For the biodiesel market, we are focusing on the development of improved, high-yielding, non-edible castor bean seeds as an economically viable alternative feedstock for the production of biodiesel with a reduced environmental footprint. The success of this operation will depend on our ability to address several unique challenges, including developing effective growth protocols for our castor bean varieties and achieving mechanized harvest capabilities. We do not expect, however, to start selling seeds under this operation for at least three years.

We currently employ 188 employees, of which approximately 78% are involved in research and development and 48 hold a Ph.D. degree. Our multi-disciplinary team includes experts in biology, chemistry, plant genetics, agronomics, mathematics, computer science and other related fields.

We have been listed for trading on the TASE since 2007, are headquartered in the agricultural and biotech hub of Rehovot, Israel, and have field testing activities in Israel, Brazil and Argentina.

Our Strengths

We believe we are strategically positioned to capitalize on the fundamental need to increase agricultural yields in highly attractive end-markets such as food, feed and biofuel. Our competitive strengths include.

A leading position in the field of plant genomics. Since our company’s formation in 2002, we have established a powerful integrated infrastructure that we believe is unique in our industry for understanding plant genomics, addressing some of the key challenges in agriculture productivity. The infrastructure combines our know-how in plant genomics with our proprietary technologies and processes that span data integration and analysis, field experiments and plant validation. This infrastructure allows us to identify, prioritize and validate over 1,000 genes per year in our in-house research center, labs, greenhouses and field locations. Our professional and skilled employee base includes experts in computer science, genetics, agriculture science, molecular biology and other fields. Approximately 78% of our 188 employees as of June 30, 2013 are involved in research and development, and 48 of our employees hold Ph.D. degrees.

Innovative proprietary computational technologies, capable of efficiently integrating and analyzing vast amounts of complex genomic data. Our core competency lies in our advanced proprietary computational tools, which are the cornerstone to our plant genomic capabilities. These proprietary computational technologies are based on advanced algorithms and predictive methodologies for data integration and data analysis. The focus in the seed industry has shifted from data generation to data analysis due to the significant increase in volume and complexity of genomic data. Our computational technologies have demonstrated capability to integrate and comprehensively analyze vast amounts of public and proprietary data, covering more than 200 plant species and in the scope of 500 terabytes, enabling us to identify and prioritize genes and genomic components aimed at improving key plant traits.

A partner of choice for industry leaders. We have collaborations with five of the seven leading global seed and ag-chemical companies, focusing on the development of traits for key crops in their product portfolios such as corn, soybean and wheat. We believe that our ability to identify and validate target genes and genomic components in an efficient and methodological manner is a driver of innovation in our collaborators’ product development pipelines. Two of our key collaborators, Monsanto and Bayer, have made significant equity

 

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investments in our company and have entered into more than one agreement with us, and we believe that our track record of renewing or entering into new collaboration agreements with our collaborators underscores the potential strategic nature of our relationships with most of the world’s leading seed and ag-chemical companies.

A balanced and scalable business model. We currently generate revenues primarily through research and development and milestone payments; in the long term, we expect to also receive significant revenues from sales royalties generated by our collaborators upon commercialization of seeds incorporating genes and genetic components we identify. However, because the development cycle of products is lengthy, any revenue from royalty payments may not be earned before six years, if at all. We benefit from a business model in which, pursuant to most of our existing collaboration agreements, a significant part of our operating costs are borne by our collaborators. We self-fund our initial research and development costs in selected projects, with a goal of capturing a larger share of our collaborators’ future revenues. For example, one of our collaboration agreements with DuPont provides for higher milestone and royalty payments as a consequence of fully self-funded initial costs.

Diversified product portfolio and multiple paths of commercialization. Our innovative and adaptable technology infrastructure, scientific and computational expertise, and our close links to major companies in the seed and ag-chemical industry allow us to benefit from multiple business opportunities in the agriculture markets. Our more than ten different collaborations with world-leading seed and ag-chemical companies cover a portfolio of 20 products tailored to address specific market needs across various traits, such as yield enhancement and disease resistance, in a variety of crops, such as corn, soybean and wheat. Under these collaborations, hundreds of genes we identified are currently undergoing early testing in our collaborators’ pipelines. In addition, our expertise in plant genomics and flexible computational technologies will allow us to address new commercial opportunities in agriculture markets, such as discovery of target proteins in the ag-chemical market; and the development of castor bean seeds for second generation feedstock for the biodiesel market. We believe that both activities represent substantial business opportunities in additional large markets.

Broad intellectual property portfolio, claiming protection for thousands of key genes impacting valuable key traits. In the past ten years we have established a broad intellectual property portfolio that includes patents covering key traits such as yield and drought tolerance. We have more than 20 patent families, over 180 national filings and over 30 granted patents covering thousands of key genes and genomic components impacting valuable key traits. We believe that our intellectual property portfolio will enable us to benefit from royalty payments in the long-term and maintain our competitive advantage.

Our Growth Strategy

Our goal is to extend our market experience in improving plant productivity and performance using plant genomics. To achieve that goal we intend to pursue the following strategies.

Expand our innovative technologies in plant genomics. We intend to enhance our competitive advantage by further investing in our technology infrastructure and research and development capabilities in order to improve the process of identification and validation of genes and genomic components. Specifically, with respect to our technology infrastructure, we intend to continue to (i) improve our existing computational technologies through the introduction of novel methodologies and more advanced algorithms, as well as the development of new computational technologies, such as our recently launched Gene2Product; (ii) develop proprietary genomic data through field experiments utilizing advanced technologies, such as systems for collection and integration of field data; and (iii) improve our plant validation capabilities, such as the recent launch of our unique monocot validation system. In addition, we intend to continue investing resources in understanding the basic biological phenomena in plants at the genomic and molecular level.

Continue to advance our existing collaborations in seed traits. We are focused on executing and advancing our existing collaborations by continuing to provide innovative solutions, thereby maintaining high output quality

 

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standards. We strive to work closely with our collaborators throughout the development processes and support them with our technology infrastructure in order to expedite our genes and genetic components towards commercialization with a view to generating significant milestone and royalty revenues from our collaborations. Our efforts with collaborators has resulted in several of them expanding the scope of our existing collaborations over time, for example the extension and expansion of our collaboration with Monsanto in 2011.

Extend and expand our seed trait project portfolio. We plan to continue to leverage our scalable and adaptable infrastructure, plant genomics expertise and close relationships with agriculture industry leaders in order to (i) address new traits, such as insect resistance; (ii) add new crops to our portfolio, such as sugarcane or selected vegetables; and (iii) commercialize new offerings by extending our current collaborations and introducing new technologies into our existing collaborations. For example, in 2009 we commenced collaboration with Bayer to improve yield in rice, and in 2010 initiated a new collaboration with Bayer to improve the yield, nitrogen use efficiency and abiotic stress tolerance of wheat. Similarly, in 2011, Monsanto extended and expanded the collaboration we entered into with them in 2008 to include gene optimization approach using our Gene2Product computational technology in the collaboration projects.

Capture an additional share of the value chain by increasing self-funded research and development. In most of our current collaborations our collaborators fund our direct research and development and associated expenses in the early stages of the discovery process, prior to the delivery and license of genes to our collaborators. We intend to complement our revenue streams by selectively self-funding a larger portion of our direct research and development costs in the initial phases of selected projects and licensing genes to our collaborators at a later stage of the development process, with a goal of capturing a larger share of our collaborators’ future revenues.

Further develop and commercialize our ag-chemical operations. We are leveraging our know-how and computational technologies to position our company at the forefront of the discovery and innovation in ag-chemicals by (i) discovering new modes of action for the development of novel herbicides to mitigate growing weed resistance; (ii) identifying trait-specific chemical active ingredients displaying crop enhancing effects with respect to yield and abiotic stress tolerance; and (iii) leveraging our existing relationships with major seed and ag-chemical companies, such as Bayer and Syngenta, to enter into new collaborations in the ag-chemical sector.

Further develop and commercialize the activities of our subsidiary Evofuel. We intend to further develop our castor bean seed operations towards commercialization. Our key initiatives include: (i) commercializing advanced high yielding castor bean varieties, suitable for commercial production and mechanized harvest; (ii) introducing next generation traits to our castor bean varieties utilizing our genomic technologies; (iii) expanding our existing pre-commercial collaborations with SLC Agricola in Brazil and T6 in Argentina in order to be able to sell our castor beans on a commercial scale; and (iv) seeking new collaborations in additional target markets with key companies.

Our Products

We are a plant genomics company that uses a comprehensive and integrated technology infrastructure to enhance seed traits underlying crop performance and productivity through biotechnology and advanced breeding methods. Our business focuses on three distinct product-driven operations: (i) seed trait (divided into (a) yield and abiotic stress, and (b) biotic stress) (ii) ag-chemical and (iii) seeds focusing on second generation feedstock for biodiesel. We currently generate all of our revenues from our seed trait operations, and a significant majority of our employees are focused on these operations. Our operations in ag-chemicals and seeds focusing on second generation feedstock for biodiesel are in the pre-revenue stage and we have not yet entered into collaboration agreements in the ag-chemical area. We may use a significant portion of the proceeds of this offering to invest in and grow our ag-chemical and seeds focusing on second generation feedstock for biodiesel operations.

 

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Seed Traits

In this field, we use our expertise in plant genomics to improve plant performance through biotechnology and advanced breeding, helping address the global demand for food, feed and fuel. Our proprietary computational technologies, validation techniques and other capabilities enable us to identify promising “candidate” genes and genetic markers, or SNPs (i.e., a single-nucleotide polymorphism, which is essentially a DNA sequence variation that occurs when a single nucleotide, a basic gene “building block,” varies from one DNA sequence to another), that have the potential to improve traits of interest, such as yield, drought tolerance, and disease resistance in commercial (or “target”) crops, such as corn, soybean, wheat, rice and cotton. The most promising “candidate” genes will be used to develop improved biotechnological seeds; the SNPs will be used for conventional seeds improved through advanced breeding. We have entered into collaboration agreements with some of the world’s leading seed and ag-chemical companies, including Monsanto, Bayer, DuPont and Syngenta, which license the trait-improving genes that we generate with the goal of introducing these genes into the seeds of commercial crops.

Our seed traits programs specialize in improving plant yield and increasing plant tolerance to abiotic stress (such as drought, heat and salinity) and resistance to biotic stress (such as disease, pest and insect resistance) through both biotechnology and advanced breeding. The use of biotechnology, or the genetic modification of plants, involves the direct manipulation of a plant’s genome by inserting a gene into the plant’s DNA. This method of plant improvement provides for a wider range of traits in a plant and usually results in more substantial seed trait improvement compared to advanced breeding. Under the advanced breeding method, plants with favorable characteristics are selectively crossed through genomic-guided breeding schemes, with the goal of eventually improving seed traits.

Our product development cycle for seed traits is comprised of six phases. See “—Product Development Cycle—Seed Trait Product Development Cycle.” Currently, we specialize in the upstream portion of the development cycle, particularly in the Discovery phase (i.e., when candidate genes are identified and validated in model plants). In some cases, we also test candidate genes in target plants, as part of Phase I or “proof of concept.” We license our most promising candidate genes to our collaborators with the intent that they will further develop and commercialize the products.

We have over ten collaboration agreements with world leading seed and ag-chemical companies, covering a portfolio of 20 products tailored to address specific market needs across various traits. Under these agreements, hundreds of genes we have discovered are currently undergoing Phase I testing in our collaborators’ pipelines. In addition, under these collaboration agreements, our collaborators have committed to pay us more than $100 million in the form of research and development and related payments, as well as in the form of purchases of our ordinary shares at a premium. This does not include milestone payments, which we are entitled to when our products advance from phase to phase, or royalties, which we expect to be entitled to once our products are sold to farmers. A substantial majority of our collaborations currently focus on improving traits through biotechnology.

 

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The following table sets forth our products currently under development with our collaborators:

 

Product #

  

Trait

  

Crop

  

Collaborator

      Yield and Abiotic Stress Tolerance*

1

   Yield    Corn    Monsanto, Biogemma (1), DuPont

2

   Yield    Soybean    Monsanto

3

   Yield    Wheat    Bayer (targeting both GM and non-GM products)

4

   Yield    Cotton    Monsanto

5

   Yield    Canola    Monsanto, Viterra

6

   Yield    Rice    Bayer, Rasi Seeds

7

   Abiotic Stress Tolerance    Corn    Monsanto, Biogemma, DuPont

8

   Abiotic Stress Tolerance    Soybean    Monsanto

9

   Abiotic Stress Tolerance    Wheat    Bayer (targeting both GM and non-GM products)

10

   Abiotic Stress Tolerance    Cotton    Monsanto, CIRAD

11

   Abiotic Stress Tolerance    Canola    Monsanto, Viterra

12

   Abiotic Stress Tolerance    Rice    Rasi Seeds, DBN

13

   Nitrogen Use Efficiency    Corn    Monsanto

14

   Nitrogen Use Efficiency    Wheat    Bayer (targeting both GM*** and non-GM products)

15

   Nitrogen Use Efficiency    Cotton    Monsanto

16

   Nitrogen Use Efficiency    Canola    Monsanto

17

   Nitrogen Use Efficiency    Rice    DBN

      Biotic Stress Resistance**

18

   Soybean rust resistance    Soybean    DuPont

19

   Nematode resistance    Soybean    Syngenta

20

   Black sigatoka resistance    Banana    Rahan Meristem

 

(1) Biogemma’s shareholders are Limagrain, RAGT, Euralis, Sofiproteol and Unigrain.
* Yield and abiotic stress tolerance refers to a plant’s yield stability over varying environmental conditions and tolerance to environmental stress factors, such as drought and fertilizer utilization.
** Biotic stress resistance refers to a plant’s disease, pest and insect resistance.
*** I.e., genetic modification.

Based on a 2013 Phillips McDougall analysis, the cumulative annual future revenue potential for seed companies from key traits of significant biotechnology crops that we and our collaborators are developing is estimated at between $5-8 billion.

Yield and abiotic stress

Initiated in 2004, our yield and abiotic stress programs focus on important seed traits that have a direct impact on crop production and productivity. Pursuant to these programs, we seek to identify and prioritize genes capable of, among other things, increasing crop yield per acre of land, improving plants’ yield and abiotic stress tolerance (i.e., yield stability over varying environmental conditions and tolerance to environmental stress factors, such as drought and fertilizer utilization). Major seed companies have declared their goal to significantly increase crop yield to meet the growing needs of the world population. For instance, Monsanto has indicated that it plans to double the yield in its main crops by 2030. We believe that our advanced technologies, expertise and know-how position us to play an important role in assisting these companies to achieve the ambitious goal of substantially increasing crop yields in the future.

Since we initiated our yield and abiotic stress programs, we have assembled a substantial scientific knowledge center on plant mechanisms and biological pathways associated with yield and abiotic stress traits. Currently, we generate proprietary genomic data from 15 different plant species, and have two model validation plants that can validate over 1,000 genes annually under different greenhouse and tissue culture validation assays (i.e. tests designed to analyze plant performance under specific growth conditions, for instance, measuring a plant’s greenhouse seed yield under simulated drought conditions).

 

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Our most significant collaborations in yield and abiotic stress include two multi-year agreements with:

 

   

Monsanto addressing yield, drought tolerance and fertilizer utilization in corn, soybean, cotton and canola through biotechnology. The collaboration period (i.e., the period of active discovery efforts, separate from continuing validation efforts or continuing diligence and development obligations) under this agreement is six years and entitles us to approximately $47.4 million in research and development and up-front payments. The collaboration, initiated in 2008, originally focused on gene discovery using our ATHLETE computational technology, but a 2011 expansion of the agreement added new research activities, including the use of our new proprietary computational technology, Gene2Product, for increased trait efficacy; and

 

   

Bayer addressing yield, drought tolerance and fertilizer utilization in wheat through both biotechnology and advanced breeding. The collaboration period under this agreement is five years and entitles us to approximately €17 million in research and development and up-front payments. Our collaboration with Bayer calls for the use of our gene discovery computational technology, ATHLETE, as well as our computational technology for advanced breeding, EvoBreed.

Our agreements with Monsanto and Bayer, through June 30, 2013, have accounted for approximately $48.4 million in revenues, and in the future could lead to substantial royalty payments if Monsanto or Bayer commercialize products that incorporate genes that we license to them. However, because the development cycle of products is lengthy, any revenue from royalty payments may not be earned before six years, if at all.

Additional collaborations in yield and abiotic stress include our agreement with Biogemma, currently our only agreement in Phase II of the product development cycle. Other agreements with Viterra, DuPont, Rasi Seeds and CIRAD are all in either Discovery or Phase I of the product development cycle.

The following table, based on a 2013 Phillips McDougall analysis, sets forth the estimated commercial value (the “Trait Commercial Value”) of key yield and abiotic stress traits in key crops that we and our collaborators are developing. Trait Commercial Value refers to the total revenue potential for seed companies generated from the premium charged on biotechnology seeds (a “Technology Fee”) due to the added value of the improved trait. Projected Trait Commercial Value was calculated by multiplying the estimated number of acres (per country) that could be planted with a particular biotechnology trait by the estimated Technology Fee that will be charged to growers by seed companies.

 

 

Crop

   Trait    Estimated Trait
Commercial
Value ($M)1
   Key growing countries

Corn

   Yield    1,200-2,000    U.S., Brazil, Argentina
   Abiotic Stress Tolerance    600-700   

Soybean

   Yield    1,000-1,200    U.S., Brazil, Argentina
   Abiotic Stress Tolerance    400-500   

Cotton

   Yield    150-250    U.S., India

Canola

   Yield    <200    Canada, U.S.

Wheat

   Yield    600-900    U.S., Canada

 

1 

The Trait Commercial Value reflects the estimated cumulative value of sales at maturity on an annual basis and is represented by a range derived from Phillips McDougall data. All values are expressed in constant U.S. dollar values in 2013 terms.

 

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A number of factors could potentially reduce the estimated Trait Commercial Value in the future. These include the following factors as well as other factors described in “Risk Factors”:

 

   

Traits may not achieve the desired effect in target plants;

 

   

The function of introduced traits may become less effective over time;

 

   

A market may not exist for certain traits or seeds containing the traits may not be commercially successful;

 

   

Increased consumer or government resistance to genetically modified organisms;

 

   

Failure to obtain regulatory approvals;

 

   

Declining crop prices, which may deter farmers from purchasing genetically modified seeds;

 

   

Adverse economic conditions in the major countries where genetically modified crops are grown; and

 

   

Competitors may launch competing or more effective products, including biological-or chemical-based products.

In recent years, we have continued to expand our technological capabilities, introducing new computational technologies, such as EvoBreed for advanced breeding and Gene2Product for increasing trait efficacy, and launching more advanced versions of our computational technologies, including the launch of ATHLETE version 4 in 2012. Together with new validation technologies and new data-collection tools, we continue to enhance our ability to correctly link candidate genes with specific traits. These capabilities and assets continue to expand as we enter into additional collaborations and pursue new products. For example, we expect to enter into new collaborations focusing on yield and abiotic stress in the upcoming years for new crops, including rice, sugar beet and other vegetables, and new traits, such as cold tolerance.

Biotic stress

Initiated in 2007, our biotic stress programs focus on improving plant resistance to pests, insects and diseases, including nematodes, soil parasites that attack the roots of developing plants, and soybean rust, a severe fungal disease. To perform research activities relating to biotic stress, we leverage a significant amount of the expertise and know-how acquired in our yield and abiotic stress segment. At the same time, we seek to develop unique technological tools and capabilities aimed specifically at biotic stress traits. For example, we recently bolstered our comprehensive genomic database with data relating to plant-to-pathogen interaction, thus further enriching our candidate gene pool with pathogen genes (as distinct from plant genes). We have also adapted our computational technologies to better address biotic stress traits and developed tailored model validation systems to test and confirm candidate gene impact on model plants. As the resistance of pests, insects and diseases increases to existing products that address biotic stress, the seeds industry is seeking more advanced technological solutions to address these resistance issues. We believe that our cutting-edge technologies, expertise and know-how position us to play an important role in assisting the seed and ag-chemical industry in addressing these resistance issues.

To date, we have entered into three collaborations to develop biotic stress products. These include agreements with:

 

   

Syngenta addressing resistance to soybean cyst nematode;

 

   

DuPont addressing resistance to Asian soybean rust; and

 

   

Rahan Meristem addressing resistance to black sigatoka in bananas.

 

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The following table, based on a 2013 Phillips McDougall analysis, sets forth the estimated Trait Commercial Value of key biotic stress traits in key crops that we and our collaborators are developing.

 

Crop

   Trait    Estimated Trait
Commercial

Value ($M)1
   Key growing
countries
 

Soybean

   Soybean rust resistance    200-400      U.S., Brazil, Argentina   
   Nematode resistance    400-600   

 

1 

The Trait Commercial Value reflects the estimated cumulative value of sales at maturity on an annual basis and is represented by a range derived from Phillips McDougall data. All values are expressed in constant U.S. dollar values in 2013 terms.

In the coming years, we plan to expand our presence in the field of disease and nematode resistance through new collaboration agreements. As we undertake new collaborations under our biotic stress program—some potentially involving new crops such as corn, wheat, rice and cotton—we expect to broaden our genomic datasets, improve our scientific know-how, update our computational technologies, and develop additional tailored validation assays. In addition, we plan on entering the field of insect resistance, and may also focus in the future on bacteria resistance, virus resistance and herbicide tolerance. We anticipate that this strategic expansion into new biotic stress segments will require a substantial investment of resources on our part, and may involve establishing research and testing infrastructure in the United States.

Ag-Chemical

Our ag-chemical operations utilize our core competency in plant genomics to develop novel crop protection and crop enhancement products. We currently focus on the early stages of the product development pipeline, specifically on discovering new herbicides and crop enhancement products. We initiated our ag-chemical operations in 2012 in order to leverage our existing plant genomics assets and capabilities and apply them to the discovery of biologically significant proteins, or “targets,” and chemical compounds. Our understanding of plant genomics and our capabilities in the area of gene discovery enable us to identify novel targets and, in turn, novel chemical compounds that can be used to develop more effective crop protection and crop enhancement products. Our ag-chemical operations are currently in the development stage and are pre-revenue; we have not yet entered into collaborations in this area. While we believe that our capabilities and assets in seed traits will facilitate our entry into the ag-chemical market, we are still developing the computational technologies, validation systems and tailored genomic datasets that will be necessary for ag-chemical operations.

Our current activities in ag-chemicals are dedicated to the discovery of new herbicides and crop enhancement products. Herbicides and crop enhancers share a similar underlying function: both are comprised of chemical compounds that affect target proteins in the plant. In the case of herbicides, the chemical compounds inhibit the target proteins, resulting in plant death; in the case of crop enhancers, however, the chemical compounds are designed to enhance plant performance. We intend to establish a “chemical library,” which we will use when performing high throughput testing of chemicals. These chemicals will be arranged according to the molecular characteristics of the targets that we discover, streamlining the process of identifying the chemicals with most potential to become ag-chemical products.

In the future, we may expand our ag-chemical operation to different products such as insecticides and fungicides. We may also potentially pursue ag-biologicals, which are products made from natural materials and applied as sprays or seed treatments, complementing or replacing ag-chemicals.

 

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The following is a summary of our current ag-chemical activities:

Herbicide discovery

Invasive plants such as weeds are a major cause of crop loss; they outgrow other plants and deprive crops of large amounts of water and nutrients. Extensive use of herbicides, however, has accelerated weed resistance, creating substantial weed-management problems for growers. We are working to develop new herbicides with new mechanisms that can mitigate the challenge of increasing weed resistance.

Most ag-chemical producers have traditionally relied on a process of trial-and-error in developing their herbicides, a process that involves screening thousands of chemicals against plants or weeds, in the hope that some of these chemicals may kill or damage the plant. This trial-and-error process is often referred to within the industry as “spray-and-pray.” Our herbicide discovery program is designed to assist ag-chemical producers in moving beyond the traditional spray-and-pray method of herbicide discovery by implementing a more targeted approach aimed at identifying and developing novel herbicides with new mechanisms to cope with the growing resistance of weeds. We will utilize our expertise in plant genomics, as well as our advanced technologies and know-how, to discover target proteins, ultimately leading to new herbicides that display new mechanisms or “modes of action.” In essence, we intend to follow the same development process we use in our seed traits operations, beginning with the production of large genomic datasets, moving to the analysis of data using our proprietary computational technologies, and ending with the validation of discovered targets in certain plants. Our PoinTar computational technology, which we are developing and aim to launch in 2013, will be our primary tool for novel target discovery. We have also begun to develop a second complementary computational technology capable of identifying chemical compounds that are likely to inhibit discovered targets, and that therefore may serve as the basis of new herbicides.

Crop enhancer discovery

Crop enhancers are ag-chemicals that are capable of improving crop traits such as yield, fertilizer use efficiency and drought tolerance. In this respect, crop enhancers are designed to achieve the same end goal as our yield and abiotic stress products, except through the use of chemistry rather than biotechnology or advanced breeding. We believe the market for crop enhancers is emerging and very promising. Major seed and ag-chemical companies have invested (and are continuing to invest) significant resources in the pursuit of effective crop enhancers. Similar to crop protection products, crop enhancers are comprised of chemicals that bind themselves to a target in the plant, and through the binding trigger can create an improvement in desired plant traits. As with our biotic stress activities, we plan on leveraging the significant expertise and know-how acquired in our yield and abiotic stress segment, including our innovative computational technologies, tailored proprietary data and established validation assays, to discover and develop novel crop enhancement products. We also plan on utilizing the over 3,500 genes that we have identified during our yield and abiotic stress research, focusing especially on key genes identified as high-impact for yield and abiotic stress traits.

Seeds Focusing on Second Generation Feedstock for Biodiesel

Our wholly owned subsidiary, Evofuel Ltd., or Evofuel, develops seeds for second generation feedstock intended for use in the alternative fuel industry. We initiated these operations in 2007, which were spun-off from Evogene in January 2012 to operate as a separate company. We currently focus on the development of advanced high-yielding castor bean varieties which are not genetically modified (“GM”) and that can serve as a feedstock source for biodiesel and biojet. Our target markets will initially be Latin America, particularly Brazil and Argentina, where there are already large and established markets for growing crops used as feedstock for alternative fuels. We have entered into two collaboration agreements with leading domestic companies in these markets, and expect to benefit from their established agriculture production models.

Castor bean is grown today for its high-quality oil, which is used for various products in the bio-polymers and lubricants industries. Though treated as a “low-tech” crop in its key production areas around the world (e.g., the castor bean is harvested using traditional techniques such as hand picking), the castor bean plant holds great

 

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promise as a source for the alternative fuel industry: oil comprises nearly 50% of the castor bean seed, and the plant itself contains innate characteristics of heat and drought tolerance. We believe that by leveraging our advanced breeding capabilities and methods to improve castor bean seeds, the improved castor bean and the oil it produces can serve as an economic, scalable, sustainable and suitable second generation feedstock for the biodiesel and biojet fuel industries. We believe that the benefits of using castor bean as second generation feedstock include:

 

   

Economic. We are developing castor bean varieties that we believe will produce a high-yield-per-land (tons/Ha) with low input; that is, our castor bean crop is designed to be entirely rain fed (and not irrigated). We estimate that the improved yield-per-land ratio is aimed at enabling biodiesel production at an equivalent oil price of approximately $50 per barrel, making castor bean-based biodiesel an affordable and competitive commodity. In recent field trials in Brazil, we were able to demonstrate that our castor bean crop showed improved yields compared to crops grown by local farmers.

 

   

Scalable. We are developing castor bean varieties that can be harvested in a fully mechanized, efficient manner, and that are thus suitable for cultivation on a commercial scale. We have already engaged a leading agricultural machinery company to cooperate on development of mechanized harvest capabilities for castor bean crops. In addition, we have formulated a number of different key agronomic practices for the efficient growth and cultivation of the castor bean, including the use of castor bean as a rotation crop with soybean.

 

   

Sustainable and suitable. A 2010 life-cycle analysis we commissioned from Symbiotic Engineering found that, assuming the enhanced projected yield of our castor bean plant, castor bean biodiesel production and use in Brazil reduces net greenhouse emissions by more than 75% compared to conventional fossil fuel, indicating the castor bean’s potential suitability as a sustainable alternative fuel source. In addition, through a collaboration with the U.S. National Aeronautics and Space Administration, or NASA, and UOP LLC, a Honeywell Company, we successfully demonstrated that castor oil meets the international standards of biojet fuel and is therefore suitable for biojet fuel production.

In addition to pursuing opportunities in the expanding biodiesel market, we anticipate that our improved castor bean varieties will also be useful for businesses in traditional castor oil markets, where the oil is relatively high priced and is used in a range of industrial products such as bio-polymers, lubricants, paints and cosmetics.

In 2010, we entered into a strategic, pre-commercial collaboration with SLC Agricola, a publicly traded Brazilian ag-business that grows 280,000 hectares of soybean, corn and cotton in Brazil. The collaboration, which involves rotating our castor bean seeds with SLC Agricola’s soybean inventory, focuses on developing improved, high-yielding castor bean varieties. In September 2013, we completed our third year of field trials in SLC Agricola’s plantations in northeast Brazil, and we expect to begin advanced product development and pre-commerical trials in 2014. Our agronomic model in Brazil is based on the practice of “crop rotation,” or the practice of sowing castor bean crops shortly after soybean harvests in order to replenish the soil and preserve its productivity. According to USDA’s Oilseeds and Products Annual Report estimates, in 2012, Brazil had over 27 million hectares dedicated to growing soybean, of which we estimate approximately seven million hectares may be suitable for castor bean growth under the rotation model.

In 2012, we also entered into a pre-commercial collaboration with T6, the leading biodiesel producer in Argentina. The collaboration with T6 aims to develop high-yielding castor bean varieties as a key source for biodiesel production, with Argentina as the target market. Our agronomic model in Argentina, however, is based on growing the castor bean crop in farmlands where food crops are marginally grown, an area that we estimate may be as large as five million hectares. We believe that we stand to benefit from T6’s position as a large-scale producer and exporter of biodiesel, as T6 has a strategic interest in diversifying and reducing the costs of its plant feedstock sources.

Our operations in seeds focusing on second generation feedstock for biodiesel are currently in the development stages and we have not yet sold seeds or generated revenues from these operations. We expect that

 

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sales will not commence for at least three years, however, we cannot guarantee that we will begin marketing and selling a product within this timeframe. Among other benchmarks, we believe that we will be able to begin commercializing our castor bean seeds once we achieve yields on a commercial scale in the target markets and once we have equipment in place for mechanized harvesting on a commercial scale.

Business Model

Our business model is primarily based on collaborations with seed and ag-chemical companies, where we mostly participate in the upstream innovative phases while downstream activities would be undertaken by our collaborators. We generate revenues primarily through annual research and development and milestone payments, and we expect to generate revenues from royalty payments once a commercial product containing our technology is sold.

Seed Traits

Under our current collaboration agreements for seed traits products, we usually conduct the upstream “Discovery” phase, which includes identification of candidate genes or SNPs that can improve the target traits, as well as validation of the candidate genes in our model plant systems. The genes and SNPs we identify are licensed to our collaborators, who continue to evaluate and further develop them, by, among other things: transforming the genes into the target crop and field trial testing of the transformed target crop; advanced testing of the genes or SNPs in elite genetic material; obtaining regulatory approval for a product containing the licensed genes or SNPs; and finally, commercializing a product with the improved traits. Our collaborators are usually required to reach certain development milestones within agreed-upon timeframes in order to retain their license to a gene.

Under our broad, multi-year agreements with our collaborators, we and our collaborators define the “field” on which we will collaborate on an exclusive basis during the collaboration period. The “field” includes specific trait(s), crop(s) and technology(s) (e.g., biotechnology or advanced breeding). For example, under our collaboration with Bayer, we granted Bayer an exclusive license in a “field” that consists of (i) the improvement of yield and abiotic stress tolerance, (ii) in wheat, (iii) using biotechnology and advanced breeding technologies, (iv) for a period of five years.

We currently generate revenues from our seed traits operations through research and development payments to cover the costs of our research and development activities and milestone payments received upon the achievement of certain specified results in our collaborator’s pipeline, for example when a candidate gene or SNP advances a phase in the product development cycle, or when a product containing the genes or SNPs is submitted for regulatory approval. We also expect to generate royalty payments once a commercial product containing our genes or SNPs is launched by a collaborator. Currently, in most of our existing collaboration agreements in which our collaborator funds the discovery phase, the standard royalty range is between 5% and 12%. Royalty payments are usually calculated as a percentage of the premium charged on the sale of the seeds containing our licensed genes or SNPs compared to the sale of similar seeds without the genes or SNPs. However, because the development cycle of products is lengthy, any revenue from royalty payments may not be earned before six years, if at all. These royalty payments are usually calculated as a percentage of the premium charged on the sale of the seeds containing our licensed genes or SNPs compared to the sale of similar seeds without the genes or SNPs.

With respect to selected traits, we intend to increase our share of our collaborators’ future revenues through larger future milestone and royalty payments from our collaborators by either (i) self-funding a larger portion of our direct research and development costs in the Discovery phase, or (ii) capturing an additional share of the product development value chain by sharing the development costs with our collaborators beyond the Discovery phase. Currently, in our existing collaboration agreements in which we fund the discovery phase, the standard royalty range is between 8% and 18%. Royalty payments are usually calculated as a percentage of the premium

 

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charged on the sale of the seeds containing our licensed genes or SNPs compared to the sale of similar seeds without the genes or SNPs. We expect the cost-sharing model to generate even greater royalty ranges than the self-funding model. For example, as part of our 2011 collaboration with DuPont, aimed at developing soybean varieties that are resistant to soybean rust, we agreed to finance our initial research and development activities in return for improved commercial terms in later stages. Additionally, we hold a contractual option with DuPont to co-invest in the development costs of a product up to the date of its commercial launch for even greater royalty percentages.

Ag-Chemical

We have not yet entered into any collaboration agreements in our ag-chemical operations. As with our seed trait activities, we anticipate that our activities in the ag-chemical market will focus on the initial research and development phases of the product development cycle. In essence, when developing a herbicide, we intend to discover and validate targets that, when inhibited, result in plant death; in a parallel process, we also intend to identify chemical compounds capable of inhibiting these targets. The chemical compounds that most effectively and consistently inhibit the targets may serve as a basis for new herbicides.

We expect to complete the development of our computational technologies for ag-chemical operations (including the PoinTar platform used for identifying novel targets) in 12 to 18 months, which we expect will facilitate our ability to enter into new collaboration agreements in this area. However, we cannot provide any assurance that we can complete these computational technologies or enter into new collaborations in this timeframe, if at all.

We anticipate that our business model for our ag-chemical operations will be similar to the business model in our seed traits operations.

Seeds Focusing on Second Generation Feedstock for Biodiesel

Through Evofuel, we expect to generate revenues from seed sales to various agriculture companies and large-scale seed growers. Although we will focus initially on the markets in Brazil and Argentina, we plan on eventually expanding our seed sales to other markets around the world.

Currently, as part of our research and development activities in seeds, we collaborate with companies that have the potential to become our future seeds customers, such as SLC Agricola and T6. We expect that these collaborations, which have not yet generated revenues and are currently in the early stages of developing a seed product, will facilitate eventual commercialization of improved seeds, once we have a product ready for launch. Furthermore, once we are able to commercialize our own seed product, we may decide to advance our activities further down the value chain. For example, we may enter into collaborations with leading agribusinesses to establish and operate large-scale production projects, covering thousands of hectares of farmland, for the commercialization of castor bean grain (i.e., castor bean seeds from which the oil has been extracted).

We currently do not expect to begin selling seeds under our Evofuel operation for at least three years.

Technology Infrastructure

We believe that we have achieved a unique position in the seed and ag-chemical industry through our ability to effectively integrate and analyze massive amounts of complex genomic data for the purpose of improving plant performance. Our technology infrastructure facilitates all of our product-driven operations: seed traits, ag-chemicals and seeds focusing on second generation feedstock for biodiesel. This infrastructure, which is highly flexible and synergistic, provides us with the means of integrating our plant genomics core competencies. Specifically, our technology infrastructure is comprised of four enablers that are key to our leading position in plant genomics: (i) plant science know-how and expertise, continuously enriched through advances in our

 

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discovery programs as we address new traits and crops; (ii) vast amounts of data generated in-house or collected from public sources, tailored to support hypotheses we develop based on our scientific know-how; (iii) computational technologies that integrate, assemble and mine the vast amount of genomic data; and (iv) validation systems and assays in various plants, used to validate the discoveries made through our computational technologies.

We continuously strive to improve and expand our technological capabilities. Since our initiation in 2002, we believe that we have developed valuable computational technologies containing unique features that cannot be found elsewhere in our industry. We intend to continue investing in our research capabilities in order to expand our technological capabilities in plant genomics and continue to provide innovative solutions to our collaborators.

Science and Know-how

Our research and development activities involve 147 employees as of June 30, 2013, amounting to approximately 78% of our total full-time workforce. Our staff possesses multidisciplinary and wide-ranging expertise, with employees specializing in biology, chemistry, plant genetics, agronomics, mathematics, computer science and other related fields. Additionally, 48 of our employees hold a Ph.D. Our physical research and development facilities are located near the agricultural and biotech hub in Rehovot, Israel, and we benefit from continuing professional relationships with members of the agriculture and plant-science academy. Furthermore, we employ a Scientific Advisory Board composed of representatives from the Faculty of Agriculture of the Hebrew University in Jerusalem, the Weizmann Institute of Science in Rehovot and other institutions of higher learning.

Our internal research and development activities are divided into three groups. Our first group develops our technological infrastructure to facilitate ongoing projects, including our computational technologies, our technologies to harvest genomic and phenotypic data and our validation systems. Our second group manages our trait discovery programs that focus on identifying genes, SNPs and other DNA fragments pursuant to our collaboration agreements or internal independent research projects. Researchers in this group develop the hypotheses that guide our trait discovery programs, design the type and scope of genomic data generation, determine data-mining queries run on our computational technologies and decide the type of model plant validation to be used. Our third group, upon the instruction of the second group, executes our trait discovery programs, which include genomic data generation and integration, computational discovery, gene cloning and insertion into plants and model system validation.

We are constantly improving our scientific skillset and know-how. As we enter into new collaborations involving new traits and new crops, we are able to leverage our existing know-how and enrich our genomic knowledge and capabilities. We also intend to leverage this know-how to expand our operations into new markets in which we currently do not operate, as we did when we commenced our ag-chemical operations in 2012.

Genomic Databases

The past decade has witnessed an explosion of genomic-related data, greatly expanding the reach of plant genomics. To successfully manage and data-mine the large and complex range of information presently available, we continue to develop increasingly sophisticated data-processing tools capable of synthesizing the information and enabling new discoveries and insights. While our genomic databases draw in part on the public domain (primarily from academic institutions and research publications), we are compiling increasing amounts of proprietary data, generated either in-house or received from our collaborators. Our database covers over 200 plant species, and accounts for various data types, including phenotypic (i.e., data related to a plant’s observable characteristics, morphology, development and physiological properties) and genotypic (i.e., data from the molecular level, derived from DNA, RNA or other sources).

 

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Our in-house data generation activities are able to support up to 40 experiments and field trials a year based on 15 different crops. In those trials, plants can undergo a dozen different treatments during the growing seasons, producing data that supports or refutes our trait researchers’ scientific hypotheses. For example, to support a discovery effort for drought-tolerant genes in corn, we may design specific experiments for a variety of crops, such as corn, wheat and sorghum, and test their resistance to different stress conditions. By pursuing parallel yet related experiments, we improve our ability to identify, in the computational discovery stage, key genes that are triggered in crops under stress. We expect to continue to expand the scale of our data-generation activities: for example, the large-scale wheat trials that we are conducting in Israel involve our most extensive and wide-ranging data-collection efforts to date, comprised of approximately 200 wheat lines, numerous testing conditions and hundreds of thousands of data points.

We also rely on our large seed bank with an inventory of approximately 60 species and sub-species of seeds and more than 4,000 imported seed lines. All together, we are able to record more than two million phenotypic data points directly from the field each year. For example, through the use of our Phenomix computational tool, we are able to collect, store and integrate phenotypic data directly from surveillance of field trials, evaluating crop behavior in controlled environments that closely resemble the growth conditions existing in commercial agriculture. This tool combines a number of modified sensors, digital imaging cameras and other devices to create a real-time and direct field-to-computer research channel.

To organize and process the vast amount of information available to us, we have developed a sophisticated internal IT system of central processing unit clusters and over 670 processing cores, capable of storing and analyzing the more than 500 terabytes of data that we have collected and generated to date. We also continue to pursue and develop innovative approaches to data transmission and storage.

Using field trials and advanced technologies for the collection and integration of different data types, we intend to continue developing and expanding our proprietary genomic database. We are focusing in particular on compiling the data for the “chemical library” we are designing to be used in conjunction with PoinTar for our ag-chemical operations.

Computational Technologies

We believe that the key to future innovation in the seed and ag-chemical industry has shifted from data creation to data integration and data analysis, focusing on the ability to harness and mine the vast amounts of genomic data that has become available over the last decade. Our computational technologies, utilized for data integration and analysis, are central to our operation as a plant genomics company, and we believe that we are positioned at the forefront of this shift in industry focus. We have developed advanced proprietary computational technologies comprised of novel algorithms and methodologies, which are designed to handle immense amounts of data. For example, our ATHLETE technology assembles and mines genomic data on millions of genes, resulting in tens to hundreds of genes that we are able to predict will be “key” genes for improving a desired trait. Each of our computational technologies includes a stage of database assembly, whereby any “junk” data is removed and a reliable, comprehensively detailed and integrated through building a structured gene-centric database. The next stage of each technology includes mining the database through hundreds of queries that utilize various methodologies and algorithms.

We believe the key features of our computational technologies are:

 

   

Novel: Substantially all of the methodologies and tools utilized by our computational technologies were developed in-house and are proprietary and unique in the industry.

 

   

Reliable: We apply our methodologies and statistical tools to meaningfully sort the data we receive and have quality assurance processes to ensure the reliability of the outputs we generate.

 

   

Flexible: Our computational technologies are not restricted to a certain crop or trait, and thus permit us to continuously focus on new crops and traits and enter new fields in plant genomics that foster product innovation.

 

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Learning: As we generate new information related to our discovery efforts and validation results, our computational technologies are able to integrate this information and generate new computational solutions. We also continuously monitor and improve the performance of our existing tools and expand our capabilities.

 

   

Efficient: In our experience, in most cases, a period of only six to nine months is required to complete the discovery process for “key” genes, SNPs or other DNA fragments.

We intend to continue to improve our existing computational technologies through novel methodologies and enhanced algorithms and to develop new technologies, both of which we expect will allow us to address new plant genomics fields and the arising needs of seed and ag-chemical industry pipelines. Where appropriate, we may also enter agreements with third parties to bolster our technological capabilities.

We today operate and develop the following computational technologies:

ATHLETE

The ATHLETE computational technology was launched in 2006 and is our central computational technology for plant gene identification, comprised of unique algorithmic tools and novel data-mining concepts that allow generation of rapid and reliable lists of genes relevant to a target trait.

Using this technology, we are able to capture and dissect vast amounts of genomic data types from various plant species and other species and engage in the efficient discovery and prioritization of hundreds of genes linked to desired traits. Fundamentally, ATHLETE relies on statistical analysis and biological rationales to determine whether a certain gene is linked to a desired plant trait, facilitating the use of the gene to develop biotech-based traits. This technology is a gene-centric tool that links all available data relevant to a gene in a single assembled database. Such data includes available information on the gene’s biological activity, its molecular characteristics, and any available correlation between the gene’s phenotype and its activity on the molecular level. The data also includes the same type of information for similar genes in other plant species. Through hundreds of queries, the system is able to prioritize the genes linked to a desired trait. ATHLETE is one of our most versatile technological tools as well; we apply this tool to different traits and crops, all according to the needs of our various internal programs and collaboration agreements.

ATHLETE is the computational technology used in most of our collaborations, including our broad, multi-year collaborations with Monsanto and Bayer. Though our ATHLETE technology is already capable of cutting-edge data processing and analysis, we are continuing to make improvements and introduce new features to this technology, creating a faster and more efficient analytical tool. We have improved various aspects of ATHLETE since the launch of the technology in 2006; we launched version 4 in April 2012 and expect to launch version 5 later this year.

Gene2Product

The Gene2Product technology was launched in 2013, although components of the tool have been used since 2010. Gene2Product is a unique integrated computational technology to develop biotechnology seed traits—by high throughput optimization of selected gene function in a target crop (which we refer to as “mode of use”). This technology complements our ATHLETE technology: efficacy of a gene depends not only on the presence or absence of the gene of interest, which is determined by ATHLETE, but also on the optimization of the gene with other factors related to the mode of use of such gene, which is determined by Gene2Product. Such factors include the choice of gene variant for the crop of interest, the interaction of the gene with other genes, the tissues in which the gene is expressed, the level and/or pattern of expression of the gene and the gene’s performance under changing environmental conditions. Gene2Product is designed to improve trait efficacy for certain genes identified (for example by ATHLETE) through the following tools:

 

   

PlaNet (Plant Network), which improves trait efficacy when approaching complex traits, such as yield, by predicting appropriate combinations of the identified gene with additional genes, designed to jointly

 

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impact the trait when combined, and prioritize possible combinations with respect to their ability to improve a given trait;

 

   

GeneSpec (Gene Spectrum), which selects the preferred variants for the selected gene of interest for the crop of interest by identifying and classifying, up to 1,000 possible variants per gene, through the use of novel algorithms, according to sequence-function and other relationships;

 

   

Repack (Regulation Package), which predicts the regulation mode for the selected gene that will provide the optimal expression pattern, including predicting where in the plant the expression would be beneficial and where it would be undesired in respect of tissue, organ, timing, level of expression and other aspects that can impact trait efficacy; and

 

   

GeneDex (Gene Index), currently under development, which predicts functional robustness of the selected gene across different genetic backgrounds and environmental conditions, providing multiple relative index scores for each gene predicting such gene’s contributions with respect to each trait of interest across different combinations of such variables.

EvoBreed

The EvoBreed computational technology was launched in 2010. EvoBreedis our computational technology for discovery of SNPs, to enhance advanced plant breeding, designed to offer reliable correlations between genetic data and plant phenotype. Like ATHLETE, EvoBreed specializes in comprehensive cross analysis, tapping into the extensive genomic datasets we have collected. The result is a prediction of SNP-to-trait association. The ultimate purpose of EvoBreed is to enable plant breeders to design optimal crosses between breeds, enhancing a desired trait or set of traits, allowing for logical and insightful breeding decisions, to accelerate and correct the breeding process from start to end.

PoinTar

We are currently developing a computational technology for our ag-chemical division, PoinTar, which we aim to launch this year. This tool will specialize in the identification of targets (proteins) for development of ag-chemicals such as herbicides. This technology is target-centric and integrates data aimed to predict the potential impact that a target, when inhibited, would have on a weed. In addition to integrating the tools available in ATHLETE, PoinTar addresses the structural characteristics of a target in order to predict the target’s likelihood of binding to a small chemical molecule for use as a herbicide.

Validation Systems

Efforts to improve traits of interest in key crops require both the predictive tools of our computational technologies and the experimental tools of our validation systems, which allow us to test the actual performance of our predictions in plants. Such validation efforts typically begin with model plant systems, utilizing Arapidopsis and Brachypodium, which offer a faster and more efficient high throughput means of initially evaluating and prioritizing candidate genes, SNPs and other DNA fragments. Initial testing in model plants can usually provide a result within one year, whereas validation in target crops such as corn usually requires two to three years. Once the prioritized genes pass proof of concept in the model plants, they then undergo further validation in the target crops.

Our validation systems, which employ state-of-the-art facilities and techniques, allow high throughput and efficient plant validation of over 1,000 new genes per year. We primarily use our validation systems to evaluate genes for yield, drought tolerance and nitrogen use efficiency, however, we have also developed validation systems for other traits, such as our Arapidopsis-based validation for nematode resistance. The plant validation process is cross-disciplinary, requiring the use of molecular biology and plant transformation facilities, extensive greenhouse trials, and the application of advanced imaging and data-analysis techniques. Our candidate genes are first identified in silico (i.e., via computer) using our advanced computational technologies. These genes are then cloned and transformed (or transferred) into model plants, which, due to their short life cycles, well-known

 

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genomes and ease of cultivation, offer an efficient way of assessing gene impact. We use Arabidopsis as our model plant for dicots (i.e., a plant with two embryonic seed leaves such as soybean, canola, cotton and sunflower) and Brachypodium as our model plant for monocots (i.e., plants with a single embryonic seed leaf such as corn, rice and wheat). We are able to validate over 1,000 genes per year using the Arabidopsis model plant, with 16 types of experiments utilizing both our greenhouses and tissue-culture validation techniques. Through our recently launched Brachypodium system, we are able to additionally test over 100 genes per year through six types of experiments that take place in our greenhouses. We believe that we are the only company that has a high throughput Brachypodium model plant validation system.

Our molecular labs and tissue-culture facilities employ automated equipment and state-of-the-art technologies, greatly increasing our output of viable candidate genes. The bulk of the validation process, however, is conducted across our 34 cutting-edge GM greenhouses on 24,600 square meters (or approximately 264,800 square feet) of farmland. Our greenhouses have the capacity to accommodate over 15 established experiments at any given time. Each experiment involves dozens of genes and hundreds of model plants to allow for statistically meaningful results. In addition, each greenhouse is rigorously controlled for temperature, irrigation, light, nitrogen, salinity and other variables, allowing for controlled testing, monitoring and continuous year-round growth. Data from the plants are routinely acquired during the greenhouse trials and automatically fed into a statistical analysis system. The results are then evaluated by our trait researchers in order to prioritize the most promising genes.

In certain cases, certain prioritized genes are introduced into target crops and assessed in field trials following experiments in model plants. We operate field trial sites in various locations in Israel and collaborate with local partners to achieve more rapid and comprehensive field-test results.

We intend to continue to improve our plant validation capabilities by developing validation systems for new traits, improving the capacity and quality of our current validation systems and generally enhancing our facilities and quality assurance competencies. Where appropriate, we may also enter agreements with third parties to bolster our plant validation capabilities. For example, in 2013, we entered into an agreement with Plant Array for the use of Plant Array’s computer-based technology for high throughput screening. During the term of the agreement, we agreed to provide Plant Array with management support and access to a greenhouse as the technology is further tested.

Key Collaborations

Our seed trait projects are conducted through collaborations with leading seed and ag-chemical companies, with whom we share the development process of improving plant performance. In most cases, we generate revenue from our collaboration agreements at three different points: first, we usually receive research and development services payments to cover the costs of our research, including our gene discovery and validation efforts; second, we receive milestone payments when certain specified results are achieved, such as when a candidate gene progresses to a later phase in the product development cycle, or when a product containing our traits is submitted for regulatory approval; finally, we expect to receive royalty payments once a commercial product containing our traits is launched into the market. Royalty payments will generally be made for the longer of a specified number of years after product launch, or for the duration of our applicable patents in the United States.

Our principal collaborations are with Monsanto and Bayer which together accounted for 94% of our revenues for the year ended December 31, 2012, of which Monsanto accounted for 70% and Bayer accounted for 24% of our total revenues. Monsanto and Bayer, accounted together for 98% of our revenues for the six months ended June 30, 2013, of which Monsanto accounted for 66% and Bayer accounted for 32% of our total revenues. We also entered into share purchase agreements with Monsanto and Bayer, and a portion of the amounts paid under each of the share purchase agreements were considered to be advances under each of the collaboration agreements with Monsanto and Bayer. See “—Share Purchase Agreements.” We also have collaborations with other leading seed and ag-chemical companies, including DuPont, Syngenta and Biogemma, as well as companies such as Rahan Meristem, Rasi Seeds, CIRAD, Viterra, Zeraim Gedera and CDB Technologies. These additional collaborations do not currently account for a material portion of our revenues.

 

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Monsanto

2008 Collaboration Agreement, Amended and Restated in 2011

(i) Background and Duties

In August 2008, we entered into a Collaboration and License Agreement with Monsanto. This agreement was amended and restated in November 2011 to extend and expand the original agreement executed in 2008. This agreement, which we refer to as the “Monsanto Collaboration Agreement,” represents a significant portion of our current revenues. Pursuant to the terms of the Monsanto Collaboration Agreement, Monsanto funds a research program in which we apply two different proprietary computational technologies: (i) ATHLETE, our computational gene discovery technology, used in this case to identify genes with the potential to improve yield, nitrogen use efficiency and abiotic stress tolerance in corn, soybean, cotton and canola, and (ii) Gene2Product, our computational gene optimization technology, used to improve gene performance through recommendations on how to use the genes we identify in the target crop (e.g., corn). All of the genes that we discover are to be tested and validated by us in our model plants. The collaboration period under the Monsanto Collaboration Agreement (i.e., the period of active computational discovery efforts, separate from validation efforts that may follow) is six years, scheduled to expire in August 2014, and is followed by more than a year of validation activities. The collaboration period is subject to extension for two additional years if Monsanto exercises an extension option by February 1, 2014.

(ii) License Grants

Under the terms of the Monsanto Collaboration Agreement, we have granted Monsanto an exclusive, royalty-bearing, worldwide license under our patents and know-how to commercially exploit and conduct research on (i) the genes we discover and patent under the collaboration, and (ii) the recommendations stemming from our gene-optimization activity under the collaboration, each solely for transgenic applications in the specified crops. In addition, we have granted Monsanto certain ancillary research and development licenses, including, among others, a non-exclusive license to use the genes we generate and patent and the recommendations under our gene-optimization activity for research purposes in certain plant species specified under the agreement. As part of its consideration for these license grants, Monsanto agreed to provide us with research and development services payments, development milestone payments upon the occurrence of certain milestone events, and royalties based on the value added to each product as a result of either incorporating our licensed genes, or of applying our licensed recommendations under the gene-optimization activity. Royalty payments will generally be made for a specified number of years after product launch, or for the duration of our applicable patents in the United States.

In addition to the licenses we have granted to Monsanto, we have agreed for the duration of the research program under the Monsanto Collaboration Agreement (x) to not license or otherwise transfer to any third party the right to use in the specified crops for any transgenic application: (i) any gene we discover for the specified traits or (ii) any recommendation we make under our gene-optimization activity for the specified traits, and (y) to not engage or pursue any collaboration or other activity with a goal of (i) discovering genes that confer the specified traits in the specified crops for any transgenic application, or (ii) formulating recommendations with respect to gene-optimization for the specified traits in the specified crops for any transgenic application.

(iii) Diligence Obligations

We and Monsanto both have minimum diligence obligations under the Monsanto Collaboration Agreement: our diligence obligations surround (i) the discovery and research of candidate genes, and (ii) the discovery and research of recommendations using our gene-optimization technology, while Monsanto is obligated to test a specified number of these genes and recommendations for the purpose of ultimately developing and commercializing products containing the genes. For example, we have agreed to perform a minimum number of computational discovery efforts (or “generation rounds”) and deliver a minimum number of genes to Monsanto.

 

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A failure by us to meet our diligence obligations may have the effect of eliminating or reducing certain Monsanto diligence obligations, and diligence failures by Monsanto may result in the termination of certain of its licenses. While Monsanto has certain diligence obligations under the Agreement, there is no express requirement that it actually commercialize any products using the genes that we license to it.

The effects of failures by either party to perform other obligations under the Monsanto Collaboration Agreement are limited to impacts on particular rights and obligations under the agreement, and do not give rise to a general right to terminate the agreement entirely. For example, in the event of certain uncured breaches by Monsanto, some of the licenses we have granted to it would remain in effect, while others would terminate. In the event that we breach certain provisions of the Monsanto Collaboration Agreement and fail to cure these breaches, Monsanto’s licenses remain in effect but it may elect to cease further research activity, stop making annual research and data-generation payments for the relevant project, and have no further diligence obligations with respect to the project.

(iv) Change in Control

In the event that we experience a change of control, the majority of provisions under the Monsanto Collaboration Agreement would remain in full force and effect. However, if we come under the control of one of Monsanto’s competitors: (i) the research portion of the Monsanto Collaboration Agreement may be terminated either fully or in part by Monsanto, and if it is not terminated, we become subject to increased diligence obligations; and (ii) the timing of certain milestone payments and the duration of certain royalty payments due to us under the agreement may also be affected.

(v) Consideration and Costs

As of June 30, 2013, we had received approximately $37.6 million in research payments under the Monsanto Collaboration Agreement. This includes an up-front payment of $5 million paid upon entering into the agreement, as well as annual data generation and periodic research and development service payments. Between now and the completion of our research and development activities under the collaboration (i.e., our active discovery efforts, our continuing validation efforts and our continuing diligence obligations), which is scheduled to occur in 2015, and in the event that Monsanto does not exercise its extension option, we expect to receive an additional $12 million in research and development services payments from Monsanto. Although we have not yet begun to earn milestone payments or royalty payments, and may never earn such milestone payments or royalty payments, Monsanto also is obligated under the Monsanto Collaboration Agreement to provide us with royalty payments on any sales or other transfers of products it develops containing our licensed genes. These royalty payments are generally calculated as a percentage of the premium charged on the sale of the seeds containing our licensed genes compared to the sale of similar seeds without the genes. In addition, if Monsanto exercises its option to extend the initial research term for an additional two years, Monsanto will pay us a fee of $6 million for the extension of our exclusivity undertakings (described above) as well as an additional $26 million in research and development services payments during the extension period.

In August 2008, Monsanto purchased 1,636,364 of our ordinary shares at a price per share of $11.00, for an aggregate investment of $18.0 million. Prior to the completion of this offering, Monsanto held approximately 8.7% of our outstanding equity. In addition, we hold an irrevocable put option, exercisable beginning February 2014 until August 2014, pursuant to which we can require Monsanto to purchase 500,000 additional ordinary shares at a price per share of $24.00 for an additional aggregate investment of $12.0 million. However, in the event that Monsanto exercises its option to extend the Monsanto Collaboration Agreement for two additional years, then the put option allows us to require Monsanto to purchase only 214,286 additional ordinary shares at a price per share of $28.00 for an additional aggregate investment of $6.0 million.

 

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2007 Collaboration Agreement

We entered into our first collaboration agreement with Monsanto in September 2007. Under this agreement, structured according to an earlier business model, we granted Monsanto certain research licenses and an option to obtain an exclusive, royalty-bearing license to one or more of a group of genes with the potential to improve nitrogen use efficiency in corn, soybean, cotton and canola. While the period for Monsanto to evaluate the candidate genes in target crops was originally set to expire in September 2012, we and Monsanto mutually agreed to an extension of this period into 2013, and Monsanto has subsequently exercised its rights under the agreement to extend this period through January 2014. As of today, we have completed the performance of our obligations and are no longer performing any significant research under this agreement. This agreement accounts for only a very small percentage of our current revenues.

Bayer

2010 Collaboration Agreement

(i) Background and Duties

We currently have two research and development agreements with Bayer CropScience LP, an affiliate of Bayer CropScience AG, or Bayer. The later of the two agreements with Bayer is the collaboration agreement entered into in December 2010, which we refer to as the “Bayer Wheat Agreement.” This agreement focuses on the improvement of yield, nitrogen use efficiency, and abiotic stress tolerance of wheat. Pursuant to this agreement, and upon Bayer’s request, the parties may agree to expand the scope of research to any other trait in wheat. The initial term of the research period under the Bayer Wheat Agreement—i.e., the period of active computational gene and SNP discovery—is five years, expiring January 2016. The agreement also gives Bayer an option to extend the agreement for an additional year or, under certain conditions, to terminate the agreement in full or in part prior to the conclusion of the research period.

As in most of our collaboration efforts, the Bayer Wheat Agreement involves the use of our ATHLETE computational technology to identify and prioritize candidate genes with the potential to improve specified traits in wheat through the application of our proprietary technologies. More uniquely, however, the Bayer Wheat Agreement also requires the application of EvoBreed, our computational technology for advanced breeding applications, which is used to identify SNPs capable of enhancing individual plant features and ultimately leading to enhanced traits. The genes that we discover undergo model plant validation.

(ii) License Grants

Under the Bayer Wheat Agreement, we granted Bayer an exclusive, worldwide, royalty-bearing license under certain of our patents and know-how to use, solely in wheat, certain genes and SNPs we identify during the collaboration in order to grow, commercialize and sell wheat products containing those genes or SNPs. We also agreed that during the collaboration period we would not: (i) license to any third party the right to use any of our patented genes or any of our SNPs in wheat for any transgenic or breeding application in wheat, regardless of trait; or (ii) undertake any discovery rounds that intentionally target genes or SNPs that may improve the specified traits specifically in wheat in collaboration with or for the benefit of any third party. However, we may freely license our genes to any third party for use in any crop other than wheat, and similarly may freely use our wheat datasets and any other Evogene datasets with respect to crops other than wheat for any and all purposes.

(iii) Diligence Obligations

Pursuant to the Bayer Wheat Agreement, both we and Bayer are subject to certain minimum diligence obligations, which relate to our respective responsibilities under the agreement: our own diligence obligations surround the discovery and research of candidate genes, as well as the discovery of candidate SNPs; Bayer’s diligence obligations require Bayer to evaluate a specified number of genes and SNPs for the purpose of

 

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ultimately developing and commercializing products containing the genes or SNPs. For example, by the conclusion of each year in which we undertake an ATHLETE discovery round, we are obligated to provide Bayer with a certain minimum number of reports reviewing the candidate genes that we have identified as having the potential to improve the target traits in wheat. Similarly, following each EvoBreed discovery round, we are obligated to provide Bayer with a certain number of reports reviewing the candidate SNPs that we have identified as having the potential to improve a target trait. For its part, Bayer is obliged under the Bayer Wheat Agreement to introduce a minimum number of our genes and SNPs into wheat plants and to perform field trials using the genes and SNPs that we deliver, with the goal of ultimately developing, launching and marketing commercial products containing our licensed genes and SNPs.

Various provisions under the Bayer Wheat Agreement lay out the consequences of either party’s failure to perform its diligence obligations. Absent certain extenuating circumstances, if we fail or are delayed in delivering the specified number of gene or SNP reports, we may have to complete and deliver the missing deliverables over an extended timeframe at no additional cost to Bayer, or reimburse Bayer for the applicable research fees paid in respect of such deliverables. Under certain circumstances, Bayer may also be able to terminate the research and development program under the agreement. If, on the other hand, Bayer does not fulfill its obligations, including its development obligations, within the relevant timeframes under the agreement, Bayer may lose its license to the relevant genes, or for SNPs, Bayer’s license to the relevant SNPs may become non-exclusive.

(iv) Change in Control

If we experience a change of control, the Bayer Wheat Agreement would remain in effect. However, if we come under the control of a Bayer competitor, Bayer may elect to terminate the research and development collaboration, including all of our activities under the collaboration. In such a case, Bayer would no longer have to provide us with annual research payments.

(v) Consideration and Costs

As of June 30, 2013, we had received approximately €7.6 million in research payments under the Bayer Wheat Agreement including an up-front payment upon entering the Bayer Wheat Agreement. Bayer also agreed to make certain annual research and development services payments during the collaboration period in addition to milestone payments upon the achievement of agreed-upon results. Between now and the completion of our research and development activities under the collaboration, which, subject to a right of earlier termination, is scheduled to occur in 2017, we are due to receive €10.7 million in research and development services payments. In the event that Bayer launches commercial wheat products containing one or more of our licensed genes or SNPs, Bayer will have an obligation to provide us with royalty payments based on the additional sales value conferred by the improved crop trait we identify for Bayer. Under our agreement, Bayer is required to use at least the specified levels of diligence in developing and commercializing the applicable products. Furthermore, Bayer’s royalty obligations run for periods specified based on patent coverage in the applicable country and/or a minimum period post-launch.

In connection with entering into the Bayer Wheat Agreement, in January 2011 Bayer purchased 863,310 of our ordinary shares at a price per share of $13.90, for an aggregate investment of approximately $12 million. Prior to the completion of this offering, Bayer held approximately 4.6% of our outstanding equity.

2009 Collaboration Agreement

Our first collaboration agreement with Bayer, entered into in April 2009, as amended and restated in June 2011, which we refer to as the “Bayer Rice Agreement,” required us to use our seed trait know-how and our computational technologies to identify genes that have the potential to improve the yield of rice under standard, abiotic, and sub-optimal nutrient conditions. The collaboration period under the Bayer Rice Agreement expired

 

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in April 2012. However, while this date marked the end of our own active research efforts with respect to rice-improving genes, Bayer remains responsible under the agreement to provide us with milestone and royalty payments should it decide to advance our candidate genes or related technology in its product development pipeline or license the genes or related technology in future rice products.

Other

DuPont

2007 Collaboration Agreement

In 2007, we signed an evaluation and commercial license agreement with Pioneer Hi-Bred International, a DuPont entity, focusing on the improvement of yield and tolerance to abiotic stress in corn and soybeans. In 2012, DuPont notified us of its election not to further evaluate the genes in soybeans. Pursuant to the agreement, DuPont must use reasonable efforts to develop or commercialize corn and soybean products containing our licensed genes. In the event that DuPont fails to achieve certain milestones within specific timeframes under the agreement, DuPont may forfeit its license to some or all of our genes.

Under this agreement, we granted DuPont: (i) an exclusive, research-only license to certain genes identified by our ATHLETE computational technology in corn and soybean, and a non-exclusive research only license in other plants; and (ii) an exclusive license to commercialize transgenic applications of such licensed genes in corn and soybeans. Pursuant to the agreement, DuPont agreed to pay us an up-front payment and annual licensing fees, to provide us with milestone payments upon achieving certain results, and to provide us with royalty payments once DuPont begins selling improved corn or soybean products containing our licensed genes. DuPont has the right to terminate the agreement at any time without cause, but if it exercises that right it loses the licenses we granted it under the agreement.

2011 Collaboration Agreement

(i) Background and Duties

In 2011, we entered a second multi-year research and development collaboration with DuPont to improve resistance to Asian Soybean Rust (“ASR”), a devastating fungal disease in soybean. Pursuant to this collaboration, we apply our proprietary ATHLETE computational discovery technology to identify relevant genes having the potential to improve in-plant resistance to ASR. The collaboration period under this agreement, including the stages of data generation, gene discovery, and preliminary testing by DuPont, is expected to last for approximately five years.

(ii) License Grants

Under the 2011 agreement, we granted DuPont a worldwide, royalty-bearing, exclusive license to develop and commercialize soybean products containing our licensed genes. We also granted DuPont an option, limited in time, to obtain an exclusive license to use the licensed genes for certain products other than soybean.

(iii) Diligence Obligations

The research program under this agreement is to be carried out in accordance with agreed timelines set forth in a project plan. In addition, we have diligence obligations that require us to identify a minimum number of genes intended to improve the target trait (i.e., ASR in-plant resistance), and to provide DuPont with a minimum number of reports describing such identified genes. DuPont’s diligence obligations, on the other hand, require it to test a specified number of genes before advancing any qualified genes through its product development pipeline. If DuPont fails to meet its obligations, some or all of the licenses it received under the agreement may terminate. In addition, under the 2011 agreement, DuPont is also obliged to use commercially reasonable efforts

 

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to advance, develop and commercialize products containing our licensed genes. However, at all times, DuPont retains the discretion to stop advancing or developing any products that it determines are not commercially viable, but only at the possible cost of losing some or all of the licenses it was granted.

(iv) Termination and Change in Control

Either party has the right to terminate the research project, with or without cause. The precise effects of such a termination depend on the point in time at which the right is exercised, but generally, the agreement allows the non-terminating party to continue with the project alone and at its own cost.

The 2011 agreement with DuPont does not automatically terminate upon our undergoing a change in control. However, if we experience a change in control to one of DuPont’s major competitors, DuPont may elect to terminate the agreement entirely, or terminate certain unexercised co-investment options (described below). If the agreement is terminated as a result of our change in control, DuPont’s licenses relating to genes that confer ASR-tolerance would terminate. Nevertheless, even following a change of control to a competitor, DuPont would retain a non-exclusive, royalty bearing, worldwide license to the genes discovered under the collaboration for traits other than ASR in certain specific crops.

(v) Consideration and Costs

As with our other research and development collaborations, our compensation under the 2011 agreement with DuPont is in the form of milestone payments and royalty payments based on the sales of resulting products. However, unlike our other collaborators, DuPont is not funding the costs of our research and development through annual research and development services payments; rather, we are funding the discovery phase using our own resources and a grant from BIRD, while DuPont is covering the cost of all downstream expenses. This arrangement likely provides us with higher milestone and royalty payments than in our other collaborations where our collaborators fund both our research and their own development costs. In addition, we hold a contractual option to co-invest in the development costs for greater royalty percentages downstream if a product is successfully commercialized.

Syngenta

(i) Background and Duties

Our multiyear collaboration with Syngenta, commenced in June 2009 and amended and restated in September 2013, focuses on another highly sought soybean trait: soybean cyst nematode, or SCN, resistance, along with resistance to other nematode species. The nematode is a soil parasite that attacks the roots of developing plants with significant yield-limiting results. The agreement is focused on identifying and developing genes targeting this trait in soybeans. However, Syngenta has a right of first negotiation to expand the scope of the agreement to cover additional crops. The research period under the agreement is expected to last until March 2017, and the collaboration is currently in Phase I testing by Syngenta.

Under this agreement, we use our ATHLETE computational technology to assemble and mine our genomic database in order to identify and prioritize genes with the potential to improve nematode tolerance. In addition, we are also to apply our PlaNet computational technology to make “gene stacking” recommendations, indicating whether certain identified genes can be combined with other genes to jointly impact SCN resistance. After we provide Syngenta with such genes, Syngenta is to validate the genes in the validation system generally used in Syngenta’s product development program, a process that is currently ongoing. Syngenta is obliged to test a specified number of genes and use commercially reasonable efforts to evaluate and advance the development of products containing our licensed genes, or alternately, to abandon them, in which case we will have the right to develop and commercialize the applicable genes in the target crops. If Syngenta fails to carry out its diligence obligations in regards to any relevant gene it may forfeit its rights and options to such gene in soybean.

 

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(ii) License Grants

Pursuant to the agreement, we granted Syngenta an exclusive license to develop and commercialize, solely for transgenic applications, soybean products containing certain genes identified as a result of the collaboration. Syngenta also holds an option to obtain a commercial license for non-transgenic application of the licensed genes in soybeans, although this option must be exercised within a certain period following final gene selection. Finally, we also granted Syngenta a limited in time, first right to negotiate commercial licenses to use the licensed genes in additional plant varieties. In return, Syngenta granted us an exclusive right to develop and commercialize products containing the licensed genes, with the payment of certain proceeds to Syngenta, but only using crops other than those already reserved for Syngenta.

(iii) Diligence Obligations

Syngenta is required to use commercially reasonable efforts to evaluate and progress the licensed genes in its product development programs, with the aim of developing and commercializing soybean products using our licensed genes. However, at all times, Syngenta retains the discretion to stop advancing or developing any products in its sole discretion, but only at the possible cost of losing its rights to such genes. Among other things, the diligence obligations require Syngenta to perform minimum numbers of validation experiments.

(iv) Termination and Change in Control

In addition to each party’s right to terminate the agreement upon a material breach by the other party, Syngenta may terminate the agreement (i) at any time without cause or (ii) if we experience a change of control to certain identified Syngenta competitors, provided, however, that the termination right in respect of a change of control is subject to certain exceptions. In both such cases, if Syngenta exercises its termination right, it must assign all of its rights in certain intellectual property to us, and we will then have the exclusive right to develop and commercialize the licensed genes in any crop, without any obligation to Syngenta.

(v) Consideration and Costs

In addition to milestone payments and royalty payments based on sales, Syngenta funds our research costs under the agreement.

Biogemma

(i) Background and Duties

In 2006, we entered a joint research and collaboration agreement with Biogemma SAS, a subsidiary of Limagrain, focusing on improving yield and abiotic stress tolerance in corn. In 2010, we signed a license agreement, replacing the commercialization provisions of the 2006 agreement, and enabling Biogemma and its shareholders (Limagrain, RAGT, Euralis, Sofiproteol and Unigrain) to pursue commercialization of corn products containing our licensed genes. This later agreement remains in effect. This marked the first time we entered into a license agreement with a collaborator for genes that were already tested in field trials involving the target crops. The license agreement with Biogemma is also our only current agreement that has entered Phase II of our product development cycle.

In the early stages of the 2006 agreement, we provided Biogemma with candidate genes that we identified using our ATHLETE computational technology, as well as data regarding those genes. We and Biogemma then jointly selected the most promising candidate genes for further validation and testing.

(ii) License Grants

Under the 2010 license agreement, we granted Biogemma an exclusive, worldwide, royalty-bearing license to (i) transgenically introduce specified genes into Biogemma corn products for research and development

 

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purposes, and (ii) commercialize and sell corn products containing our licensed genes. Pursuant to the license agreement, Biogemma will continue to test the impact of the licensed genes in its own research and development program.

(iii) Diligence Obligations

Under the 2010 license agreement, Biogemma is required to use its best efforts to develop, launch and market corn products containing our licensed genes and must achieve certain milestone events within specified timeframes. If it fails to meet those obligations, it may forfeit its license for the relevant gene.

(iv) Termination

In addition to each party’s right to terminate the 2010 agreement upon a material breach by the other party, or upon the commencement of bankruptcy proceedings against the other party, Biogemma has the right to terminate the license agreement at any point, if Biogemma determines that the licensed genes will not result in a commercially viable product. Should Biogemma exercise this right, Biogemma would forfeit its licenses.

(v) Consideration and Costs

The license agreement provides for several one-time research and development services payments to cover our prior research and development efforts, milestone payments, and royalty payments. In 2010, Biogemma accounted for 16.9% of our revenues. Since then, our revenues from Biogemma have decreased substantially.

Rahan Meristem

In 2007, we commenced a collaboration with Rahan Meristem, or Rahan, amended in 2009, focusing on the development of banana varieties showing increased tolerance to black sigatoka, a fungus that damages banana leaves. Rahan is an Israeli company dedicated to growing, cultivating and marketing banana plants. Under the agreement, following a field trial, both parties are to select up to a certain number of genes to be used by Rahan in developing and commercializing banana products. Pursuant to the terms of the agreement, we granted Rahan an exclusive license to use these genes in developing and commercializing banana plants or any other plants, except that Rahan is prohibited from using the genes in certain specified major crops. Rahan granted us, on the other hand, an exclusive license to develop and commercialize any product in the specified major crops using the genes identified as a result of the collaboration. Each party has agreed to pay the other royalty payments calculated as a percentage of net proceeds of the sale or licensing of products containing joint intellectual property. Each party otherwise bears its own costs under the agreement.

Rasi Seeds

We entered into an agreement in 2012 with Rasi Seeds Ltd., or Rasi, a leading developer and marketer of rice seeds and other crops in India. Under the agreement, we are to provide Rasi with a specified number of genes with the potential to improve yield and drought tolerance in rice. Rasi, in turn, agreed to meet certain diligence obligations, including integrating certain genes in rice and developing products containing those genes, and to use its best efforts to commercialize and market a rice product containing our licensed genes in India. To this end, we granted Rasi an exclusive, royalty-bearing license to develop and commercialize hybrid rice seeds containing our licensed genes in India. In addition, Rasi may seek to negotiate with us an expansion of the geographic scope of the agreement beyond India to cover certain other countries identified in the agreement. Rasi has covered our research costs through a one-time up-front fee, and is also committed to milestone payments and royalty payments.

 

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CIRAD

In 2004, we entered into a five-year collaboration agreement with the Centre de Coopération Internationale en Recherche Agronomique pour le Développement, or CIRAD, which is dedicated to research and development of agricultural technology in developing countries. In 2007, we entered into a separate agreement with CIRAD, called “Project 3,” and we also extended the term of our collaboration in 2011. The goal of our collaboration with CIRAD is to develop GM cotton showing improved abiotic stress resistance. Under the Project 3 agreement, CIRAD granted us (i) a royalty-bearing license to use the results of our cotton collaboration in any way we deem fit in cotton and (ii) a fully paid-up and royalty-free license to use the collaboration results in any plants other than cotton in any way we deem fit. We, in turn, granted CIRAD a royalty-bearing, non-exclusive license to use the collaboration results only with relation to the genetic modification of cotton, and only in certain specified territories. The Project 3 agreement also sets forth the royalty payments for the above licenses, pursuant to which either party will pay the other a fixed percentage of the sale proceeds of cotton products containing any jointly owned and licensed genes or know-how. Each party otherwise bears its own costs under the agreement.

Viterra

In 2008, we entered into a research and development agreement with Viterra Inc., a publicly traded Canadian agriculture company that develops and tests varieties of grains and oilseeds. Our goal of this collaboration is to develop transgenic canola and rapeseed plants that demonstrate improved yield and abiotic stress tolerance. Each party to the agreement pays for its own activities, and the collaboration is partially funded by a grant from the CIIRDF. Once the research phase of the collaboration agreement is complete, the agreement proposes three potential product commercialization pathways to be incorporated into new separate commercialization agreements each covering a different set of products. Throughout the agreement period, we maintain a full right to use our candidate genes in all crops other than canola and rapeseed. Viterra has recently completed a first field trial in Canada of our genes in canola and rapeseed. According to a draft report that Vittera provided to us for review, in Vittera’s opinion, the performance of the genes in the field trial does not support further testing and development toward commercialization.

Beijing Dabeinong Technology Group

In 2013, we entered into a licensing agreement with Beijing Dabeinong Technology Group Co., Ltd. (“Beijing Dabeinong Technology”), a publicly traded Chinese developer and marketer of seeds, particularly rice. Pursuant to the licensing agreement, we are to identify and deliver to Beijing Dabeinong Technology a specified number of genes with the potential to improve drought tolerance and the efficient use of fertilizer in rice. We have granted Beijing Dabeinong Technology an exclusive, royalty-bearing license to develop and commercialize hybrid rice seeds containing our licensed genes in China. In return, Beijing Dabeinong Technology will pay us a small upfront development fee and has committed to milestone and royalty payments.

We have also entered into several other collaboration agreements with other companies in the agriculture industry, such as Zeraim Gedera Ltd. and CBD Technologies Ltd., each of which is not material to our business.

Evofuel Collaboration Agreements

To further our goal of becoming a producer and seller of castor bean seeds, we have entered into two important collaboration agreements with leading biodiesel producers in Brazil and Argentina (described below). Both agreements involve pre-commercial evaluations and testing of our castor bean seeds. The agreements are in a pre-revenue stage as well, and do not provide for research, licensing, or royalty payments. If initial evaluations of the castor bean are positive, we may be able to extend these agreements or enter into new agreements at a commercial or semi-commercial level, with the aim of developing and producing castor bean seeds for the biodiesel market.

 

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SLC Agricola

In 2010, we entered into a collaboration agreement with SLC Agricola, a leading agribusiness and producer of soybean, corn and cotton in Brazil. We extended the term of the collaboration agreement in 2011, and again in 2012. In September 2013, we completed our third year of field trials in SLC Agricola’s plantations in northeast Brazil, and we expect to begin advanced product development and pre-commercial trials in 2014. Our goals under the agreement are to evaluate and identify castor bean varieties displaying economic yields under rain-fed conditions, and to develop more effective agronomic methods of growing castor bean crops. Eventually, we hope to develop improved castor bean varieties suitable for commercial scale production in rotation with soybean. The term of our collaboration with SLC Agricola is set to expire in December 2014.

Pursuant to the collaboration agreement, we are responsible for providing SLC Agricola with castor bean seeds that can be grown on SLC Agricola’s plantations in northeast Brazil. We have also committed to providing SLC Agricola with technical growth protocols and guidance for growing the castor bean crops. SLC Agricola has agreed to provide the land, employees, equipment, and other infrastructure needed to grow the castor bean crops. Our employees manage and supervise the execution of the collaboration agreement, visiting the SLC Agricola plantations and supervising the analysis and selection of the most promising castor bean varieties.

Under the agreement, SLC Agricola grows the castor bean strictly pursuant to the parameters of the collaboration. SLC Agricola is prohibited from using the castor bean varieties for any other purpose, including for commercializing castor bean products. Furthermore, all intellectual property that results from the collaboration—whether in the form of data, inventions, growth protocols, patents, or trade secrets—vests solely in us, and does not accrue to SLC Agricola.

Each party bears the costs and expenditures incurred in connection with its own activities under the collaboration agreement. We alone bear the cost, however, of obtaining government permits or licenses for importing and using the castor bean seeds in Brazil. SLC Agricola is responsible for obtaining all other secondary governmental or municipal licenses and permits. Both parties may terminate the agreement without cause, except that no termination is possible when any castor bean project has entered the growing season.

T6

In 2012, we entered into a collaboration agreement with T6, an Argentinian company that produces and supplies biodiesel to both domestic and foreign markets. The purpose of the agreement with T6 is to determine whether certain castor bean varieties can be used as a sustainable and cost-effective source for the production of biodiesel. The agreement is set to expire in May 2014.

Specifically, we are to provide T6 with castor bean seeds, and we are to guide and advise T6 with respect to castor bean growth protocols, storage and disposal. For its part, T6 is to provide us with field-trial infrastructure, including land, labor and equipment. While T6 is responsible for collecting data from the field trials, our agronomists and breeders analyze and select those castor bean varieties showing the greatest potential as second generation biodiesel feedstock.

T6 has agreed to refrain from growing, harvesting, or analyzing the castor bean varieties for any purpose other than that specified in the agreement. T6 is prohibited, for instance, from attempting to commercialize castor bean products resulting from the collaboration. While we hold all rights to the intellectual property created by and during the collaboration, T6retains ownership of any intellectual property relating specifically to the conversion of castor oil into biodiesel.

The agreement specifies that we and T6 will work jointly to obtain any permits or licenses required to import and use castor bean seeds in Argentina. If the requisite permits or licenses are not obtained, the performance of duties under the agreement will be postponed until the next planting season, or until any other time mutually agreed by us and T6.

 

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We and T6 have each agreed to fund our own costs expenditures under the agreement. Either party can terminate the agreement without cause, except that no termination is possible when any project castor bean has entered the growing season.

Share Purchase Agreements

Monsanto Share Purchase Agreement

In contemplation of entering into the Monsanto Collaboration Agreement in 2008, we also entered into a share purchase agreement with Monsanto, dated August 27, 2008, as subsequently amended, or the Monsanto Share Purchase Agreement. Under the Monsanto Share Purchase Agreement, Monsanto agreed to invest up to $30.0 million in our ordinary shares in two tranches: 1,636,364 ordinary shares were purchased at a price per share of $11.00 upon the closing of the Monsanto Share Purchase Agreement in August 2008, for an aggregate purchase price of $18.0 million, and an additional 500,000 ordinary shares are issuable pursuant to a put option whereby we can require Monsanto to purchase such additional 500,000 ordinary shares at a price per share of $24.00, for an aggregate purchase price of $12.0 million. We may only exercise this put option beginning February 1, 2014 until August 31, 2014. In the event that Monsanto extends the term of the Monsanto Collaboration Agreement prior to February 1, 2014, the put option will be reduced to 214,286 ordinary shares at a price per share of $28.00, for an aggregate purchase price of $6.0 million. Pursuant to the terms of the Monsanto Share Purchase Agreement, Monsanto has the right to appoint one observer to our board of directors, which they have not yet appointed. See “Management—Board of Directors.” Monsanto’s ownership has remained unchanged since its purchase of ordinary shares in 2008, and Monsanto does not have different or special voting rights under the Monsanto Share Purchase Agreement.

Bayer Share Purchase Agreement

On December 10, 2010, in contemplation of entering into the Bayer Wheat Agreement, we and Bayer entered into a share purchase agreement, or the Bayer Share Purchase Agreement. Pursuant to the Bayer Share Purchase Agreement, Bayer purchased 863,310 ordinary shares at a price per share of $13.90 for an aggregate investment of $12 million. Bayer also has the right under the Bayer Share Purchase Agreement to appoint one observer to our board of directors, which they have not yet appointed. Bayer’s right to appoint an observer to our board of directors will continue so long as Bayer holds at least 4% of our issued and outstanding shares.

Product Development Cycle

Seed Trait Product Development Cycle

Developing and integrating seed traits into commercial seeds using advanced breeding or biotechnology takes, on average, between six and thirteen years. The length of the process may vary depending on both the complexity of the trait and the type of crop involved. The length of the process of developing seed traits impacts the uncertainty of product development; for example, during the development process, the gene may fail to address the performance criteria required to advance to later development stages, changes in the competitive landscape may occur that could affect development and alternative methods of seed improvement may advance.

The development process for seed traits is divided into several discrete steps or “phases,” which generally include discovery, validation and development, and end with regulatory approval and commercial launch of a seed product containing the trait. The process for developing seed traits is relatively similar for both biotechnology and advanced breeding. However, the two differ significantly in later phases of development; for example, receiving regulatory approval for biotech seeds is a far more comprehensive and lengthy process than doing the same for advanced breeding seeds.

 

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The development process of biotech seed traits and their integration into commercial seeds is generally divided into six phases, which may vary depending on our collaborator and the specific crop and trait we are working on:

 

   

Discovery: The first step in the seed trait development process is Discovery, or the identification of candidate genes, or SNPs in the case of advanced breeding, potentially capable of enhancing specified plant traits. These genes or SNPs are usually introduced into model plants, which serve as testing grounds to determine whether the gene or SNP will enhance the specified trait. We usually employ our own advanced greenhouse facilities in Israel to perform model plant validation utilizing Arabidopsis for dicots, such as soybean, canola, cotton and sunflower, and Brachypodium for monocots, such as corn and wheat. In our experience, using our technologies and methodologies, the Discovery phase typically lasts approximately 18 months. According to Monsanto’s 2011 Investor Toolkit, this phase has an average probability of success of approximately 5%.

 

   

Phase I, or “Proof of Concept”: Upon successful validation of the genes or SNPs, promising candidate genes or SNPs are advanced to Phase I, a process called “proof of concept.” In this phase, the genes or SNPs are inserted into target plants and their efficacy in improving plant performance is tested through greenhouse trials, field trials, or both. The goal of the proof of concept phase is to determine which candidate genes or SNPs have the greatest potential to improve plant performance. Phase I is typically conducted by our collaborators in their own facilities, although we are capable of conducting certain tests and actually do conduct them for some projects. In our experience, Phase I typically lasts between two to five years, and according to Monsanto’s 2011 Investor Toolkit, has an average probability of success of approximately 25%.

 

   

Phase II, or “Early Development”: In this phase, the field tests commenced in Phase I are expanded, and our collaborators evaluate various modes of use of the genes as well as other characteristics in order to optimize the performance in the plant on a large scale across various geographical locations and varieties. The goal of the “Early Development” phase is to identify the mode of use in which the genes or SNPs performed best and achieve the desired seed traits with commercially viable success rates. Based on our estimates, we expect Phase II to last between approximately two to four years, and according to Monsanto’s 2011 Investor Toolkit, has an average probability of success of approximately 50%.

 

   

Phase III, or “Advanced Development and Regulation”: In Phase III, extensive field tests are used to demonstrate the effectiveness of selected genes or SNPs in enhancing particular traits. The process of obtaining regulatory approvals from government authorities is also initiated during this phase, and tests are performed to evaluate the potential environmental impact of modified plants, including assessments of possible toxicity and allergenicity. According to Monsanto’s 2011 Investor Toolkit, Phase III typically lasts between one to two years, and has an average probability of success of approximately 75%.

 

   

Phase IV, or “Pre-Launch”: Phase IV involves finalizing the regulatory approval process and preparing for the launch and commercialization of new enhanced seeds. The range of activities here includes preparing the seeds for commercial sales, formulation of a marketing strategy and preparation of marketing materials. According to Monsanto’s 2011 Investor Toolkit, Phase IV typically lasts between one to three years, and has an average probability of success of approximately 90%.

 

   

Product Launch: We expect that our strategic collaborators will also perform the last step of the development process, the actual launch and commercialization of the seed containing the improved seed trait. Pursuant to our collaboration agreements, a successful product launch will trigger royalty payments from our collaborators, which are generally calculated as a percentage of the additional sales value conferred by the improved seed trait.

As indicated, the estimated timeframes of phase duration and probability of success are based on our experience and estimates, as well as on the figures presented in Monsanto’s 2011 Investor Toolkit. The phases may overlap during the product development cycle, and the total development time for a particular product may be

 

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longer or shorter than the duration presented above depending on a range of factors, including the type of crop and trait involved, and the amount of resources available, or devoted to, particular research or collaboration projects.

All of our products are currently in either the Discovery, “Phase I” or “Phase II” stages.

Ag-Chemical Product Development Cycle

Our ag-chemical activities are still in the early stages, and we have not yet entered into collaboration agreements in this area. While we believe that our significant experience in seed traits will ease our entry into the ag-chemical market, we are still in the process of developing the technologies that will enable our success in ag-chemicals. Nevertheless, once we establish our technological technology, we plan to pursue a streamlined product development cycle that will improve upon the traditional development models used in the ag-chemical industry.

Similar to our seed trait product development cycle, the ag-chemical development cycle for herbicides begins with a discovery stage. We expect, based on our extensive plant genomics know-how and the strength of our technological infrastructure, that we will specialize in the early stage of the development cycle. Specifically, we will use our proprietary computational technology, PoinTar, to perform “Target Discovery,” which involves the identification of proteins that are important to plant function and performance. The targets we will be seeking are those that, when inhibited (for instance by a chemical), lead to plant or weed death. We will also utilize a new computational technology we are currently developing to assist us in the testing and analysis of chemicals that would inhibit these targets. Following the testing model commonly used in the pharmaceutical industry, we will perform high throughput screenings of chemicals to try and pinpoint those chemicals capable of influencing the targets that we have identified, and by extension, creating significant impact on plants.

While we have not yet entered into ag-chemical collaborations, we expect that, when we do, they will be structured similarly our seed trait collaborations. Our focus, accordingly, will lie in upstream discovery and development. We intend to either establish the screening and initial development capabilities ourselves, as we have done with PoinTar, or outsource them to collaborators or other third parties.

We expect that our collaborators will perform the remaining steps in the product development cycle. Screening will be followed by a “hit-to-lead” optimization process, in which the most promising chemical molecules are further assessed and optimized. If this process successfully indicates that certain chemical molecules have a desired effective impact on plants, these molecules may be developed and commercialized into herbicides. In the final phases, any new chemical product will be registered with the proper regulatory authorities and then launched for commercialization.

There is currently no common practice in the industry for developing crop enhancers. To the extent such a practice may emerge, we expect that it will be generally similar to the product development cycle used for herbicides. For both herbicides and crop enhancers, effective target identification is critical to commencing the development process, and we intend to use our PoinTar technology for this process in crop enhancers as well as herbicides. Our ability to combine our extensive knowledge of plant genomics with our tailored computational technologies and other tools will guide our effort to detect chemicals capable of positively impacting plant performance and enhancing targeted traits in plants. The development process for crop enhancers, however, poses at least one unique challenge not relevant to herbicides: the lack of an efficient “phenotypic screen.” Chemicals with the potential to be used in herbicides are relatively simple to identify in high throughput screens since, when applied, these chemicals lead to plant death. Chemicals that may be useful for crop enhancers, however, require a much more complex high throughput testing procedure, as their impact on plants performance may be subtle, gradual or otherwise more difficult to detect.

Seeds Focusing on Second Generation Feedstock for Biodiesel Product Development Cycle

The process for developing and commercializing seeds focusing on second generation feedstock for biodiesel varies from crop to crop, and also depends on the relative maturity of the particular seed market. In the

 

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case of our castor bean seeds, for example, in order to develop advanced seeds, we need to develop new growth protocols and design new mechanized harvest equipment in order to produce the seeds on a commercial scale (as current practices rely on very traditional methods). Such efforts, in contrast, are not required for traditional field crops such as corn or wheat, which have common and long-observed production practices. Our operations in seeds focusing on second generation feedstock for biodiesel were initiated in 2007, and while we expect to start selling seeds in at least three years, we are unable to foresee when significant sales will commence.

The product development cycle for our castor bean seeds includes the following elements:

 

   

Variety Development: We collect different castor bean lines, cross them and select the varieties showing the most promise for economic and commercial development. The crossing trials are repeated and gradually increase in size until we can confidently evaluate whether a particular castor bean variety meets commercial targets.

 

   

Growth Protocol Development: Growth protocols allow growers to determine how to grow and cultivate their crop varieties, providing guidance on factors that include sowing time, sowing density, herbicide selection, fertilizer application and harvest timing. As with variety development, the process for formulating an appropriate and complete growth protocol that can enable commercial-scale seed production also involves repeating various crop trials under different growth conditions.

 

   

Mechanized Harvest Development: To the best of our knowledge, there is no current commercially viable solution for the mechanized harvest of castor beans. The process for developing new harvesting equipment requires testing existing machinery adaptations, designing a prototype, and eventually constructing a commercial prototype. We are currently collaborating with a leading agricultural machinery company to develop a mechanized castor bean harvester.

 

   

Seed Production: This step involves developing an efficient standardization protocol for the production of seeds, ensuring that all seeds meet a standard quality (e.g., variety uniformity, health, etc.).

 

   

Registration: To sell our castor bean seeds, we will need to receive certain government permits and licenses, which will vary from jurisdiction to jurisdiction. We believe that, in countries where the castor bean is already grown, such as Brazil, obtaining these permits and licenses will be a relatively rapid process, provided that the seeds are not developed using genetic modification.

Intellectual Property

Our intellectual property rights are important to our business, as they generally determine our eligibility to receive royalties for seed traits. To date, we have identified and sought patent protection for over 4,000 plant genes linked to traits such as improved yield and drought tolerance. These genes are currently protected through more than 35 patents and 150 patent applications.

Our patenting process involves four stages, as follows:

 

  (i)

Provisional Filing. In most cases, soon after using ATHLETE, our computational technology for gene discovery, we file a provisional application in the United States covering all the genes we have identified that we believe are likely to convey a specific trait in plant species. The number of genes covered in each provisional application ranges between 50 and 200 genes.

 

  (ii) PCT Filing. A PCT provisional is filed under the Patent Cooperation Treaty, or PCT, one year from the U.S. provisional filing. During this one year period, we insert the identified genes into model plants and test whether the genes actually improve target traits. This validation data is added to the PCT provisional and provides the “reduction to practice” required to advance the application.

 

  (iii)

National Filing. National filing is conducted for most countries a year and a half after the PCT filing. For Argentina, which has not signed the PCT, a national filing is made at the same time as the PCT

 

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filing. Either we or our collaborators determine in which countries patent applications should be filed. If a collaborator requests that we file and prosecute a patent in a particular country, the collaborator will usually pay for the filing fee and any associated costs. The main countries in which we file are the United States, Brazil, Argentina, Canada, Australia, India, and certain other countries in Asia, South America and Europe.

 

  (iv) Prosecution. In the countries in which we file national phase applications, we prioritize the prosecution of genes identified as the most likely commercial candidates based on discussions with our collaborators.

Our in-house know-how is another important element of our intellectual property. Our employment and consulting agreements include undertakings regarding confidentiality and assignment of inventions. Furthermore, the daily work at our various greenhouse sites, tissue culture facilities, and molecular labs involves the use of advanced mechanical tools, imaging devices, and computer hardware and software. We have established closed networks and physical security systems to prevent unapproved access.

In addition to seeking patent applications, we are in the process of obtaining trademark registrations in certain jurisdictions that we consider material to the marketing of our proprietary computational technologies, including ATHLETE, Gene2Product and EvoBreed. While we expect our patent applications to receive approval, and our trademark applications to mature into registrations, we cannot be certain that we will obtain such results. Despite our efforts to protect our proprietary rights, unauthorized third parties may attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop products or solutions with the same functionality as our solutions. In addition, the laws of some foreign countries provide less protection for proprietary rights than U.S. law. We face the occasional risk, moreover, that third parties may assert copyright, trademark and other intellectual property rights against us. Such claims may result in direct or indirect liability as we have contractually agreed to indemnify certain parties for any damages suffered as a result of infringement by us of any third-party intellectual property rights.

Competition

Our market is characterized by intense commercial and technological change, and we face significant competition in many aspects of our business. The seed and ag-chemical market in particular is highly consolidated and dominated by a relatively small number of large companies. In order to provide their customers (mostly farmers) with cutting-edge products, these companies invest substantial resources in the development of seeds, traits and agronomic methods and products. Part of these companies’ research and development activity is conducted in-house and part of it is outsourced.

Generally, the competitors in our industry can be divided into three groups:

 

   

Seed and Ag-Chemical Companies: Several seed and ag-chemical companies in our industry have internal research and development units dedicated to seed trait development, many of which also explore the development of ag-chemicals. Similar to our own operations, these internal research and development units engage in the discovery of genes, SNPs and other DNA fragments, and evaluate the application of these genes, SNPs and DNA fragments to model plants and target crops. These research and development units are also capable of pursuing post-discovery phases, and can develop their own improved seed traits. On the ag-chemical side, internal research and development units continue to test new chemicals using various approaches, the most common of which is large-scale screening operations in which thousands of chemicals may be applied to plants. Even though the internal research and development units at such companies often compete with our business activities, they may form part of our customer base as collaborators licensing our patented genes, SNPs and chemical molecules for their products. The most significant seed and ag-chemical companies in our industry are currently Monsanto, DuPont, Syngenta, Bayer, Biogemma, BASF, Dow, and KWS. These large seed and ag-chemical companies hold substantial brand recognition and wield greater financial, technical, marketing and other resources than we do.

 

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Small- to Mid-Size Biotech Companies Specializing in Plant Trait Enhancement: Companies with their own seed trait development programs are our most direct competitors. Like us, they engage in the discovery of genes, SNPS and other DNA fragments, and then license their discoveries to their customers. In addition, some of these companies also perform target discovery and identify ag-chemical molecules for crop protection and crop enhancement. In the past, several of these companies, such as Devgen, Athenix and Crop Design, were acquired by larger seed companies. We believe that there are currently dozens of small- to mid-size companies that specialize in plant trait enhancement, including Mendel Biotechnology, Targeted Growth, Inc., Hexima and Keygene.

 

   

Academic and Agricultural Research Institutions: Some academic and agricultural institutions in Israel and around the world are performing research into seed traits and the development of ag-chemical molecules. For the most part, the activities of these institutions include discovering and classifying genes, SNPs and other DNA fragments that may be relevant to specific target seed traits, as well as identifying targets and ag-chemical molecules. Many academic studies are primarily concerned with understanding the biological processes that are relevant to particular genes. Occasionally, however, academic and agricultural institutions grant licenses to third parties for the use of discovered genes, SNPs and other DNA fragments. Licensing and commercializing genes is less of a driver of academic research, however, and in most cases, academic research is limited to a small number of genes, SNPs and DNA fragments and is performed over a long period of time.

We believe that our competitive advantage lies in our ability to assemble large amounts of genomic and phenotypic data and to analyze that data using our key computational technologies, enabling us to identify and prioritize genes, targets and chemical molecules more accurately, efficiently and quickly than is common in our industry. In addition, we continue to accumulate and expand our plant genomic database, drawing partly on publicly available data, partly on our plant experiments and field trials, and partly on research and experimentation results from our collaborators. Certain seed and ag-chemical companies specializing in seed traits may, however, have genes that are in more advanced stages of product development and commercialization, and these genes may relate to or directly compete with the same seed traits we are currently developing. To remain competitive in our industry, we pursue three main strategies: first, we invest in the improvement of our key technologies, focusing especially on our proprietary computational technologies. Second, we focus on increasing our gene discovery capabilities and improving our plant validation systems, thus enhancing our ability to discover and classify new genes in greater numbers. Finally, we seek to protect our intellectual property rights through proper patent application and prosecution in the jurisdictions where we operate, including the United States, India, China, Brazil, Argentina and Canada.

Government Regulation

Our business is subject to regulation related to agriculture, health and the environment. To operate, we must obtain various permits and licenses from government authorities and municipalities in our active jurisdictions, and we must maintain our compliance with the terms of those permits, licenses and other government standards as necessary. These laws and regulations, particularly in relation to biotechnology, are not fully settled, but continue to evolve in order to keep pace with technological advances.

While our expertise may contribute to the downstream commercialization of enhanced seeds, we are not in the process of obtaining regulatory approvals required for the commercialization of biotechnologically improved seeds. These approvals, when needed, will be obtained by our collaborators according to our collaboration agreements.

Regulations in Israel

As an Israeli company, our activities in the fields of biotechnology and plant genomics are regulated by the Israel Ministry of Agriculture and Rural Development, or ISARD, and more specifically by the ISARD’s Plants Protection and Inspection Services, or PPIS. Our activities are subject to various laws, regulations, orders and

 

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procedures, which require us, among other things, to obtain permits for conducting experiments on genetically enhanced plants and to satisfy special conditions determined by the ISARD regarding the growing procedures of such seeds and plants. Violation of these regulations may expose the company to criminal penalties.

Pursuant to these regulations, we are also obligated to obtain separate permits to own and operate our greenhouses and testing fields in Israel and we are routinely inspected by ISARD. Our activities, as well as those of our subsidiary, Evofuel, in the field of biodiesel, are regulated by the Ministry of Environmental Protection. Pursuant to these regulations, we are required, among other things, to (i) obtain toxins permits, which allow us to conduct experiments using “hazardous materials,” as such term is defined in the applicable regulations, and (ii) follow special rules regarding waste disposal. Violation of these regulations may expose the company to criminal penalties, administrative sanctions and responsibility to compensate the injured for any environmental damages.

As recently as September 2012, we engaged an outside third party specialist to conduct an environmental survey, at our own initiative, of all our facilities and operation sites. The survey found that our facilities and procedures fully complied with the directives of Israel’s environmental protection laws and were not causing environmental pollution.

In addition, some of our research activities involve exchanging seeds with our collaborators for research activity and not commercial use. In these cases, any import or export activity is subject to specific approvals in accordance with regulations promulgated by the PPIS or by the Ministry of Industry, Trade and Labor as well as certain target country regulation, which, among other requirements, impose on us the obligation to obtain import, or export, licenses.

In the future, we may become subject to regulation by additional Israeli governmental ministries as a result of changes in our operations or changes in regulation.

Regulations of Products Containing Our Traits

Regulatory approvals are required prior to the commercialization and importation of biotechnologically enhanced seeds in most countries. Most of the key target markets where we anticipate our collaborators will sell seeds containing our traits, including the United States, European Union, Brazil and Argentina, will require such regulatory approvals prior to the commercialization of such products. Additional regulatory approvals will be required for countries importing grain produced from seeds containing our traits, such as China, India and certain countries in the European Union. Pursuant to our collaboration agreements, our collaborators will apply for all requisite regulatory approvals prior to commercialization of the products we are developing with them.

Examples of regulations our collaborators may need to apply for include, in the United States, approvals required by the USDA prior to the commercial sale of genetically modified products. The USDA’s review and deregulation process for biotech products is costly and time-intensive, with no guarantee of success. In the United States, collaborators may also need to seek regulatory approval from the United States Environmental Protection Agency, or EPA, which regulates the marketing and use of new plant pesticides and herbicides. In addition, in Brazil, the commercialization of biotech products is regulated by the National Technical Commission of Biosafety, Comissão Técnica Nacional de Biossegurança, or CTNBio under the Ministry of Science and Technology. The approval process involves data collection and analysis, environmental impact assessments and public hearings on certain products, and is similarly costly and time-intensive.

Business Development

We are constantly evaluating business opportunities in our industry. When an opportunity is identified, we work with our scientific personnel to create a tailored strategy, including deciding which computational technology or other technology to use, for a unique seed trait, ag-chemical or other product. We market our

 

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services and capabilities to potential collaborators directly, often through meeting the management, business development or research and development staff of potential collaborators. Upon the commencement of a new collaboration, we typically jointly formulate a unique research and development work plan with our collaborator and then negotiate the final business terms of the collaboration. We also participate in professional and industry conferences and give presentations that discuss our in-house technologies and capabilities.

We are in the research and developments stages of our Evofuel operations. To date, we have entered into several collaboration agreements with companies in different areas of the castor bean development and marketing value chain. Once our castor bean seeds are ready for commercialization, we will expand our sales and marketing operations to include direct outreach to castor bean growers. We anticipate that the primary markets for our castor bean seeds will be Brazil and Argentina.

Employees

As of June 30, 2013, we had 188 employees, all of whom are based in Israel. For the year ended December 31, 2012, we employed an average of 57 part-time employees. The following table shows the breakdown of our workforce as of the dates indicated:

 

Department

   As of December 31,      As of
June  30,

2013
 
       2010              2011              2012         

Management

     5         5         6         5   

Project Management

     4         6         8         6   

Research and development

     89         119         127         147   

Intellectual property

     2         2         3         3   

Business development

     3         3         4         4   

General administrative

     12         17         20         23   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     115         152         168         188   
  

 

 

    

 

 

    

 

 

    

 

 

 

Israeli labor laws govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti-discrimination laws and other conditions of employment. Subject to certain exceptions, Israeli law generally requires severance pay upon the retirement, death or dismissal of an employee, and requires us and our employees to make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Our employees have pension plans that comply with the applicable Israeli legal requirements.

Facilities

Our principal facility is located in Rehovot, Israel and consists of 2,709 square meters (approximately 21,200 square feet) of leased office space. This facility accommodates our corporate offices and our molecular labs. The lease for this facility expires on December 31, 2015, and we have an option to renew the lease for an additional three year term.

We perform most of our research and plant validation work at our “Evogene Farm,” located on two adjacent lots we lease outside Rehovot. The first lot is subject to two leases: the first lease covers approximately 1,110 square meters (or approximately 11,950 square feet) of land, and expires on April 30, 2017. The second lease covers approximately 13,000 square meters (or approximately 140,000 square feet) of land, and expires on February 1, 2016. Pursuant to an extension option, we may extend the term of the second lease for an additional period of up to three years. The lease for the second lot covers 10,000 square meters (approximately 108,000 square feet) and, pursuant to an extension option, expires on October 1, 2016. The Evogene Farm contains 34

 

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greenhouses, which are used for gene validation in model and target plants, plant propagation, and plant nurseries. In addition, the Evogene Farm contains warehouses, office facilities and seed banks.

In June 2011, we entered into a lease for approximately 30 acres of agriculture land outside Rehovot. Pursuant to an amendment to this lease, beginning in November 2012, we exchanged the 30 acre lot for a 40 acre lot. We will occupy the 40 acre lot until September 1, 2013, at which time we will return to the original 30 acre lot. The lease expires on June 1, 2015, and we have an option to extend the lease for an additional period of three to five years at our discretion.

Legal Proceedings

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in any legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

 

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MANAGEMENT

Executive Officers and Directors

The following table sets forth the name, age and position of each of our executive officers and directors:

 

Name

 

Age

  

Position

Executive officers

    

Ofer Haviv

  47    President and Chief Executive Officer

Sigal Fattal

  42    Chief Financial Officer

Assaf Kacen

  41    Executive Vice President of Technology Infrastructure

Dr. Hagai Karchi

  51    Chief Technology Officer and Executive Vice President of Development

Assaf Oron

  38    Executive Vice President of Strategy and Business Development

Directors

    

Martin S. Gerstel

  72    Chairman of the Board

Leon Y. Recanati

  65    Director

Dr. Michael Anghel(1)(2)(3)

  74    Director

Dr. Kinneret Livnat Savitzky(1)(2)(3)

  46    Director

Dr. Simcha Sadan(1)(2)

  71    Director

Dr. Adina Makover

  62    Director

 

(1) Member of our Audit Committee
(2) Member of our Compensation and Nominating Committee
(3) External director. See “—External Directors.”

Executive Officers

Ofer Haviv has served as our President and Chief Executive Officer since December 2004 and joined our company in January 2002 as Chief Financial Officer. Mr. Haviv serves as Chairman of the Board of Directors of each of Evogene Inc. and Evofuel Ltd., both subsidiaries of our company, and has held such positions since 2006 and 2012, respectively. From 2006 to 2007, Mr. Haviv served as a director of our company. Mr. Haviv is a Certified Public Accountant and holds a B.A. in Accounting and Economics from Tel Aviv University.

Sigal Fattal has served as our Chief Financial Officer since May 2013. Ms. Fattal originally joined our company in June 2012 as our Chief Executive Officer’s assistant and was appointed as our Vice President of Finance in October 2012. Prior to joining our company, Ms. Fattal served as the chief executive officer of wwCFO Ltd., from 2010 to 2012. Prior to that time, from 2008 to 2009 Ms. Fattal served as the chief financial officer at Cal International Ltd. and from 2006 to 2007 served as the Director of Finance and manager of the Economics Department at Cal Ltd. Ms. Fattal holds a B.A. in Accounting and Economics, with honors, and a MBA specializing in finance and marketing, both from Tel Aviv University.

Assaf Kacen has served as our Executive Vice President of Technology Infrastructure since March 2011 after having joined our company in July 2009 as Vice President of Technology Infrastructure. Mr. Kacen has also served as a director of our subsidiary, Evofuel Ltd., since January 2012. Prior to joining our company, Mr. Kacen served as a Solution Fit Product Manager at Nokia Siemens Network, from 2008 to 2009. Prior to that, Mr. Kacen served as a Manager of the Software Development Group at Nokia Siemens Network from 2004 to 2008. Mr. Kacen holds an MBA with a major in Finance from the Interdisciplinary Center Herzeliya, and a B.Sc in Communication Systems Engineering from Ben-Gurion University.

 

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Dr. Hagai Karchi joined our company from its origination in January 2002 as one of our founders, and has served as our Executive Vice President of Development and Chief Technology Officer since September 2008. Dr. Karchi also serves as a director of Evogene Inc., our U.S. subsidiary, and has held such position since September 2006. Prior to serving in his current position at our company, Dr. Karchi served as our Vice President of Development and Technologies from 2007 to 2008. Dr. Karchi holds a PhD in Plant Genetics and Genomics, earned jointly from the Weizmann Institute of Science and the Hebrew University in Jerusalem, and an MA and BA in Plant Genetics, both of which were received from the Hebrew University in Jerusalem.

Assaf Oron has served as our Executive Vice President of Strategy and Business Development since September 2008. After joining our company in March 2006, Mr. Oron served as Business Development Director and then as Vice President of Business Development prior to his current position. Mr. Oron also serves as a director and chief executive officer of Evofuel Ltd, our subsidiary, and has held those positions since January 2012. Prior to joining our company Mr. Oron served as CEO of ChondroSite Ltd., a biotechnology company that develops tissue engineered products in the field of orthopedics, from 2004 to 2006. Prior to that Mr. Oron served as Senior Project Manager and Strategic Consultant at POC Ltd., a leading Israeli management consulting company from 1999 to 2003. Mr. Oron holds an M.Sc in Biology (Bioinphormathic) and a B.Sc in Chemistry and Economics, both from Tel Aviv University.

Directors

Martin Gerstel has served as our chairman of the board of directors since December 2004 and as a director since February 2004. Mr. Gerstel has also served as the chairman of Compugen Ltd., a predictive drug discovery and development company, since 1997, other than from February 2009 to February 2010, during which time he served as either chief executive officer or co-chief executive officer and, in both cases, as a member of the board of directors. Prior to joining Compugen, Mr. Gerstel was co-chairman and chief executive officer of ALZA Corporation, a U.S. pharmaceutical company specializing in advanced drug delivery, which he helped to found in 1968. In addition, Mr. Gerstel has served as chairman of Keddem Bioscience Ltd., a drug discovery company, since 2004 and has been the co-founder and co-chairman of Itamar Medical Ltd., a medical device company, since 1997 and has been a board member of Yissum Ltd. and Yeda Ltd., two technology transfer companies, since 2003 and 1994, respectively, and the U.S. Foundation for the National Medals of Science and Technology since 1993. He is a member of the Board of Governors and the Executive Committee of the Weizmann Institute of Science and the Board of Governors of The Hebrew University of Jerusalem, and is an advisor to the Burrill Life Science Funds, the Life Science Foundation and the board of the Israel-U.S. Binational Industrial Research and Development Foundation. Mr. Gerstel holds a B.S. from Yale University and an MBA from Stanford University.

Leon Recanati has served as a director of our company since May 2005. Mr. Recanati has served as chairman and chief executive officer of GlenRock Israel Ltd. since 2003. Previously, Mr. Recanati was chief executive officer and/or chairman of IDB Holding Corporation; Clal Industries Ltd.; Azorim Investment Development and Construction Co Ltd.; Delek Israel Fuel Corporation; and Super-Sol Ltd. He also founded Clal Biotechnologies Industries Ltd., a biotechnology investment company operating in Israel. Mr. Recanati holds an MBA degree from the Hebrew University of Jerusalem and Honorary Doctorates from the Technion Institute of Technology and Tel Aviv University.

Dr. Michael Anghel has served as an external director of our company since September 2007. Dr. Anghel has served as the chairman of Matach—The Israeli Educational Technology Center since 2009 and as the chairman of Lahav—Executive Education Program in Tel Aviv University since 2005. Dr. Anghel also serves as a director in the following companies: BioLineRx Ltd., a drug development company, since 2010; Syneron Medical Ltd., a global aesthetic device company, since 2004; Partner Communications Company Ltd., a mobile network operator, since 2006; Strauss Group Ltd., an Israeli food and beverage company, since 2008; Orbotech Ltd., a developer of automated optical inspection systems, since 2008; and Dan Hotels Ltd., an Israeli luxury hotel chain, since 2008. Dr. Anghel earned a Ph.D. in Business Management with a major in Finance and an

 

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MBA each from Columbia University, New York and a BA in Economics from the Hebrew University in Jerusalem.

Dr. Kinneret Livnat Savitzky has served as an external director of our company since September 2010. Since 2010, Dr. Savitzky has served as the chief executive officer of BioLineRx Ltd., a drug development company. She also served on its board of directors from 2010 to 2011, and as its Vice President of Research and Development during 2004. From 2005 to 2009, she served as the General Manager of BioLine Innovations Jerusalem Ltd., after having been employed by Compugen Ltd. from 1997 to 2004, where she last served as Vice President of Biology. Dr. Savizky holds a B.Sc. in Biology from the Hebrew University in Jerusalem, as well as a Ms.C. in Biochemistry and a Ph.D. in Molecular Biology, both from Tel Aviv University, in Israel.

Dr. Simcha Sadan has served as a director of our company since February 2006. Dr. Sadan was a lecturer of the faculty of management at Tel Aviv University and the chairman of the accounting department from 1978 to 1981. Over the course of the last five years, Dr. Sadan has served as a consultant to various companies and organizations. He also serves as the chairman of the board of directors of Powerbrook Spain S.L., a holding company of a Greek hotel and casino and as a director of various companies, including: companies under the group of Club Hotel Eilat Ltd., a holding company of hotels and tourism companies; Elite Sports Center Ltd., a subsidiary of Tel Aviv University; SYS Ltd and SMB Ltd., economic and finance consulting firms; Maariv Holdings Ltd. (a holding company of a publishing house); Malrag Engineering and Construction Ltd., an infrastructure company; Ofakim Ltd., a holding company of a motorcar dealer; Siemens Israel Ltd., an electric company; and Rozen, Mintz Richter Ltd. (a cycles dealership). Dr. Sadan holds in a PhD in Business Administration from the University of California, at Berkeley, an MBA with a major in Finance and Accounting and a BA in Economics and Statistics, both from the Hebrew University in Jerusalem, and an LLB from Tel Aviv University.

Dr. Adina Makover has served as a director of our company since February 2003. Dr. Makover also serves as a director of the following companies: GeneGrafts Ltd., a biotechnology company, since 2006; Spine 21 Ltd., a medical device company, since 2008; EarlySense Ltd., a medical device company, since 2006; and PerfAction Technologies Ltd., a medical device company, since 2007. She has also served as a board observer at Argo Medical Ltd., a medical device company in the rehabilitation field, since 2011. From 2006 to present, Dr. Makover has served as the investment manager of the Life Sciences ventures at ProSeed Venture Capital Fund Ltd. Dr. Makover holds a PhD in Life Sciences earned jointly from the Weizmann Institute of Science and Columbia University, and an MBA from Bar-Ilan University.

NYSE Listed Company Manual and Home Country Practices

The Sarbanes Oxley Act, as well as related rules subsequently implemented by the SEC, requires foreign private issuers, such as us, to comply with various corporate governance practices. In addition, upon the contemplated listing of our ordinary shares on the NYSE, we will need to comply with the NYSE Listed Company Manual, to which we refer as the Listed Company Manual. Under the Listed Company Manual, we may elect to follow certain corporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Listed Company Manual.

In accordance with Israeli law and practice and subject to the foregoing exemption available to foreign private issuers, if we list on the NYSE we intend to follow the provisions of the Companies Law, rather than the Listed Company Manual, with respect to the following requirements:

 

   

Quorum at shareholder meetings. Our amended and restated articles of association provide that the quorum for any meeting of shareholders shall be at least two shareholders present in person or by proxy, who hold at least 25% of the voting power of our shares. However, for an adjourned meeting at which a quorum is not present within half an hour from the time for such meeting, our articles of association

 

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generally allow the meeting to adjourn for one week following the date of the meeting. If no quorum is present at such adjourned meeting, our articles of association allow us to proceed so long as at least any one shareholder is present, irrespective of the voting power held by him, her or it.

 

   

Executive sessions of independent directors. Israeli law does not require executive sessions of independent directors. Although all of our current directors are “independent directors” under the applicable NYSE criteria, we do not intend to comply with this requirement if we have directors who are not independent.

 

   

Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the Companies Law, which include (i) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), (ii) transactions concerning the compensation, indemnification, exculpation and insurance of the chief executive officer; (iii) the compensation policy recommended by the compensation and nominating committee of our board of directors and approved by our board of directors (and any amendments thereto); (iv) extraordinary transactions with, and the terms of employment or other engagement of, a controlling shareholder (if and when this becomes relevant to our company), (v) amendments to our articles of association, and (vi) certain non-public issuances of securities. In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies. We will not, however, seek shareholder approval for any of the following events described in the Listed Company Manual:

 

   

issuance of more than 1% of our outstanding ordinary shares (or voting power) to our affiliates;

 

   

an issuance that will result in a change of control of our company; and

 

   

adoption of, or material changes to, our equity compensation plans.

We otherwise intend to comply with the rules generally applicable to U.S. domestic companies listed on NYSE. We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NYSE corporate governance rules. We are also required to comply with Israeli corporate governance requirements under the Companies Law applicable to public companies such as us.

Board of Directors

Under the Companies Law and our articles of association, the supervision of the management of our business is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to executive management. Our Chief Executive Officer (referred to as a “general manager” under the Companies Law) is responsible for our day-to-day management. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the employment agreement that we have entered into with him. All other executive officers are appointed by the Chief Executive Officer and are subject to the terms of any applicable employment agreements that we may enter into with them.

Under our articles of association, our board of directors must consist of not less than three and no more than seven directors, not including two external directors as required by the Companies Law. See “—External Directors.” Our board of directors will consist of six directors upon the consummation of this offering, which will include two external directors. Other than external directors, for whom special election requirements apply under the Companies Law, our directors are divided into three classes such that one-third of the directors (or, if their number is not a multiple of three, the number closest to, but not exceeding, three), are elected at each general meeting of our shareholders, in a staggered fashion, and serve on the board of directors for three years and until their respective successor has been elected and qualified or until their earlier removal by our shareholders at a general meeting, or upon the occurrence of certain events, in accordance with the Companies Law and our articles of association.

 

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Upon the closing of this offering, the members of, and terms of, the classes will be as follows:

 

   

Martin Gerstel and Leon Y. Recanati will serve for a term that expires at the annual meeting of shareholders to be held in 2014;

 

   

Dr. Adina Makover will serve for a term that expires at the annual meeting of shareholders to be held in 2015; and

 

   

Dr. Simcha Sadan will serve for a term that expires at the annual meeting of shareholders to be held in 2016.

In addition to the directors referenced above, we have two external directors, who serve for terms of three years each and may be elected for an unlimited number of additional three-year terms (beyond their initial three year terms) under certain circumstances (as described under “External Directors” below). External directors may be removed from office only under the limited circumstances set forth in the Companies Law. See “—External Directors.” Pursuant to the terms of the Monsanto Share Purchase Agreement, Monsanto also has the right to appoint one observer to our board of directors as long as Monsanto holds at least 5% of the voting rights of the Company. The observer is entitled to receive notices convening board meetings, participate at such meetings and receive a copy of all information distributed in connection with such meetings. The observer will not have any voting rights. Monsanto has not yet appointed an observer. In addition, pursuant to the Bayer Share Purchase Agreement, Bayer also has the right to appoint one observer to our board of directors so long as Bayer holds at least 4% of our issued and outstanding shares. The observer is entitled to be advised reasonably in advance of board meetings, and is to receive copies of all material distributed in connection with such meetings. The observer will not have any voting rights. Bayer has not yet appointed an observer.

Each director, other than external directors, will be appointed by a simple majority vote of holders of our voting shares, participating and voting at an annual meeting of our shareholders.

In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors or as new directors, in each case for a term of office that lasts until the next annual meeting of our shareholders. In the event of a vacancy resulting in the board consisting of less than the minimum number of directors required by our articles of association, the board of directors may only act in order to convene a general meeting of our shareholders for the purpose of electing such additional number of directors.

The removal of any director, other than an external director, prior to the expiration of his or her term (regardless of how the director was appointed or elected), requires the vote of a special majority, consisting of at least three-quarters of the votes of our shareholders entitled to vote.

Chairman of the Board

Our articles of association provide that the chairman of the board is appointed by the members of the board of directors and serves as chairman of the board throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the general manager or a relative of the general manager may not serve as the chairman of the board of directors, and the chairman or a relative of the chairman may not be vested with authorities of the general manager without shareholder approval consisting of a majority vote of the shares present and voting at a shareholders meeting, provided that either:

 

   

such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such appointment, present and voting at such meeting; or

 

   

the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment voting against such appointment does not exceed two percent of the aggregate voting rights in the company.

 

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In addition, a person subordinated, directly or indirectly, to the general manager may not serve as the chairman of the board of directors; the chairman of the board may not be vested with authorities that are granted to those subordinated to the general manager; and the chairman of the board may not serve in any other position in the company or a controlled company, except that he may serve as a director or chairman of a subsidiary.

External Directors

Under the Companies Law, the board of directors of a company whose shares are publicly traded is required to include at least two members who qualify as external directors. The qualifications of an “external director,” as detailed below, are mandated statutorily by the Companies Law, and are distinguishable in certain ways from the criteria for serving as an “independent director” under the Listed Company Manual. Although it is possible for a director to qualify as an “external director” under the Companies Law without qualifying as an “independent director” under the Listed Company Manual, or vice-versa, in many instances, directors will either qualify as both or neither. The terms of service of external directors, as characterized by the unique duration of their term of office, the special majority required for their election, the regulation of their compensation and their required service on board committees (in each case, as described below), are each mandated by the Companies Law. While these terms are paralleled in certain instances by corresponding service conditions applicable to independent directors under the Listed Company Manual and our articles of association, the details of those conditions often differ. Dr. Michael Anghel and Dr. Kinneret Livnat Savitzky qualify and currently serve as our external directors. Each of our external directors will be subject to re-election for an additional three-year term at a shareholders meeting that we intend to hold prior to the consummation of the offering. The principal requirements with respect to external directors are set forth below.

The Companies Law provides for special approval requirements for the election of external directors. External directors must be elected by a majority vote of the shares present and voting at a shareholders meeting, provided that either:

 

   

such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such election (other than a personal interest which is not derived from a relationship with a controlling shareholder), present and voting at such meeting; or

 

   

the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such election (other than a personal interest which is not derived from a relationship with a controlling shareholder) voting against the election of an external director does not exceed two percent of the aggregate voting rights in the company.

After an initial term of three years, external directors may be reelected to serve in that capacity for up to two additional terms of three years each, and for a company such as ours with shares listed on the NYSE, for an unlimited number of additional three-year terms, subject to certain requirements set forth in the Companies Law and the regulations promulgated thereunder.

External directors may be removed from office by the same shareholder vote percentage required for their election or by a court, but only under limited circumstances. If there are fewer than two external directors on the board of directors, the board of directors is required under the Companies Law to call a shareholders’ meeting as soon as practicable to appoint a replacement external director.

The audit committee and the compensation and nominating committee must each include all external directors then serving on the board of directors. Each other committee of the board of directors that exercises powers of the board of directors must include at least one external director. Under the Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation from the company other than for their services as external directors, which compensation is determined prior to their appointment and in general may not be changed throughout the term of their service as external directors.

 

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The Companies Law provides that a person is not qualified to serve as an external director if, as of the appointment date or at any time during the two years preceding his or her appointment, that person or a relative, partner or employer of that person, any person to whom that person is subordinate (whether directly or indirectly), or any entity under that person’s control, had any affiliation or business relationship (which terms are defined in the Companies Law) with the company, any controlling shareholder or relative of a controlling shareholder or an entity that, as of the appointment date is, or at any time during the two years preceding that date was, controlled by the company or by any entity controlling the company.

The following additional qualifications apply to an external director:

 

   

a person may not be elected as an external director if he or she is a relative of a controlling shareholder;

 

   

if a company does not have a controlling shareholder or a holder of 25% or more of the voting power, then a person may not be elected as an external director if he or she (or his or her relative, partner, employer or any entity under his or her control) has, as of the date of the person’s election to serve as an external director, any affiliation with the then chairman of the board of directors, Chief Executive Officer, a holder of 5% or more of the issued share capital or voting power, or the most senior financial officer of the company;

 

   

a person may not serve as an external director if he or she (or his or her relative, partner, employer, a person to whom he or she is subordinated or any entity under his or her control) has business or professional relations with anyone with whom affiliation is prohibited as described above, and even if these relations are not on a regular basis (other than de minimis relations); and

 

   

a person may not continue to serve as an external director if he or she accepts, during his or her tenure as an external director, direct or indirect compensation from the company for his or her role as a director, other than the amounts prescribed under the regulations promulgated under the Companies Law, indemnification, the company’s undertaking to indemnify such person and insurance coverage.

The Companies Law provides additional requirements with respect to external directors as well as certain limitations on the relationship between external directors and their affiliates, on the one hand, and the companies, on the other hand, following termination of the external directors’ service. Among others, the Companies Law provides that if at the time an external director is appointed all members of the board of directors who are not controlling shareholders or their relatives are of the same gender, the external director must be of the other gender.

Pursuant to the regulations promulgated under the Companies Law, a person may be appointed as an external director only if he or she either has professional qualifications or has accounting and financial expertise (as defined in those regulations). In addition, at least one of the external directors must be determined by our board of directors to have accounting and financial expertise and the board is required to determine the minimum number of board members who are required to possess accounting and financial expertise. In determining the number of directors required to have such expertise, the members of our board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that at least one of our directors must possess accounting and financial expertise. In this regard, our board of directors has determined that two of our current directors, Dr. Michael Anghel and Dr. Simcha Sadan, each possess “accounting and financial” expertise, while another director, Dr. Kinneret Livnat Savitzky, has “professional qualifications”.

Audit Committee

Listing Requirements

Under the NYSE corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise.

 

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Following the listing of our ordinary shares on NYSE, our audit committee will continue to consist of Dr. Michael Anghel, Dr. Kinneret Livnat Savitzky and Dr. Simcha Sadan. Dr. Michael Anghel will continue to serve as the Chairman of the audit committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE corporate governance rules. Our board of directors has determined that that each of Dr. Michael Anghel and Dr. Simcha Sadan is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the NYSE corporate governance rules.

Each of the members of the audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board and committee members.

Companies Law Requirements

Under the Companies Law, the board of directors of a public company must appoint an audit committee. The audit committee must be comprised of at least three directors, including all of the external directors, and a majority of its members must be unaffiliated directors. An unaffiliated director is an external director or a director who is appointed or classified as such, and who meets the qualifications of an external director (other than the professional qualifications/accounting and financial expertise requirement), whom the audit committee has confirmed to meet the external director qualifications, and who has not served as a director of the company for more than nine consecutive years (with any period of up to two years during which such person does not serve as a director not being viewed as interrupting a nine-year period). For Israeli companies traded on certain foreign stock exchanges, including NYSE, a director who qualifies as an independent director for the purposes of such director’s membership in the audit committee in accordance with the rules of such stock exchange is also deemed to be an unaffiliated director under the Companies Law. Such person must meet the nine-year requirement described above. Following the nine-year period, a director of an Israeli company traded on such foreign stock exchange may continue to be considered an unaffiliated director for unlimited additional periods of three years each, subject to certain conditions set forth in the Companies Law. Our board of directors has determined that Dr. Michael Anghel, Dr. Simcha Sadan and Dr. Kinneret Livnat Savitzky are unaffiliated directors.

The audit committee may not include the chairman of the board, any director employed by the company or who regularly provides services to the company (other than as a board member), a controlling shareholder or any relative of the controlling shareholder, or any person who is affiliated with the controlling shareholder. The chairman of the audit committee must be an external director.

Audit Committee Role

Our board of directors (following the approval by our audit committee) has adopted an audit committee charter setting forth the responsibilities of the audit committee consistent with the rules of the SEC and the NYSE corporate governance rules, which include:

 

   

retaining and terminating our independent auditors, subject to board of directors and shareholder approvals;

 

   

pre-approval of audit and non-audit services to be provided by the independent auditors;

 

   

reviewing with management and our independent directors our financial reports prior to their submission to the SEC; and

 

   

approval of certain transactions with office holders and other related-party transactions.

Additionally, under the Companies Law, an audit committee is required, among other things, to (i) identify deficiencies in the administration of the company (including by consulting with the internal auditor), and

 

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recommend remedial actions with respect to such deficiencies, (ii) review and approve certain related party transactions, including determining whether or not such transactions are extraordinary transactions, and (iii) adopt procedures with respect to processing employee complaints in connection with deficiencies in the administration of the company, and the appropriate means of protection afforded to such employees. In addition, the audit committee is responsible for overseeing the internal control procedures of the company. Under the Companies Law, the approval of the audit committee is required for specified actions and transactions with office holders and controlling shareholders. See “—Approval of Related Party Transactions Under Israeli Law.” However, the audit committee may not approve an action or a transaction with a controlling shareholder or with an office holder unless at the time of approval the majority of the members of the audit committee are present, of whom a majority must be unaffiliated directors and at least one of whom must be an external director.

Compensation and Nominating Committee

Our compensation and nominating committee consists of Dr. Kinneret Livnat Savitzky (chairman of the committee), Dr. Michael Anghel and Dr. Simcha Sadan. Prior to this offering, our board of directors will adopt a compensation policy setting forth the responsibilities of the committee consistent with NYSE rules and the Companies Law, which include:

 

   

reviewing and recommending an overall compensation policy with respect to our Chief Executive Officer and other executive officers, as described below under “Compensation Policy”;

 

   

reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, including evaluating their performance in light of such goals and objectives;

 

   

reviewing and approving the granting of options and other incentive awards; and

 

   

reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.

Our board of directors (following approval by our compensation and nominating committee and our board of directors) has adopted a compensation and nominating committee charter. The charter governs the required composition, meeting procedures and other matters related to the terms of operation of the committee. The charter also describes the responsibilities of the committee with respect to its role as our nominating committee under the Listed Company Manual, including advising our board of directors in selecting individuals who are best able to fulfill the responsibilities of a director or executive officer of our Company.

Each of the members of our compensation and nominating committee is independent under the listing standards of NYSE. Under the Companies Law, all external directors must be members of, and constitute a majority of the members of, the compensation committee, and each remaining committee member must be a director whose compensation and nominating does not exceed an amount that may be paid to an external director.

Compensation Policy

Under an amendment to the Companies Law that was adopted in December 2012, in addition to appointing a compensation and nominating committee, we are required to establish a policy regarding the terms of engagement of office holders (which include directors and senior executive officers), or a compensation policy. Such policy will need to be set by our board, after considering the recommendation of our compensation and nominating committee, and will require shareholder approval.

The compensation policy serves as the basis for determining the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain

 

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factors specified in the Companies Law, including advancement of the company’s objectives, the company’s business and its long-term strategy, and creation of appropriate incentives for executives. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The Companies Law describes what factors have to be considered by, and what principles must be included in, the compensation policy.

Under the Companies Law amendment, we have until September 12, 2013 to adopt our compensation policy.

Compensation of Directors and Officers

Under the Companies Law, the compensation of each of our directors and our Chief Executive Officer requires the approval of our compensation and nominating committee, the subsequent approval of the board of directors and, unless exempted under the regulations promulgated under the Companies Law, the approval of our shareholders at a general meeting (in the case of a company’s chief executive officer, the shareholder approval must include the special majority described under “—Exculpation, Insurance and Indemnification of Office Holders” below, which in our case (due to the fact that we have no controlling shareholder) is currently inapplicable).

The compensation of any other office holder (who is neither a director nor our Chief Executive Officer), if consistent with our then-effective compensation policy, requires the approval of our compensation and nominating committee, followed by our board of directors. Compensation of any such office holder that deviates from our then-effective compensation policy will also require shareholder approval.

External directors are entitled to remuneration subject to the provisions and limitations set forth in the regulations promulgated under the Companies Law.

For additional information, see “—Compensation of Officers and Directors.”

Finance Committee

Our board of directors has formed a finance committee, on which Mr. Martin Gerstel, Dr. Simcha Sadan and Dr. Michael Anghel serve as members. The finance committee assists our board of directors in fulfilling its oversight responsibilities across the principal areas of corporate finance for our company and its subsidiaries. This committee may also assist the board by reviewing such matters as capital structure, equity and debt financing, capital expenditures, cash management, banking activities and relationships, investments, risk management, insurance and securities repurchase activities and making recommendations for consideration by our board of directors.

Internal Auditor

Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee (subject to the limits imposed by the Companies Law on who may be appointed as an internal auditor). Under the Companies Law, the internal auditor may be an employee of the company but not an office holder, or an affiliate, or a relative of an office holder or affiliate, and he may not be the company’s independent accountant or its representative.

The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. Doron Cohen, CPA, has been appointed

 

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as our internal auditor and he has served in such role since November 19, 2009. Mr. Cohen is a certified internal auditor and a partner of Fahn Kanne Control Management Ltd, an affiliate of Grant Thornton LLP.

Approval of Related Party Transactions Under Israeli Law

Fiduciary Duties of Directors and Executive Officers

The Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Management—Executive Officers and Directors” is an office holder under the Companies Law.

An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in good faith and in the best interests of the company.

The duty of care includes a duty to use reasonable means to obtain:

 

   

information on the appropriateness of a given action submitted for his or her approval or performed by virtue of his or her position; and

 

   

all other important information pertaining to these actions.

The duty of loyalty includes a duty to:

 

   

refrain from any conflict of interest between the performance of his or her duties in the company and his or her personal affairs;

 

   

refrain from any activity that is competitive with the business of the company;

 

   

refrain from exploiting any business opportunity of the company in order to receive a personal gain for himself or herself or others; and

 

   

disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.

Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions

The Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may have and all related material information known to him or her concerning any existing or proposed transaction with the company. If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless the company’s articles of association provide for a different method of approval. Our articles of association provide that for non-extraordinary interested party transactions, the board of directors may delegate its approval, or may provide a general approval to certain types of non-extraordinary interested party transactions. No transaction that is adverse to the company’s interest may be approved by the board of directors. Approval first by the company’s audit committee and subsequently by the board of directors is required for an extraordinary transaction, meaning any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities. A director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors or the audit committee may generally (unless it is with respect to a transaction which is not an extraordinary transaction) not be present at such a meeting or vote on that matter unless a majority of the directors or members of the audit committee, as applicable, have a personal interest in the matter. If a majority of the members of the audit committee or the board of directors has a personal interest in the approval of such a transaction then all of the directors may

 

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participate in deliberations of the audit committee or board of directors, as applicable, with respect to such transaction and vote on the approval thereof and, in such case, shareholder approval is also required.

Pursuant to the Companies Law, extraordinary transactions with our office holders who are not directors require audit committee approval and subsequent approval by our board of directors. Compensation, insurance, indemnification or exculpation arrangements for office holders who are not directors require approval by our compensation and nominating committee, followed by our board of directors and, if deviating from our then-effective compensation policy, our shareholders. Compensation arrangements with directors, including in their capacities as executive officers, or with or our Chief Executive Officer, as well as insurance (unless exempted under the applicable regulations), indemnification or exculpation of directors or our Chief Executive Officer, require the approval of the compensation and nominating committee, the board of directors and our shareholders, in that order. If the transaction or compensation arrangement of the office holder brought for approval amends an existing arrangement, then only the approval of the audit committee or compensation and nominating committee (as appropriate) is required if that committee determines that the amendment is not material in relation to the existing arrangement.

Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions

Pursuant to the Companies Law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controlling shareholder of a public company. We currently do not have a controlling shareholder.

An extraordinary transaction between a public company and a controlling shareholder, or in which a controlling shareholder has a personal interest, require the approval of a company’s audit committee, board of directors and shareholders in that order. For the terms of compensation (or insurance, indemnification or exculpation) of a controlling shareholder who is an office holder, the approval by our compensation and nominating committee is required in lieu of audit committee approval. The shareholder approval for any such extraordinary transaction or compensatory arrangement must fulfill one of the following requirements:

 

   

at least a majority of the voting rights in the company held by shareholders who have no personal interest in the transaction and who are present and voting at the general meeting, must be voted in favor of approving the transaction or arrangement (for this purpose, abstentions are disregarded); or

 

   

the voting rights held by shareholders who have no personal interest in the transaction or arrangement and who are present and voting at the general meeting, and who vote against the transaction, do not exceed two percent of the voting rights in the company.

Shareholder Duties

Pursuant to the Companies Law, a shareholder has a duty to act in good faith and in an acceptable manner toward the company and other shareholders and to refrain from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters:

 

   

an amendment to the company’s articles of association;

 

   

an increase of the company’s authorized share capital;

 

   

a merger; or

 

   

interested party transactions that require shareholder approval.

In addition, a shareholder has a general duty to refrain from discriminating against other shareholders.

Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a

 

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shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or exercise any other rights available to it under the company’s articles of association with respect to the company. The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty of fairness.

Israeli courts have not yet interpreted the scope or nature of any of these duties.

Approval of Private Placements

Under the Companies Law, a significant private placement of securities requires approval by the board of directors and the shareholders by a simple majority. A private placement is considered a significant private placement if it results in a person becoming a controlling shareholder, or if all of the following conditions are met:

 

   

the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance;

 

   

some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and

 

   

the transaction will increase the relative holdings of a shareholder who holds 5% or more of the company’s outstanding share capital or voting rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital or voting rights.

Exculpation, Insurance and Indemnification of Office Holders

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.

An Israeli company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:

 

   

financial liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria;

 

   

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and

 

   

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in

 

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connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent.

An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:

 

   

a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

 

   

a breach of the duty of care to the company or to a third party, including a breach arising out of the negligent conduct of the office holder;

 

   

a financial liability imposed on the office holder in favor of a third party;

 

   

a financial liability imposed on the office holder in favor of a third party harmed by a breach in an administrative proceeding; and

 

   

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her.

An Israeli company may not indemnify or insure an office holder against any of the following:

 

   

a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

 

   

a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

 

   

an act or omission committed with intent to derive illegal personal benefit; or

 

   

a fine or forfeit levied against the office holder.

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation and nominating committee and the board of directors and, with respect to directors and our Chief Executive Officer, also by our shareholders (with a special majority among the shareholders who have no personal interest in such approval).

Our articles of association allow us to indemnify and insure our office holders for any liability imposed on them as a consequence of an act which was performed by virtue of being an office holder. We intend to ask our shareholders to approve, prior to consummation of this offering, an amendment to our articles of association that will extend such indemnification and insurance to cover omissions by our office holders (in their role as such) as well. Our office holders are currently covered by a directors’ and officers’ insurance policy.

We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.

The maximum indemnification amount set forth in such agreements is limited to an amount equal to 25% of our shareholders’ equity as reflected in our most recent consolidated financial statements prior to the date on which the indemnity payment is made. We intend to ask our shareholders to approve, prior to the consummation of this offering, an amendment to such indemnification agreements that will provide that if the amount equal to 25% of our shareholders’ equity is insufficient to cover all indemnity amounts payable with respect to all indemnifiable directors and executive officers, such amount will be allocated among our directors and executive officers pro rata, in accordance with their relative culpabilities, as finally determined by a court with respect to a

 

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particular claim. The maximum amount set forth in such agreements is in addition to any amount paid (if paid) under insurance and/or by a third party pursuant to an indemnification arrangement. In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, is against public policy and therefore unenforceable.

Compensation of Officers and Directors

The compensation paid by us to our current executive officers, including salaries and share-based compensation, for the year ended December 31, 2012, was approximately $1,431,000. This amount includes $901,000 of gross salaries set aside or accrued to provide pension, severance, retirement, or similar benefits or expenses, but does not include any business travel, relocation, professional and business association dues and expenses reimbursed to office holders, and other expenses commonly reimbursed by companies in Israel.

Our compensation for our executive officers is derived from employment agreements and each executive officer’s personal contribution to our management, operations and our success, and will be determined consistently with our compensation policy (following its adoption by our compensation and nominating committee, board and shareholders). Each executive officer’s annual bonus is determined according to a formula that is consistent with the compensation policy and that links financial-target based goals and metrics determined at the beginning of each fiscal year to specific goals and objectives within the responsibility of the relevant executive officer. The financial target is uniform with respect to all of our executive officers, including our Chief Executive Officer; however, our Chief Executive Officer has discretion to determine its weight with respect to our other executive offers, taking into account the degree of influence such executive officer has on achieving our financial target. Our Chief Executive Officer’s goals and objectives are determined by the compensation and nominating committee and our board of directors, and our board of directors has authorized our Chief Executive Officer to set specific goals and objectives for each of our other executive officers. At the beginning of each fiscal year, our board of directors determines the maximum bonus for each of our executive officers, including our Chief Executive Officer. In the case of our executive officers other than the Chief Executive Officer, assuming that the bonus terms conform to the compensation policy, such terms only require approval by the compensation and nominating committee followed by the board of directors. For our Chief Executive Officer, the bonus terms will in general require approval by our shareholders as well.

Under Israeli law, as a public company with shares listed only on the TASE until the consummation of this offering, we have been required to disclose the compensation, on an individual basis, of our five most highly compensated executive officers. The following table presents information regarding compensation accrued in our financial statements for our executive officers with respect to whom specific disclosure has been made in Israel, namely our Chief Executive Officer (Ofer Haviv), our Chief Financial Officer (Sigal Fattal), our Chief Technology Officer and Executive Vice President of Development (Hagai Karchi), our Executive Vice President of Technology Infrastructure (Assaf Kacen) and our Executive Vice President of Strategy and Business Development, (Assaf Oron), as of December 31, 2012.

 

Name and Position

   Salary      Bonus      Value of Options
Granted
    Total  

Ofer Haviv, President and Chief Executive Officer

   $ 278,123       $ 44,064       $ 151,374  (2)    $ 473,561   

Sigal Fattal, Chief Financial Officer(1)

     77,760         11,923         13,219         102,902   

Hagai Karchi, Chief Technology Officer and Executive Vice President of Development ,

     182,478         20,736         83,204         286,418   

Assaf Kacen, Executive Vice President of Technology Infrastructure

     184,033         24,624         77,501         286,158   

Assaf Oron, Executive Vice President of Strategy and Business Development

     178,330         20,736         83,204         282,270   

 

(1) Employment commenced June 2012.
(2) In September 2013, our compensation and nominating committee and board of directors approved a revised grant to our President and Chief Executive Officer, Ofer Haviv, of 215,000 options to purchase 215,000 ordinary shares. The options shall be exercisable at a price of NIS 48.18 (approximately $13.62). The grant is subject to the approval of our shareholders at our general shareholders meeting.

 

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We pay our external director Dr. Michael Anghel an annual fee of NIS 71,300 (approximately $20,158) as well as a fee of NIS 3,750 (approximately $1,060) for attendance at board meetings and committee meetings and our other external director, Dr. Kinneret Livnat Savitsky an annual fee of NIS 53,500 (approximately $15,126) as well as a fee of NIS 2,820 (approximately $797) for attendance at board meetings and committee meetings. Independent directors that are not external directors are also entitled to annual compensation and compensation for attendance at board meetings. Currently, our only independent director who is not also an external director is Dr. Simcha Sadan, to whom we pay an annual fee of NIS 71,300 (approximately $20,158) as well as a fee of NIS 3,750 (approximately $1,060) for attendance at board meetings and committee meetings. We also reimburse our directors for expenses arising from their board membership.

Employment and Consulting Agreements with Executive Officers

We have entered into written employment agreements with all of our executive officers. Each of these agreements contains provisions regarding non-competition, confidentiality of information and assignment of inventions. The non-competition provision applies for a period that is generally 12 months following termination of employment. The enforceability of covenants not to compete in Israel and in the United States is subject to limitations.

Directors’ Service Contracts

There are no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their service as directors of our company.

Option Plans

We maintain three share option and incentive plans which, as of June 30, 2013, are constituted as follows: (i) our Evogene Share Option Plan (2002), or the 2002 Plan, which provides for the grant of options to purchase up to 90,676 of our ordinary shares to our company’s and our subsidiaries’ respective directors, employees and consultants; (ii) our Evogene Ltd. Key Employee Share Incentive Plan, 2003, or the 2003 Plan, which provides for the grant of options to purchase up to 2,563,083 of our ordinary shares; and (iii) the Evogene Ltd. 2013 Share Option Plan, or the 2013 Plan, which provides for the grant of options to purchase up to 1,232,102 of our ordinary shares. As of June 30, 2013, a total of 1,232,102 ordinary shares remained available for issuance under our share option and incentive plans, all under our 2013 Plan, as all remaining ordinary shares under our 2002 Plan and 2003 Plan that are not subject to outstanding option grants had been transferred to our 2013 Plan. As of that date, 90,676 and 2,563,083 ordinary shares were issuable upon the exercise of outstanding options under our 2002 and 2003 Plans, respectively, while no options had yet been issued under our 2013 Plan. Of the foregoing outstanding options, options to purchase 1,972,417 ordinary shares, in the aggregate, had vested under the plans as of that date, with a weighted average exercise price of NIS 22.22, or $6.14 per share.

Among other option awards, the plans provide for granting options in compliance with Section 102 of the Israeli Income Tax Ordinance, 1961, or the Ordinance, which provides to employees, directors and officers, who are not controlling shareholders (i.e., hold less than 10% of a company’s share capital) and are Israeli residents, favorable tax treatment for compensation in the form of shares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the relevant employee, director or officer and are (or were) to be held by the trustee for at least two years after the date of grant or issuance. Under the “capital gains track”, we are not allowed to deduct an expense with respect to the grant or issuance of the options or shares.

The plans also permit us to grant options to U.S. residents, which options may qualify as “incentive stock options” within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, and to residents of other jurisdictions.

Options granted under our plans are subject to vesting schedules and generally expire 10 years from the grant date. The plans address the treatment of vested and unvested options upon the termination of employment

 

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of the option holder as well as upon consummation of a merger or consolidation of our company, or sale of all or substantially all of our shares or assets. The plans also provide for certain lock up arrangements (generally, for a 180-day period) to which option holders and holders of shares issued upon exercise of options will be subject upon consummation of a public offering, similarly to our directors and executive officers.

The plans are administered by our board of directors or by a committee appointed by our board of directors.

 

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PRINCIPAL SHAREHOLDERS

The following table sets forth information with respect to the beneficial ownership of our shares as of September 10, 2013 and after this offering by:

 

   

each person or entity known by us to own beneficially more than 5% of our outstanding shares;

 

   

each of our directors and executive officers individually; and

 

   

all of our executive officers and directors as a group.

The beneficial ownership of ordinary shares is determined in accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power, or the right to receive the economic benefit of ownership. For purposes of the table below, we deem shares subject to options or warrants that are currently exercisable or exercisable within 60 days of September 10, 2013, to be outstanding and to be beneficially owned by the person holding the options or warrants for the purposes of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of shares beneficially owned prior to the offering is based on 18,879,987 ordinary shares outstanding as of September 10, 2013. We have also set forth below information known to us regarding any significant change in the percentage ownership of our ordinary shares by any major shareholders during the past three year.

As of September 10, 2013, we had two holders of record of our ordinary shares in the United States. Such holders of record currently hold 12.0% of our outstanding ordinary shares. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, as the shares of all shareholders who hold shares on the TASE are recorded in the name of our Israeli share registrar, Bank Leumi Le’Israel Registration Company Ltd.

All of our shareholders, including the shareholders listed below, have the same voting rights attached to their ordinary shares. See “Description of Share Capital—Articles of Association—Voting.” Neither our principal shareholders nor our directors and executive officers have different or special voting rights. Unless otherwise noted below, each shareholder’s address is 13 Gad Feinstein Street, Park Rehovot P.O.B 2100, Rehovot 76121, Israel.

A description of any material relationship that our principal shareholders have had with us or any of our predecessors or affiliates within the past three years is included under “Certain Relationships and Related Party Transactions.”

 

Name of Beneficial Owner

   Shares Beneficially
Owned Prior to Offering
    Shares Beneficially
Owned After Offering
   Number      Percentage     Number    Percentage

Directors and Executive Officers

          

Ofer Haviv(1)

     512,500         2.7     

Sigal Fattal(2)

     25,781         *        

Assaf Kacen(3)

     99,691         *        

Dr. Hagai Karchi(4)

     292,812         1.5     

Assaf Oron(5)

     167,812         *        

Martin S. Gerstel(6)

     400,256         2.1     

Leon Y. Recanati(7)

     856,984         4.5     

Dr. Michael Anghel(8)

     15,000         *        

Dr. Kinneret Livnat Savitsky(9)

     7,500         *        

Dr. Simcha Sadan(10)

     52,275         *        

Dr. Adina Makover(11)

     12,674         *        

All executive officers and directors as a group (11 persons)

     2,443,285         12.9     

Principal Shareholders

          

Monsanto Company(12)

     1,636,364         8.7     

 

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* Less than 1%.
(1) Consists of 512,500 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The weighted average exercise price of these options is NIS 19.11 or $5.40 per share and expire on June 19, 2020. Does not include 215,000 options to purchase 215,000 ordinary shares, which remain subject to shareholder approval at our general shareholders meeting.
(2) Consists of 25,781 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The weighted average exercise price of these options is NIS 37.92 or $10.72 per share and expire on July 15, 2023.
(3) Consists of 99,691 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 29.46 or $8.33 per share and expire on July 15, 2023.
(4) Consists of 90,000 ordinary shares and 202,812 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 24.67 or $6.97 per share and expire on July 15, 2023.
(5) Consists of 167,812 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 27.31 or $7.72 per share and expire on July 15, 2023.
(6) Consists of 51,250 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 12.43 or $3.51 per share and expire on April 9, 2020. Also includes 349,006 ordinary shares, consisting of: (a) 133,815 shares ordinary shares held by Martin Gerstel and (b) 215,191 shares held by Shomar Corporation over which Martin Gerstel and his wife Mrs. Shoshana Gerstel possess voting and investment power.
(7) Consists of 838,859 ordinary shares and 18,125 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 13.20 or $3.73 per share and expire on April 9, 2020.
(8) Consists of 15,000 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 13.21 or $3.73 per share and expire on April 9, 2020.
(9) Consists of 7,500 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 32.30 or $9.13 per share and expire on September 17, 2020.
(10) Includes 18,125 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 13.20 or $3.73 per share and expire on April 9, 2020. Also includes 34,150 ordinary shares, held by S.M.B. Ltd., over which Dr. Sadan possesses voting and investment power.
(11) Consists of 1,424 ordinary shares and 11,250 ordinary shares underlying options to purchase ordinary shares exercisable within 60 days of September 10, 2013. The exercise price of these options is NIS 15.18 or $4.29 per share and expire on April 9, 2020.
(12) The address for Monsanto Company is 800 North Lindbergh Boulevard, St. Louis, Missouri 63167. The purchase price of the ordinary share was NIS 38.91 or $11.00 per share. Monsanto Company possesses voting and dispositive investment power. Monsanto Company is a Delaware corporation and is listed on the New York Stock Exchange.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Indemnification Agreements with Office Holders

Our articles of association to be effective following this offering permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted by law, subject to limited exceptions. We have entered into agreements with each of our current office holders exculpating them from a breach of their duty of care to us to the fullest extent permitted by law, subject to limited exceptions, and undertaking to indemnify them to the fullest extent permitted by law, including with respect to liabilities resulting from this offering to the extent that these liabilities are not covered by insurance. See “Management—Exculpation, Insurance and Indemnification of Office Holders.”

Investors’ Rights Agreement

 

On January 3, 2006, we entered into an Investors’ Rights Agreement (“IRA”) with our shareholders. Pursuant to the IRA, at any time upon or after an initial public offering of our securities, any shareholder or group of shareholders holding an aggregate of at least 12.5% of our ordinary shares may request in writing that (i) we use our best efforts to register such shareholder or shareholders’ ordinary shares, or any part thereof, for trading on a recognized European or U.S. securities exchange or quotation system (“demand rights”), provided that these demand rights may only be effected after six months from the consummation of the initial public offering and the aggregate anticipated offering price of such shares equals at least $4.0 million, or (ii) we effect a registration statement on Form F-3 for such shares (“F-3 rights”), provided that the aggregate anticipated offering price of such shares equals at least $2.5 million. The IRA also provides our shareholders with incidental or “piggy back” registration rights in the event that we determine to register any of our securities pursuant to or following an initial public offering, although no “piggy back” rights will be available in connection with an initial public offering of our securities in which security holders of ours do not participate as sellers.

Any rights to registration granted under the IRA, however, terminate upon the fifth anniversary of the closing of an initial public offering of our securities. Furthermore, we are not obligated to effect the demand rights or F-3 rights contemplated under the IRA when (i) effecting such rights would require us to execute a general consent to service of process in a particular jurisdiction, unless we are already subject to service in such jurisdiction and except as may be required by the Securities Act of 1933, (ii) we had already effected a registration of shares pursuant to the IRA within the previous 12 months, and such registration was declared or ordered effective, or (iii) we receive an opinion of counsel, satisfactory to us and the respective shareholder or shareholders, stating that the sale of shares may be made in a transaction exempted from the registration and prospectus delivery requirements of the Securities Act of 1933 and from the comparable requirements of the applicable state securities laws so that any transfer restrictions may be removed upon the consummation of such sale.

 

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DESCRIPTION OF SHARE CAPITAL

Share Capital

Our authorized share capital consists of 150,000,000 ordinary shares, par value NIS 0.02 per share, of which 18,879,987 shares are issued and outstanding as of June 30, 2013.

All of our outstanding ordinary shares are validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and do not have any preemptive rights. The current position of the TASE is that a company whose shares are traded on the TASE may not issue or register for trading preferred shares. Under the Israeli Securities Law, all of our outstanding shares must be validly issued and fully paid, and must be registered for trading on the TASE. All of our ordinary shares have equal rights and are fully paid.

Our board of directors may determine the issue prices and terms for such shares or other securities, and may further determine any other provision relating to such issue of shares or securities. We may also issue and redeem redeemable securities on such terms and in such manner as our board of directors shall determine. Our board of directors may not make calls or assessments on our ordinary shares.

Our articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution duly passed by our shareholders at an annual or extraordinary general meeting by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits and an issuance of shares for less than their nominal value, require the approval of both our board of directors and an Israeli court.

Articles of Association

All references to our articles of association in this section refer to our articles of association to be effective following this offering.

Objects and Purposes. Our registration number with the Israeli Registrar of Companies is 51-283872-3. Our purpose as set forth in article 4 of our articles of association is to engage in any legal business.

Voting. Holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder meeting. Shareholders may vote at shareholder meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholder resolutions by means of written consent in lieu of a shareholder meeting. Shareholder voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future. Except as otherwise disclosed herein, an amendment to our articles of association to change the rights of our shareholders requires the prior approval of a simple majority of our shares represented and voting at a general meeting and of the holders of a class of shares whose rights are being affected (or the consent in writing of all the holders of such class of shares).

Share Ownership Restrictions. The ownership or voting of ordinary shares by non-residents of Israel is not restricted in any way by our articles of association or the laws of the State of Israel, except that citizens of countries which are in a state of war with Israel may not be recognized as owners of ordinary shares.

Transfer of Shares. Fully paid ordinary shares are issued in registered form and may be freely transferred under our articles of association unless the transfer is restricted or prohibited by another instrument, Israeli law or the rules of a stock exchange on which the shares are traded.

Election of Directors. Our ordinary shares do not have cumulative voting rights for the election of directors. Rather, under our articles of association our directors are elected, upon expiration of the term of office of any

 

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director, by the holders of a simple majority of our ordinary shares at a general shareholder meeting (excluding abstentions). As a result, the holders of our ordinary shares that represent more than 50% of the voting power represented at a shareholder meeting and voting thereon (excluding abstentions) have the power to elect any or all of our directors whose positions are being filled at that meeting, subject to the special approval requirements for external directors described under “Board Practices—Board of Directors—External Directors.” Vacancies on our board of directors, resulting from a resignation or other termination of service by a then serving director, may be filled by a vote of a simple majority of the directors then in office as described under “Board Practices—Board of Directors—Directors and Officers.” For additional information regarding the election of and voting by directors, please refer to “Board Practices—Board of Directors.”

Dividend and Liquidation Rights. Under Israeli law, we may declare and pay a dividend only if, upon the reasonable determination of our board of directors, the distribution will not prevent us from being able to meet the terms of our existing and contingent obligations as they become due. Under the Companies Law, the distribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years according to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date of distribution. In the event that we do not have retained earnings and earnings legally available for distribution, as defined in the Companies Law, we may seek the approval of the court in order to distribute a dividend. The court may approve our request if it is convinced that there is no reasonable concern that the payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.

In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of ordinary shares on a pro-rata basis. Dividend and liquidation rights may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future. See “Dividend Policy.”

Shareholder Meetings. Under the Companies Law, we are required to convene an annual general meeting of our shareholders once every calendar year, not more than 15 months following the preceding annual general meeting. Our board of directors may convene a special general meeting of our shareholders and is required to do so at the request of two directors or one quarter of the members of our board of directors, or at the request of one or more holders of 5% or more of our share capital and 1% of our voting power, or the holder or holders of 5% or more of our voting power. All shareholder meetings require prior notice of at least 14 days and, in certain cases, 35 days. The chairperson of our board of directors or another one of our directors authorized by our board of directors presides over our general meetings. If either of such persons is not present within 15 minutes from the appointed time for the commencement of the meeting, the directors present at such meeting shall appoint one of our directors as the chairperson for such meeting and if they fail to do so, then the shareholders present shall appoint one of our directors to act as chairperson and if no director is present, then one of the shareholders present at such meeting shall act as chairperson. Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior to the date of the meeting, depending on the type of meeting and whether written proxies are being used.

Quorum. Under our amended and restated articles of association, the quorum required for a meeting of shareholders consists of at least two shareholders present in person, by proxy or by written ballot, who hold or represent between them at least 25% of our voting power. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place (without requirement of additional notification to the shareholders), or to a later time, if indicated in the notice to the meeting or to such other time and place as determined by the board of directors in a notice to our shareholders. At the reconvened meeting, if a quorum is not present within half an hour from the appointed time for the commencement of the meeting, the meeting will take place so long as at least one shareholder is present, unless the meeting was called pursuant to a request by our shareholders, in which case the quorum required is the number of shareholders required to call the meeting as described under “—Shareholder Meetings.”

 

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Resolutions. Under the Companies Law, unless otherwise provided in the articles of association or applicable law, all resolutions of the shareholders require a simple majority of the voting rights represented at the meeting, in person, by proxy or by written ballot, and voting on the resolution (excluding abstentions).

Access to Corporate Records. Under the Companies Law, all shareholders generally have the right to review minutes of our general meetings, our shareholder register, including with respect to material shareholders, our articles of association, our financial statements and any document we are required by law to file publicly with the Israeli Companies Registrar or the Israeli Securities Authority. Any shareholder who specifies the purpose of its request may request to review any document in our possession that relates to any action or transaction with a related party which requires shareholder approval under the Companies Law. We may deny a request to review a document if we determine that the request was not made in good faith, that the document contains a trade secret or patent or that the document’s disclosure may otherwise impair our interests.

Modification of Class Rights. The rights attached to any class of share (to the extent that we may have separate classes of shares in the future), such as voting, liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a majority of our shares represented at the meeting and the holders or a majority of the shares of that class present at a separate class meeting, or otherwise in accordance with the rights attached to such class of shares, as set forth in our articles of association.

Acquisitions Under Israeli Law

Full Tender Offer. A person wishing to acquire shares of a public Israeli company and who could as a result hold over 90% of the target company’s voting rights or the target company’s issued and outstanding share capital (or of a class thereof), is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company (or the applicable class). If (a) the shareholders who did not accept the offer hold less than 5% of the issued and outstanding share capital of the company (or the applicable class) and the shareholders who accept the offer constitute a majority of the offerees that do not have a personal interest in the acceptance of the tender offer or (b) the shareholders who did not accept the tender offer hold less than 2% of the issued and outstanding share capital of the company (or of the applicable class), all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. A shareholder who had its shares so transferred may petition the court within six months from the date of acceptance of the full tender offer, regardless of whether such shareholder agreed to the offer, to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court. However, an offeror may provide in the offer documents that a shareholder who accepted the offer will not be entitled to appraisal rights as described in the preceding sentence, as long as the offeror and the company disclosed the information required by law in connection with the tender offer. If (a) the shareholders who did not accept the tender offer hold 5% or more of the issued and outstanding share capital of the company (or of the applicable class) or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in the acceptance of the tender offer, or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class) the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital (or of the applicable class) from shareholders who accepted the tender offer.

Special Tender Offer. The Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This rule does not apply if there is already another holder of 25% or more of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company. These

 

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requirements do not apply if the acquisition (i) occurs in the context of a private placement by the company that received shareholder approval, (ii) was from a shareholder holding 25% or more of the voting rights in the company and resulted in the acquirer becoming a holder of 25% or more of the voting rights in the company, or (iii) was from a holder of more than 45% of the voting rights in the company and resulted in the acquirer becoming a holder of more than 45% of the voting rights in the company. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding controlling shareholders, holders of 25% or more of the voting rights in the company and any person having a personal interest in the acceptance of the tender offer).

In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer, or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention. An office holder in a target company who, in his or her capacity as an office holder, performs an action the purpose of which is to cause the failure of an existing or foreseeable special tender offer or is to impair the chances of its acceptance, is liable to the potential purchaser and shareholders for damages, unless such office holder acted in good faith and had reasonable grounds to believe he or she was acting for the benefit of the company. However, office holders of the target company may negotiate with the potential purchaser in order to improve the terms of the special tender offer, and may further negotiate with third parties in order to obtain a competing offer.

If a special tender offer is accepted, then shareholders who did not respond to or that had objected the offer may accept the offer within four days of the last day set for the acceptance of the offer.

In the event that a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

Merger. The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain conditions described under the Companies Law are met, a majority of each party’s shareholders. The board of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into account the financial status of the merging companies. If the board of directors determines that such a concern exists, it may not approve a proposed merger. Following the approval of the board of directors of each of the merging companies, the boards of directors must jointly prepare a merger proposal for submission to the Israeli Registrar of Companies.

For purposes of the shareholder vote, unless a court rules otherwise, if one of the merging companies (or any person who holds 25% or more of the outstanding shares or the right to appoint 25% or more of the directors of one of the merging companies) holds shares in the other merging company, the merger will not be deemed approved if a majority of the shares voted at the shareholders meeting by shareholders other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or the right to appoint 25% or more of the directors of the other party, vote against the merger. In addition, if the non-surviving entity of the merger has more than one class of shares, the merger must be approved by each class of shareholders. If the transaction would have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders. If a merger is with a company’s controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary

 

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transactions with controlling shareholders (as described above under “Approval of Related Party Transactions Under Israeli Law—Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions”).

Under the Companies Law, each merging company must inform its secured creditors of the proposed merger plans. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may further give instructions to secure the rights of creditors.

In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger is filed with the Israeli Registrar of Companies and 30 days from the date that shareholder approval of both merging companies is obtained.

Antitakeover Measures under Israeli Law

Besides the requirements described above with respect to tender offers and mergers, Israeli law and our articles of association enable the implementation of additional measures that may delay or prevent a takeover attempt and thereby preclude our shareholders from realizing a potential premium over the market value of our ordinary shares that they hold. Our articles of association allow our company to increase its registered share capital and provide that the increased capital will be divided into shares having ordinary, preferred or deferred rights or any other special rights, or may be subject to terms and restrictions in respect of dividend, repayment of capital, voting or other terms, in each case provided that the general meeting of our shareholders approves via a simple majority of shares present (in person or by proxy) and voting. Israeli law also permits the issuance of preferred stock. However, the TASE rules and regulations prohibit a listed company from having more than one class of shares listed, and the TASE’s current position is that a listed company may not issue or list preferred shares. Therefore, assuming that the TASE’s current position does not change, as long as our ordinary shares are listed on the TASE, we will be prohibited from issuing preferred stock.

To date, the legality of a poison pill as an additional antitakeover measure has not been examined in Israel.

Exchange Controls

Other than general anti-money laundering regulations, there are currently no Israeli currency control regulations in effect that restrict our import or export of capital to or from the State of Israel, or the availability of cash and cash equivalents for use by our affiliated companies. Under the Bank of Israel Law, 5770-2010, the Governor of the Bank of Israel, with the approval of the monetary policy committee of the Bank of Israel, is authorized to issue an administrative order restricting the transfer of funds to or from Israel. However, such an order is only likely to be issued under emergency circumstances and only for a temporary period, if necessary for the achievement of the goals of the Bank of Israel or the carrying out of its responsibilities under Israeli law. Furthermore, Israel has agreed, pursuant to international agreements to which it is a party (including incident to Israel’s having joined the International Monetary Fund) to allow for the free flow of capital to and from within its borders. Certain transactions nevertheless require the filing of reports with the Bank of Israel.

Similarly, there are no currently effective Israeli governmental laws, decrees, regulations or other legislation that restrict the payment of dividends or other distributions with respect to our ordinary shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding some transactions. However, legislation remains in effect under which currency controls can be imposed by administrative action at any time.

Borrowing Powers

Pursuant to the Companies Law and our articles of association, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised or taken by our shareholders, including the power to borrow money for company purposes.

 

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Transfer Agent and Registrar

Upon listing of our ordinary shares for trading on the NYSE, the transfer agent and registrar for our ordinary shares in the United States will be American Stock Transfer & Trust Company, LLC. Its address is 6201 15th Avenue, Brooklyn, New York 11219, and its telephone number is (800) 937-5449. The nominee company to the TASE in which name most of our shares are held of record is Bank Leumi Le’Israel Registration Company Ltd.

Listing

Our ordinary shares are listed on the Tel Aviv Stock Exchange under the symbol “EVGN.” We have applied to have our ordinary shares listed on the NYSE under the symbol “EVGN.”

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering our ordinary shares have been traded only on the Tel Aviv Stock Exchange. In connection with this offering, we intend to apply to have our ordinary shares listed on NYSE, under the symbol “EVGN.” Sales of substantial amounts of our ordinary shares in the public market would adversely affect prevailing market prices of our ordinary shares. Upon completion of this offering, we will have              outstanding ordinary shares, assuming the underwriters do not exercise their option to purchase additional ordinary shares. All of the ordinary shares sold in this offering will be freely transferable without restriction or further registration under the Securities Act by persons other than by our affiliates. In addition, all of our ordinary shares outstanding before this offering will be freely transferable and may be resold in the United States without restriction or further registration under the Securities Act by persons other than shares held by our affiliates and those of our existing shareholders who have signed lock-up agreements. Under Rule 144 of the Securities Act, or Rule 144, an “affiliate” of a company is a person that directly or indirectly controls, is controlled by or is under common control with that company. Affiliates may sell only the volume of shares described below and their sales are subject to additional restrictions described below.

Lock-up Agreements

We and our executive officers, directors, and substantially all of our shareholders holding collectively 20.2% of our outstanding ordinary shares, have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any ordinary shares or any securities convertible into or exchangeable for ordinary shares except for the ordinary shares offered in this offering without the prior written consent of Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. for a period of 180 days after the date of this prospectus. After the expiration of the 180 day period, the ordinary shares held by our directors, executive officers or certain of our other existing shareholders may be sold subject to the restrictions under Rule 144 under the Securities Act or by means of registered public offerings.

Rule 144

In general, under Rule 144 of the Securities Act, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our ordinary shares or the average weekly trading volume of our ordinary shares on NYSE during the four calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.

Options

Following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register              ordinary shares reserved for issuance under our share incentive plans. The registration statement on Form S-8 will become effective automatically upon filing.

Ordinary shares issued upon exercise of a share option and registered under the Form S-8 registration statement will, subject to vesting provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately after the 180 day lock-up agreements expire. See “Management—Option Plans.”

 

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TAXATION AND GOVERNMENT PROGRAMS

The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You are encouraged to consult your tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

Israeli Tax Considerations and Government Programs

The following is a brief summary of the material Israeli income tax laws applicable to us, and certain Israeli Government programs that benefit us. This section also contains a discussion of material Israeli income tax consequences concerning the ownership and disposition of our ordinary shares purchased by investors in this offering. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. Because parts of this discussion are based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.

General Corporate Tax Structure in Israel

Israeli companies are generally subject to corporate tax at the rate of 25% of their taxable income. However, the effective tax rate payable by a company that qualifies as an Industrial Company that derives income from an Approved Enterprise, a Preferred Enterprise or a Beneficiary Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are subject to the prevailing corporate tax rate. On July 29, 2013, an amendment to the Ordinance was adopted, or the Tax Amendment. Pursuant to the Tax Amendment, Israeli companies will be subject to corporate tax on their taxable income at the rate of 26.5% for the 2014 tax year and thereafter.

Law for the Encouragement of Industry (Taxes), 5729-1969

The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies.” We currently qualify as an Industrial Company within the meaning of the Industry Encouragement Law.

The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year, other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.

The following corporate tax benefits, among others, are available to Industrial Companies:

 

   

amortization over an eight-year period of the cost of purchased know-how and patents and rights to use a patent and know-how which are used for the development or advancement of the company;

 

   

under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies; and

 

   

expenses related to a public offering are deductible in equal amounts over a three-year period.

Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.

 

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There can be no assurance that we will continue to qualify as an Industrial Company or that the benefits described above will be available in the future.

Law for the Encouragement of Capital Investments, 5719-1959

The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).

The Investment Law was significantly amended effective April 1, 2005 (the “2005 Amendment”), and further amended as of January 1, 2011 (the “2011 Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the 2005 Amendment. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead irrevocably to forego such benefits and have the benefits of the 2011 Amendment apply.

Tax Benefits Prior to the 2005 Amendment

An investment program that is implemented in accordance with the provisions of the Investment Law prior to the 2005 Amendment, referred to as an “Approved Enterprise,” is entitled to certain benefits. A company that wished to receive benefits as an Approved Enterprise must have received approval from the Investment Center of the Israeli Ministry of Industry, Trade and Labor, or the Investment Center. Each certificate of approval for an Approved Enterprise relates to a specific investment program in the Approved Enterprise, delineated both by the financial scope of the investment and by the physical characteristics of the facility or the asset.

In general, an Approved Enterprise is entitled to receive a grant from the Government of Israel and certain tax benefits under the “Grant Track” or an alternative package of tax benefits under the Alternative Track. The tax benefits from any certificate of approval relate only to taxable profits attributable to the specific Approved Enterprise. Income derived from activity that is not approved by the Investment Center or not integral to the activity of the Approved Enterprise does not enjoy tax benefits.

The tax benefits include a tax exemption for at least the first two years of the benefit period (depending on the geographic location of the Approved Enterprise facility within Israel) and the taxation of income generated from an Approved Enterprise at a reduced corporate tax rate of up to 25% for the remainder of the benefit period. The benefit period is ordinarily seven years commencing with the year in which the Approved Enterprise first generates taxable income. The benefit period is limited to 12 years from the operational year as determined by the Investment Center or 14 years from the start of the tax year in which approval of the Approved Enterprise is obtained, whichever is earlier.

A company that has an Approved Enterprise program is eligible for further tax benefits if it qualifies as a Foreign Investors’ Company, or a FIC, which is a company with a level of foreign investment, as defined in the Investment Law, of more than 25%. The level of foreign investment is measured as the percentage of rights in the company (in terms of shares, rights to profits, voting and appointment of directors), and of combined share and loan capital, that are owned, directly or indirectly, by persons who are not residents of Israel. The determination as to whether a company qualifies as a FIC is made on an annual basis. A company that qualifies as a FIC and has an Approved Enterprise program is eligible for an extended ten-year benefit period. As specified above, depending on the geographic location of the Approved Enterprise within Israel, income derived from the Approved Enterprise program may be exempt from tax on its undistributed income for a period of between two to ten years, and will be subject to a reduced tax rate for the remainder of the benefit period. The tax rate for the

 

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remainder of the benefits period will be 25%, unless the level of foreign investment exceeds 49%, in which case the tax rate will be 20% if the foreign investment is more than 49% and less than 74%; 15% if more than 74% and less than 90%; and 10% if 90% or more.

If a company elects the Alternative Track and distributes a dividend, it may be required to recapture the deferred corporate income tax applicable to the gross amount of distributed dividend that is derived from the portion of the company’s facilities that has been granted Approved Enterprise status during the tax exemption period at the applicable rate of 10%-25%. In addition, dividends paid out of income attributed to an Approved Enterprise are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be provided in an applicable tax treaty.

The Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment that are included in an Approved Enterprise program during the first five years in which the equipment is used.

The benefits available to an Approved Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations and the criteria in the specific certificate of approval. If a company does not meet these conditions, it would be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest.

One of our facilities has Approved Enterprise status granted by the Investment Center, which made us eligible for certain tax benefits under the Alternative Track.

Tax Benefits Subsequent to the 2005 Amendment

The 2005 Amendment changed certain provisions of the Investment Law. As a result of the 2005 Amendment, a company was no longer obliged to obtain Approved Enterprise status in order to receive the tax benefits previously available under the Alternative Track, and therefore generally there was no need to apply to the Investment Center for this purpose (Approved Enterprise status remains mandatory for companies seeking cash grants). Rather, the Company may claim the tax benefits offered by the Investment Law directly in its tax returns by notifying the Israeli Tax Authority within 12 months of the end of that year, provided that its facilities meet the criteria for tax benefits set out by the 2005 Amendment. A company is also granted a right to approach the Israeli Tax Authority for a pre-ruling regarding its eligibility for benefits under the 2005 Amendment.

The 2005 Amendment applies to new investment programs and investment programs with an election year commencing after 2004, but does not apply to investment programs approved prior to April 1, 2005. The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of the Investment Law as in effect on the date of such approval.

Tax benefits are available under the 2005 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than 25% of their business income from export and meet additional criteria stipulate in the amendment (referred to as a “Beneficiary Enterprise”). In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment which meets all of the conditions, including exceeding a minimum investment amount specified in the Investment Law. Such investment may be made over a period of no more than three years ending at the end of the year in which the company requested to have the tax benefits apply to its Beneficiary Enterprise.

The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Beneficiary Enterprise depend on, among other things, the geographic location in Israel of the Beneficiary Enterprise. The geographic location of the company at the year of election will also determine the period for which tax benefits are available. Such tax benefits include an exemption from corporate tax on undistributed income for a period of

 

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between two to ten years, depending on the geographic location of the Beneficiary Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year if it is a qualified FIC. A company qualifying for tax benefits under the 2005 Amendment which pays a dividend out of income derived by its Beneficiary Enterprise

during the tax exemption period will be subject to corporate tax in respect of the gross amount of the dividend at the otherwise applicable rate of 10%-25%. Dividends paid out of income attributed to a Beneficiary Enterprise are generally subject to withholding tax at source at the rate of 15% or such lower rate as may be provided in an applicable tax treaty.

The benefits available to a Beneficiary Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations. If a company does not meet these conditions, it may be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest, or other monetary penalties.

On October 24, 2010, we received a tax ruling from the Israeli Tax Authority, according to which, among other things, our activity has been qualified as an “industrial activity”, as defined in the Investment Law and is also eligible to tax benefits as a Beneficiary Enterprise, which will apply to the turnover attributed to such enterprise. The benefits available to us under this tax ruling are subject to the fulfillment of conditions stipulated in the ruling. If we do not meet these conditions, the ruling may be abolished which would result in adverse tax consequences to us.

Tax Benefits Under the 2011 Amendment

The 2011 Amendment canceled the availability of the benefits granted to companies under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 15% with respect to its income derived by its Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise is located in a specified development zone (our company is not), in which case the rate will be 10%. Under the 2011 Amendment, such corporate tax rate will be reduced from 15% and 10%, respectively, to 12.5% and 7%, respectively, in 2013 and to 16% and 9% in 2014 and thereafter, respectively.

Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed to individuals or non-Israeli company a withholding of 20% or such lower rate as may be provided in an applicable tax treaty, will apply).

The 2011 Amendment also provided transitional provisions to address companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things, that unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011: (i) the terms and benefits included in any certificate of approval that was granted to an Approved Enterprise which chose to receive grants and certain tax benefits under the Grant Track before the 2011 Amendment became effective will remain subject to the provisions of the Investment Law as in effect on the date of such approval, and subject to certain conditions; and (ii) terms and benefits included in any certificate of approval that was granted to an Approved Enterprise under the Alternative Track before the 2011 Amendment became effective will remain subject to the provisions of the Investment Law as in effect on the date of such approval, provided that certain conditions are met; and (iii) a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect, provided that certain conditions are met.

We have reviewed and evaluated the implications and effect of the benefits under the 2011 Amendment, and, while potentially eligible for such benefits, we have not yet chosen to be subject to the tax benefits introduced by the 2011 Amendment.

 

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From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.

Taxation of our Shareholders

Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders. A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel will be exempt from Israeli tax so long as the shares were not held through a permanent establishment that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of 25% or more in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. Additionally, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.

Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the United States-Israel Tax Treaty, the disposition of shares by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset is generally exempt from Israeli capital gains tax unless, among other things, (i) the capital gain arising from the disposition is attributed to business income derived by a permanent establishment of the shareholder in Israel; (ii) the shareholder holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period preceding the disposition; or (iii) such U.S. resident is an individual and was present in Israel for 183 days or more during the relevant taxable year.

In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source.

Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-Israeli residents generally will be subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country of residence. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. However, a distribution of dividends to non-Israeli residents is subject to withholding tax at source at a rate of 15% if the dividend is distributed from income attributed to an Approved Enterprise, a Preferred Enterprise or a Beneficiary Enterprise, unless a reduced tax rate is provided under an applicable tax treaty. Pursuant to the Tax Amendment, effective January 1, 2014, if the dividend is being paid out of certain income attributable to an Approved Enterprise, a Preferred Enterprise or a Beneficiary Enterprise, the dividend will be subject to tax at the rate of 20% (and not 15%). A different rate may be provided in a treaty between Israel and the shareholder’s country of residence, as mentioned below.

In this regard, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a United States resident (for purposes of the United States-Israel Tax Treaty) is 25%. Consequently, distributions to U.S. residents of income attributed to an Approved Enterprise, a Preferred Enterprise or a Beneficiary Enterprise will be subject to withholding tax at a rate of 15%. However, generally, the maximum rate of withholding tax on dividends, not generated by an Approved Enterprise, a Preferred Enterprise or a Beneficiary Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend

 

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is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.

United States Federal Income Taxation

The following is a description of the material United States federal income tax consequences to U.S. Holders (as defined below) of the acquisition, ownership and disposition of our ordinary shares. This description addresses only the United States federal income tax consequences to holders that are initial purchasers of our ordinary shares pursuant to the offering and that will hold such ordinary shares as capital assets. This description does not address tax considerations applicable to holders that may be subject to special tax rules, including, without limitation:

 

   

banks, financial institutions or insurance companies;

 

   

real estate investment trusts, regulated investment companies or grantor trusts;

 

   

dealers or traders in securities, commodities or currencies;

 

   

tax-exempt entities;

 

   

certain former citizens or long-term residents of the United States;

 

   

persons that received our shares as compensation for the performance of services;

 

   

persons that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for United States federal income tax purposes;

 

   

partnerships (including entities classified as partnerships for United States federal income tax purposes) or other pass-through entities, or holders that will hold our shares through such an entity;

 

   

U.S. Holders (as defined below) whose “functional currency” is not the U.S. dollar; or

 

   

holders that own directly, indirectly or through attribution 10.0% or more of the voting power or value of our shares.

Moreover, this description does not address the United States federal estate, gift or alternative minimum tax consequences, or any state, local or foreign tax consequences, of the acquisition, ownership and disposition of our ordinary shares.

This description is based on the United States Internal Revenue Code of 1986, as amended (the “Code”), existing, proposed and temporary United States Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the date hereof. Each of the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below. There can be no assurances that the U.S. Internal Revenue Service will not take a different position concerning the tax consequences of the acquisition, ownership and disposition of our ordinary shares or that such a position would not be sustained.

For purposes of this description, a “U.S. Holder” is a beneficial owner of our ordinary shares that, for United States federal income tax purposes, is:

 

   

a citizen or resident of the United States;

 

   

a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States or any state thereof, including the District of Columbia;

 

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an estate the income of which is subject to United States federal income taxation regardless of its source; or

 

   

a trust if such trust has validly elected to be treated as a United States person for United States federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.

A “Non-U.S. Holder” is a beneficial owner of our ordinary shares that is neither a U.S. Holder nor a partnership (or other entity treated as a partnership for United States federal income tax purposes).

If a partnership (or any other entity treated as a partnership for United States federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership is encouraged to consult its tax advisor as to its tax consequences.

Unless otherwise indicated, this description assumes that we are not, and will not become, a “passive foreign investment company,” or “PFIC,” for United States federal income tax purposes. See “—Passive Foreign Investment Company Considerations.”

You are encouraged to consult your advisor with respect to the United States federal, state, local and foreign tax consequences of acquiring, owning and disposing of our ordinary shares.

Distributions

If you are a U.S. Holder, the gross amount of any distribution that we pay you with respect to our ordinary shares before reduction for any Israeli taxes withheld therefrom generally will be includible in your income as dividend income to the extent such distribution is paid out of our current or accumulated earnings and profits as determined under United States federal income tax principles. To the extent that the amount of any cash distribution exceeds our current and accumulated earnings and profits as determined under United States federal income tax principles, it will be treated first as a tax-free return of your adjusted tax basis in our ordinary shares and thereafter as capital gain. We do not expect to maintain calculations of our earnings and profits under United States federal income tax principles. Therefore, if you are a U.S. Holder you should expect that the entire amount of any cash distribution generally will be reported as dividend income to you; provided, however, that distributions of ordinary shares to U.S. Holders that are part of a pro rata distribution to all of our shareholders generally will not be subject to United States federal income tax. Subject to the PFIC rules discussed below, non-corporate U.S. Holders may qualify for the lower rates of taxation with respect to dividends on ordinary shares applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year), provided that certain conditions are met, including certain holding period requirements and the absence of certain risk reduction transactions. Moreover, such reduced rate shall not apply if we are a PFIC for the taxable year in which we pay a dividend, or were a PFIC for the preceding taxable year. Dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. Holders.

If you are a U.S. Holder, dividends that we pay you with respect to our ordinary shares will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from your taxable income or credited against your United States federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends that we distribute generally should constitute “passive category income,” or, in the case of certain U.S. Holders, “general category income.” A foreign tax credit for foreign taxes imposed on distributions may be denied if you do not satisfy certain minimum holding period requirements. The rules relating to the determination of the foreign tax credit are complex, and you are encouraged to consult your tax advisor to determine whether and to what extent you will be entitled to this credit.

 

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Sale, Exchange or Other Disposition of Ordinary Shares

Subject to the discussion below under “Passive Foreign Investment Company Considerations,” if you are a U.S. Holder, you generally will recognize an amount of gain or loss on the sale, exchange or other disposition of our ordinary shares equal to the difference between the amount realized on such sale, exchange or other disposition and your tax basis in our ordinary shares, and such gain or loss will be capital gain or loss. The tax basis in an ordinary share generally will equal the cost of such ordinary share. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other disposition of ordinary shares generally will be eligible for a preferential rate of taxation applicable to capital gains, if your holding period for such ordinary shares exceeds one year. The deductibility of capital losses for United States federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.

Passive Foreign Investment Company Considerations

If we were to be classified as a “passive foreign investment company,” or PFIC, in any taxable year, a U.S. Holder would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.

A non-U.S. corporation will be classified as a PFIC for federal income tax purposes in any taxable year in which, after applying certain look-through rules, either

 

   

at least 75% of its gross income is “passive income”; or

 

   

at least 50% of the average quarterly value of its gross assets (which may be determined in part by the market value of our ordinary shares, which is subject to change) is attributable to assets that produce “passive income” or are held for the production of passive income.

Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of funds raised in offerings of our ordinary shares. If a non-U.S. corporation owns at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income. For publicly traded corporations, the PFIC asset test described above is applied using the fair market value of the non-U.S. corporation’s assets. For purposes of a the PFIC asset test, a publicly traded non-U.S. corporation may treat the aggregate fair market value of its assets as being equal to the sum of the aggregate value of its outstanding stock (“Market Capitalization”) and the total amount of its liabilities. We intend to take the position that the excess of a non-U.S. corporation’s Market Capitalization plus liabilities over the book value of all of its assets (“Goodwill”) may generally be treated as a non-passive asset to the extent attributable to the non-passive activities of such corporation. If we are classified as a PFIC in any year with respect to which a U.S. Holder owns our ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns our ordinary shares, regardless of whether we continue to meet the tests described above.

Based on certain estimates of our gross income and gross assets, our intended use of the proceeds of this offering, and the nature of our business, we do not expect that we will be classified as a PFIC for the taxable year ending December 31, 2013. However, because PFIC status is based on our income, assets and activities for the entire taxable year, and our Market Capitalization, it is not possible to determine whether we will be characterized as a PFIC for the 2013 taxable year until after the close of the year. Moreover, we must determine our PFIC status annually based on tests which are factual in nature, and our status in future years will depend on our income, assets, activities and Market Capitalization in those years. In addition, our status as a PFIC may

 

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depend on how quickly we utilize the cash proceeds from this offering in our business. Because we currently hold, and expect to continue to hold, a substantial amount of cash and cash equivalents and other passive assets used in our business, and because the value of our gross assets is likely to be determined in large part by reference to the market prices of our securities, we would likely become a PFIC for a given taxable year if our Market Capitalization were to decrease significantly. Thus, there can be no assurance that we will not be considered a PFIC for any taxable year.

If we were a PFIC, and you are a U.S. Holder, then unless you make one of the elections described below, a special tax regime will apply to both (a) any “excess distribution” by us to you (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distribution received by you in the shorter of the three preceding years or your holding period for our ordinary shares) and (b) any gain realized on the sale or other disposition of the ordinary shares. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holder’s regular ordinary income rate for the current year and would not be subject to the interest change discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years.

If we are a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, then in lieu of being subject to the tax and interest charge rules discussed above, a U.S. Holder may make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method, provided that such ordinary shares are “regularly traded” on a “qualified exchange.” In general, our ordinary shares will be treated as “regularly traded” for a given calendar year if more than a de minimis quantity of our ordinary shares are traded on a qualified exchange on at least 15 days during each calendar quarter of such calendar year. We intend to apply to have our ordinary shares listed on the New York Stock Exchange. However, no assurance can be given that our ordinary shares will be regularly traded on a “qualified exchange” for purposes of the mark-to-market election. In addition, because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules discussed above with respect to such holder’s indirect interest in any investments we hold that are treated as an equity interest in a PFIC for United States federal income tax purposes.

If a U.S. Holder makes an effective mark-to-market election, in each year that we are a PFIC, such U.S. Holder will include in each year that we are a PFIC as ordinary income the excess of the fair market value of such U.S. Holder’s ordinary shares at the end of the year over such U.S. Holder’s adjusted tax basis in the shares. Such U.S. Holder will be entitled to deduct as an ordinary loss in each such year the excess of such U.S. Holder’s adjusted tax basis in the ordinary shares over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If a U.S. Holder makes an effective mark-to-market election, in each year that we are a PFIC, any gain such U.S. Holder recognizes upon the sale or other disposition of such U.S. Holder’s ordinary shares will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount of previously included income as a result of the mark-to-market election.

A U.S. Holder’s adjusted tax basis in the ordinary shares will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules discussed above. If a U.S. Holder makes an effective mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. U.S. Holders are encouraged to consult their tax advisers about the availability of the mark-to-market election, and whether making the election would be advisable in their particular circumstances.

 

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In certain circumstances, a U.S. equityholder in a PFIC may avoid the adverse tax and interest-charge regime described above by making a “qualified electing fund” election to include in income its share of the corporation’s income on a current basis. However, a U.S. Holder may make a qualified electing fund election with respect to the ordinary shares only if we agree to furnish you annually with a PFIC annual information statement as specified in the applicable Treasury regulations.

We do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections if we are classified as a PFIC. U.S. Holders are encouraged to consult their tax advisors to determine whether any of these elections would be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.

If we are determined to be a PFIC, the general tax treatment for U.S. Holders described in this paragraph would apply to indirect distributions and gains deemed to be realized by U.S. Holders in respect of any of our subsidiaries that also may be determined to be PFICs.

If a U.S. Holder owns ordinary shares during any year in which we are a PFIC and the U.S. Holder recognizes gain on a disposition of our ordinary shares or receives distributions with respect to our ordinary shares, the U.S. Holder generally will be required to file an IRS Form 8621 with respect to the company, generally with the U.S. Holder’s federal income tax return for that year. If our company were a PFIC for a given taxable year, then you are encouraged to consult your tax advisor concerning your annual filing requirements.

U.S. Holders are encouraged to their tax advisors regarding whether we are a PFIC and the potential application of the PFIC rules.

Backup Withholding Tax and Information Reporting Requirements

United States backup withholding tax and information reporting requirements may apply to certain payments to certain holders of stock. Information reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, our ordinary shares made within the United States, or by a United States payor or United States middleman, to a holder of our ordinary shares, other than an exempt recipient (including a payee that is not a United States person that provides an appropriate certification and certain other persons). A payor will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ordinary shares within the United States, or by a United States payor or United States middleman, to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements. Any amounts withheld under the backup withholding rules will be allowed as a credit against the beneficial owner’s United States federal income tax liability, if any, and any excess amounts withheld under the backup withholding rules may be refunded, provided that the required information is timely furnished to the Internal Revenue Service.

Foreign Asset Reporting

Certain U.S. Holders who are individuals are required to report information relating to an interest in our ordinary shares, subject to certain exceptions (including an exception for shares held in accounts maintained by financial institutions). U.S. Holders are encouraged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of our ordinary shares.

Medicare Tax

Certain U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of their dividend income and net gains from the disposition of ordinary shares. Each U.S. Holder that is an individual, estate or trust is encouraged to consult

 

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its tax advisors regarding the applicability of the Medicare tax to its income and gains in respect of its investment in the ordinary shares.

The above description is not intended to constitute a complete analysis of all tax consequences relating to acquisition, ownership and disposition of our ordinary shares. You are encouraged to consult your tax advisor concerning the tax consequences of your particular situation.

 

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated                     , 2013, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. are acting as representatives, the following respective numbers of ordinary shares:

 

Underwriter

   Number of
Ordinary  Shares

Credit Suisse Securities (USA) LLC

  

Deutsche Bank Securities Inc.

  

Oppenheimer & Co. Inc.

  

Piper Jaffray & Co.

  
  

 

Total

  
  

 

The underwriting agreement provides that the underwriters are obligated to purchase all the ordinary shares in the offering if any are purchased, other than those ordinary shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to              additional ordinary shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of ordinary shares.

The underwriters propose to offer the ordinary shares initially at the public offering price on the cover page of this prospectus. The underwriters and selling group members may allow a discount of $         per ordinary share on sales to other broker/dealers. After the initial public offering, the representatives may change the public offering price and discount to broker/dealers.

The following table summarizes the compensation and estimated expenses we will pay, which includes an amount not to exceed $         that we have agreed to reimburse the underwriters for certain expenses incurred by them in connection with this offering:

 

     Per Ordinary Share      Total  
     Without
Over-allotment
     With
Over-allotment
     Without
Over-allotment
     With
Over-allotment
 

Underwriting discounts and commissions paid by us

   $               $               $               $           

Expenses payable by us

   $        $        $        $    

We estimate that our out-of-pocket expenses for this offering will be approximately $            , consisting of $             for SEC registration fees, $             for New York Stock Exchange listing fees, $             for printing expenses, $             for legal fees, $             for accounting fees, $             for FINRA filing fees and $             for miscellaneous expenses. The underwriters have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the ordinary shares being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any of our ordinary shares or securities convertible into or exchangeable or exercisable for any of our ordinary shares, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. for a period of 180 days after the date of

 

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this prospectus, except issuances pursuant to the exercise of employee stock options outstanding on the date hereof or pursuant to our dividend reinvestment plan.

Our officers and directors and certain of our share and option holders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our ordinary shares or securities convertible into or exchangeable or exercisable for any of our ordinary shares, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our ordinary shares, whether any of these transactions are to be settled by delivery of our ordinary shares or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. for a period of 180 days after the date of this prospectus.

We agreed to indemnify the underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.

Our ordinary shares are listed on the TASE under the symbol “EVGN.” We have applied to list the ordinary shares on the NYSE.

In connection with the listing of the ordinary shares on the NYSE, the underwriters will undertake to sell round lots of 100 shares or more to a minimum of 400 beneficial owners.

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.

 

   

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

 

   

Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

 

   

Syndicate covering transactions involve purchases of the ordinary shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

 

   

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the ordinary shares originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of the ordinary shares. As a result the price of our ordinary shares may be higher than the price that might

 

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otherwise exist in the open market. These transactions may be effected on the NYSE or otherwise and, if commenced, may be discontinued at any time.

A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of ordinary shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.

United Kingdom

This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), from and including the date on which the European Union Prospectus Directive (the “EU Prospectus Directive”) was implemented in that Relevant Member State (the “Relevant Implementation Date”) an offer of securities described in this prospectus may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that, with effect from and including the Relevant Implementation Date, an offer of securities described in this prospectus may be made to the public in that Relevant Member State at any time:

 

   

to any legal entity which is a qualified investor as defined under the EU Prospectus Directive;

 

   

to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive); or

 

   

in any other circumstances falling within Article 3(2) of the EU Prospectus Directive, provided that no such offer of securities described in this prospectus shall result in a requirement for the publication by us of a prospectus pursuant to Article 3 of the EU Prospectus Directive.

For the purposes of this provision, the expression an “offer of securities to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State. The expression “EU Prospectus Directive” means Directive 2003/71/EC (and any amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

 

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Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances that do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances that do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), that is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted under the laws of Hong Kong) other than with respect to shares that are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person that is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and where each beneficiary of which is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that corporation or trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Switzerland

This document, as well as any other material relating to the shares of our common stock, which are the subject of the offering contemplated by this prospectus, does not constitute an issue prospectus pursuant to Article 652a of the Swiss Code of Obligations. The shares will not be listed on the SIX Swiss Exchange and, therefore, the documents relating to the shares, including, but not limited to, this document, do not claim to comply with the disclosure standards of the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange.

The shares are being offered in Switzerland by way of a private placement, i.e., to a small number of selected investors only, without any public offer and only to investors who do not purchase the shares with the intention to distribute them to the public. The investors will be individually approached by us from time to time.

Addresses of Representatives

The addresses of the representatives are as follows: Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, New York 10010 and Deutsche Bank Securities Inc., 60 Wall Street, New York, New York 10005.

 

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NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the ordinary shares in Canada is being made only in the provinces of Ontario, Quebec, Alberta, British Columbia and Manitoba on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of ordinary shares are made. Any resale of the ordinary shares in Canada must be made under applicable securities laws which may vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the ordinary shares.

Representations of Purchasers

By purchasing ordinary shares in Canada and accepting delivery of a purchase confirmation, a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:

 

   

the purchaser is entitled under applicable provincial securities laws to purchase the ordinary shares without the benefit of a prospectus qualified under those securities laws as it is an “accredited investor” as defined under National Instrument 45-106—Prospectus and Registration Exemptions,

 

   

the purchaser is a “Canadian permitted client” as defined in National Instrument 31-103—Registration Requirements and Exemptions, or as otherwise interpreted and applied by the Canadian Securities Administrators,

 

   

where required by law, the purchaser is purchasing as principal and not as agent,

 

   

the purchaser has reviewed the text above under Resale Restrictions, and

 

   

the purchaser acknowledges and consents to the provision of specified information concerning the purchase of the ordinary shares to the regulatory authority that by law is entitled to collect the information, including certain personal information. For purchasers in Ontario, questions about such indirect collection of personal information should be directed to Administrative Support Clerk, Ontario Securities Commission, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8 or on (416) 593-3684.

Rights of Action—Ontario Purchasers

Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the ordinary shares, for rescission against us in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the ordinary shares. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the ordinary shares. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any action exceed the price at which the ordinary shares were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the ordinary shares as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

 

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Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of ordinary shares should consult their own legal and tax advisors with respect to the tax consequences of an investment in the ordinary shares in their particular circumstances and about the eligibility of the ordinary shares for investment by the purchaser under relevant Canadian legislation.

 

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LEGAL MATTERS

The validity of the ordinary shares being offered by this prospectus and other legal matters concerning this offering relating to Israeli law will be passed upon for us by Meitar Liquornik Geva Leshem Tal, Ramat Gan, Israel. Certain legal matters in connection with this offering relating to U.S. law will be passed upon for us by White & Case LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Goldfarb Seligman & Co., Tel Aviv, Israel, with respect to Israeli law, and by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, with respect to U.S. law.

EXPERTS

The consolidated financial statements as of December 31, 2011 and 2012 and for each of the three years in the period ended December 31, 2012 included in this Prospectus have been so included in reliance on the reports of Kost Forer Gabbay & Kasierer, Certified Public Accountants, a member of Ernst & Young Global, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and any Israeli experts named in this registration statement, most of whom reside outside of the United States, may be difficult to obtain within the United States. Furthermore, because a majority of our assets and most of our directors and officers are located outside of the United States, any judgment obtained in the United States against us or certain of our directors and officers may be difficult to collect within the United States.

We have been informed by our legal counsel in Israel, Meitar Liquornik Geva Leshem Tal, that it may be difficult to assert U.S. securities laws claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact which can be a time-consuming and costly process. Matters of procedure will also be governed by Israeli law.

We have irrevocably appointed             , as our agent to receive service of process in any action against us in any United States federal or state court arising out of this offering or any purchase or sale of securities in connection with this offering. Subject to specified time limitations and legal procedures, Israeli courts may enforce a United States judgment in a civil matter which is non-appealable, including a judgment based upon the civil liability provisions of the Securities Act or the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that, among other things:

 

   

the judgment is obtained after due process before a court of competent jurisdiction, according to the laws of the state in which the judgment is given and the rules of private international law prevailing in Israel;

 

   

the prevailing law of the foreign state in which the judgment is rendered allows for the enforcement of judgments of Israeli courts;

 

   

adequate service of process has been effected and the defendant has had a reasonable opportunity to be heard and to present his or her evidence;

 

   

the judgment is not contrary to public policy of Israel, and the enforcement of the civil liabilities set forth in the judgment is not likely to impair the security or sovereignty of Israel;

 

   

the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties;

 

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an action between the same parties in the same matter was not pending in any Israeli court at the time at which the lawsuit was instituted in the foreign court; and

 

   

the judgment is enforceable according to the laws of Israel and according to the law of the foreign state in which the relief was granted.

If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form F-1 under the Securities Act relating to this offering of our ordinary shares. This prospectus does not contain all of the information contained in the registration statement. The rules and regulations of the SEC allow us to omit certain information from this prospectus that is included in the registration statement. Statements made in this prospectus concerning the contents of any contract, agreement or other document are summaries of all material information about the documents summarized, but are not complete descriptions of all terms of these documents. If we filed any of these documents as an exhibit to the registration statement, you may read the document itself for a complete description of its terms.

You may read and copy the registration statement, including the related exhibits and schedules, and any document we file with the SEC without charge at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available to the public through the SEC’s website at http://www.sec.gov.

We are not currently subject to the informational requirements of the Exchange Act. Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements will file reports with the SEC. Those other reports or other information may be inspected without charge at the locations described above. As a foreign private issuer, we will be exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within four months after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and will submit to the SEC, on Form 6-K, unaudited quarterly financial information for the first three quarters of each fiscal year within 60 days after the end of each such quarter, or such applicable time as required by the SEC.

We maintain a corporate website at www.evogene.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely for informational purposes.

 

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EVOGENE LTD.

INDEX TO FINANCIAL STATEMENTS

EVOGENE LTD. AND ITS SUBSIDIARIES

Consolidated Financial Statements

 

     Page  

Report of Independent Registered Public Accounting Firm

     F-2   

Consolidated Balance Sheets as of December 31, 2011 and 2012

     F-3   

Consolidated Statements of Comprehensive Income for the years ended December 31, 2010, 2011 and 2012

     F-4   

Consolidated Statements of Changes in Equity for the years ended December 31, 2010, 2011 and 2012

     F-5   

Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2011 and 2012

     F-6   

Notes to Consolidated Financial Statements

     F-8   

Unaudited Consolidated Balance Sheets as of June 30, 2012 and 2013

     F-40   

Unaudited Consolidated Statements of Comprehensive Income for the six months ended June 30, 2012 and June 30, 2013

     F-41   

Unaudited Consolidated Statements of Changes in Equity for the six months ended June 30, 2012 and June 30, 2013

     F-42   

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and June 30, 2013

     F-43   

Notes to Unaudited Consolidated Financial Statements

     F-45   

 

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LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Evogene Ltd.

We have audited the accompanying consolidated balance sheets of Evogene Ltd. (the “Company”) and its subsidiaries as of December 31, 2012 and 2011 and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2012 and 2011 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

KOST FORER GABBAY & KASIERER

A Member of Ernst & Young Global

Tel-Aviv, Israel

                     , 2013

The foregoing report is the form that will be signed upon completion of the 1-for-2 reverse share split described in Note 16(a) to the financial statements.

/s/ Kost Forer Gabbay & Kasierer

KOST FORER GABBAY & KASIERER

A Member of Ernst & Young Global

Tel Aviv, Israel

September 23, 2013

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

          December 31,  
     Note    2011     2012  

CURRENT ASSETS:

       

Cash and cash equivalents

   6    $ 6,465      $ 24,262   

Marketable securities

   7      34,672        30,868   

Short-term bank deposits

        17,652        —     

Trade receivables

        800        1,542   

Other receivables

   8      981        650   
     

 

 

   

 

 

 
        60,570        57,322   
     

 

 

   

 

 

 

LONG-TERM ASSETS:

       

Long term deposits

        48        43   

Plant, property and equipment, net

   9      7,138        7,401   

Intangible assets, net

        134        89   
     

 

 

   

 

 

 
        7,320        7,533   
     

 

 

   

 

 

 
        67,890        64,855   
     

 

 

   

 

 

 

CURRENT LIABILITIES:

       

Trade payables

        2,059        1,416   

Liabilities in respect of grants from the Chief Scientist

   11      905        733   

Deferred revenues

   5      4,037        4,211   

Other payables

   10      2,079        3,139   
     

 

 

   

 

 

 
        9,080        9,499   
     

 

 

   

 

 

 

LONG-TERM LIABILITIES:

       

Liabilities in respect of grants from the Chief Scientist

   11      3,039        2,918   

Deferred revenues

   5a, b      7,673        4,168   

Severance pay liability, net

   13      9        11   
     

 

 

   

 

 

 
        10,721        7,097   
     

 

 

   

 

 

 

SHAREHOLDERS’ EQUITY:

   16     

Ordinary shares of NIS 0.02 par value: Authorized—150,000,000 ordinary shares; Issued and outstanding—18,738,290 and 18,311,603 shares at December 31, 2012 and 2011, respectively

        100        102   

Share premium

        88,056        90,746   

Put option

        (7,764     (7,764

Reserve—transaction with a former controlling shareholder

        1,156        1,156   

Accumulated deficit

        (33,459     (35,981
     

 

 

   

 

 

 
        48,089        48,259   
     

 

 

   

 

 

 
      $ 67,890      $ 64,855   
     

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

U.S. dollars in thousands (except share and per share data)

 

          Year Ended December 31,  
     Note    2010     2011     2012  

Revenues

   20    $ 12,563      $ 14,901      $ 17,072   

Cost of revenues

   18a      5,811        8,247        9,552   
     

 

 

   

 

 

   

 

 

 

Gross profit

        6,752        6,654        7,520   
     

 

 

   

 

 

   

 

 

 

Operating expenses:

         

Research and development

   18b      5,544        6,384        7,252   

Business development

   18c      1,062        1,136        1,159   

General and administrative

   18d      2,123        2,317        2,235   
     

 

 

   

 

 

   

 

 

 

Total operating expenses

        8,729        9,837        10,646   
     

 

 

   

 

 

   

 

 

 

Operating loss

        (1,977     (3,183     (3,126

Financing income

   18e      724        5,023        972   

Financing expenses

   18e      (5,717     (1,195     (294
     

 

 

   

 

 

   

 

 

 

Income (loss) before taxes on income

        (6,970     645        (2,448

Taxes on income

   14      —          —          74   
     

 

 

   

 

 

   

 

 

 

Net income (loss)

      $ (6,970   $ 645      $ (2,522
     

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

      $ (6,970   $ 645      $ (2,522
     

 

 

   

 

 

   

 

 

 

Basic and diluted net income (loss) per share

   19    $ (0.48   $ 0.04      $ (0.14
     

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

U.S. dollars in thousands

 

     Share
Capital
     Share
Premium
     Put
Option
    Reserve—
Transaction
With  a
Former
Controlling
Shareholder
     Accumulated
Deficit
    Total  

Balance as of January 1, 2010

   $ 80       $ 49,670       $ (4,433   $ 1,156       $ (27,134   $ 19,339   

Total comprehensive loss

     —           —           —          —           (6,970     (6,970

Exercise of warrants and options

     2         1,798                1,800   

Share-based compensation

     —           2,562         —          —           —          2,562   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2010

     82         54,030         (4,433     1,156         (34,104     16,731   

Total comprehensive income

     —           —           —          —           645        645   

Shares issued, net

     5         9,577         —          —           —          9,582   

Issuance of put option, net

     —           727         (3,331     —           —          (2,604

Exercise of warrants and options

     13         21,593         —          —           —          21,606   

Share-based compensation

     —           2,129         —          —           —          2,129   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2011

     100         88,056         (7,764     1,156         (33,459     48,089   

Total comprehensive loss

     —           —           —          —           (2,522     (2,522

Exercise of options

     2         1,517         —          —           —          1,519   

Share-based compensation

     —           1,173         —          —           —          1,173   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2012

   $ 102       $ 90,746       $ (7,764   $ 1,156       $ (35,981   $ 48,259   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

     Year Ended December 31,  
     2010     2011     2012  

Cash flows from operating activities:

      

Net income (loss)

   $ (6,970   $ 645      $ (2,522
  

 

 

   

 

 

   

 

 

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

      

Adjustments to profit and loss items:

      

Depreciation and amortization

     943        1,419        1,835   

Share-based compensation

     2,562        2,129        1,173   

Net financing expenses (income)

     4,993        (3,828     (678

Taxes on income

     —          —          74   

Loss (gain) on disposal of property, plant and equipment

     54        4        (33
  

 

 

   

 

 

   

 

 

 
     8,552        (276     2,371   
  

 

 

   

 

 

   

 

 

 

Changes in asset and liability items:

      

Decrease (increase) in trade receivables

     (1,584     1,341        (742

Decrease (increase) in other receivables

     (208     (374     331   

Decrease (increase) in prepaid expenses

     (12     (11     5   

Increase in trade payables

     24        423        231   

Increase in other payables

     950        220        974   

Decrease in deferred revenues

     (3,779     (907     (3,331
  

 

 

   

 

 

   

 

 

 
     (4,609     692        (2,532
  

 

 

   

 

 

   

 

 

 

Cash received (paid) during the year for:

      

Interest received

     187        1,072        869   

Taxes paid (withheld by customers)

     —          —          (74
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (2,840     2,133        (1,888
  

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

      

Purchase of property, plant and equipment

     (1,403     (3,759     (2,963

Proceeds from disposal of property, plant and equipment

     —          9        34   

Proceeds from sale of marketable securities

     8,596        10,710        15,697   

Purchase of marketable securities

     (24,261     (24,268     (11,935

Proceeds from (investment in) bank deposits, net

     2,571        (13,274     17,652   
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (14,497     (30,582     18,485   
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands (except share and per share data)

 

     Year Ended December 31,  
     2010     2011     2012  

Cash flows from financing activities:

      

Proceeds from issuance of shares, net

     —          9,582        —     

Proceeds from exercise of warrants and options

     1,313        16,136        1,519   

Proceeds from the Chief Scientist grants (Note 11)

     320        260        484   

Repayment of the Chief Scientist grants (Note 11)

     (280     (402     (892
  

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     1,353        25,576        1,111   
  

 

 

   

 

 

   

 

 

 

Exchange rate differences—cash and cash equivalent balances

     (111     (782     89   
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (16,095     (3,655     17,797   

Cash and cash equivalents, beginning of the year

     26,215        10,120        6,465   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of the year

   $ 10,120      $ 6,465      $ 24,262   
  

 

 

   

 

 

   

 

 

 

Significant non-cash activities:

      

Acquisition of property, plant and equipment in credit

   $ 355      $ 1,009      $ 101   
  

 

 

   

 

 

   

 

 

 

Modification of put option

   $ —        $ 3,331      $ —     
  

 

 

   

 

 

   

 

 

 

Exercise of warrants

   $ 487      $ 5,470      $ —     
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data)

NOTE 1:—GENERAL

a. Evogene Ltd. (“Company”) is a biotech company that is engaged in research and development in the field of plant improvement. The Company was founded in 2000 as a division of Compugen Ltd. (“Compugen”) and spun-off as an independent company in January 2002. The Company focuses on the development of technology to identify gene sequences (D.N.A. sequences that are responsible for producing proteins; hereafter – genes) and other D.N.A. sequences in plants (“D.N.A. sequences”), which are likely to improve one or more of the plant’s traits (“target plant” and “target trait”). These improvements are accomplished by either introducing the genes into the target plant through genetic modification, or through cultivating the genes in the target plant through advanced breeding, and accordingly, the seeds carry the target trait. In addition, the Company is involved in the improvement and breeding of designated non-edible crops that are likely to be used in the future for the production of oil for the biodiesel industry.

The Company is considering applying its technology to identify D.N.A. sequences, and to map chemical materials, with the goal to improve plant traits.

On January 1, 2012, Evogene established Evofuel Ltd., a wholly owned subsidiary (“Evofuel”), which is engaged in the development of improved species of the castor bean plant, which may serve as a source for extraction of oil for the biodiesel industry.

b. The Company principally derives its revenues from collaboration arrangement. Revenues from its major collaborators accounted together for 94%, 94% and 91% for the years ended December 31, 2012, 2011 and 2010, respectively. As to major customers, see Notes 20(c) and 21(e). If a major customer decides to terminate its collaboration agreement with the Company, the Company may not be able to make up the lost revenue and it may have a material adverse effect on its results of operations.

c. The Company’s securities are listed for trading on the Tel Aviv Stock Exchange (the “TASE”).

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been applied consistently in the financial statements for all periods presented, unless otherwise stated.

a. Basis of presentation of the financial statements:

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

The Company’s financial statements have been prepared on a cost basis, except for financial instruments measured at fair value through profit or loss.

The Company has elected to present profit or loss items using the function of expense method.

b. The Company’s operating cycle is one year.

c. The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financial statements commences on the date on which control is obtained and ends when such control ceases.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

The financial statements of the Company and its subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform accounting policies by all companies in the group. Significant intercompany balances and transactions and gains or losses resulting from intercompany transactions are eliminated in full in the consolidated financial statements.

d. Functional currency, reporting currency and foreign currency:

 

  1. Functional currency and reporting currency:

The reporting currency of the financial statements is the U.S. dollar.

The Company and its subsidiaries determine the functional currency of each entity, based on the currency in which they primarily generate and expend cash. The Company determined that its functional currency is the U.S. dollar since most of its revenues are generated in U.S. dollars and despite having most of its expenses incurred in NIS.

The Company’s revenues were denominated mostly in U.S. dollars because of the Company’s collaboration agreement with Monsanto. This collaboration accounted for 70%, 71% and 74% of the Company’s revenues during 2012, 2011 and 2010, respectively. The Company’s costs were mostly denominated in NIS, mainly due to payroll and related costs. To further support the Company’s determination in light of these mixed indicators, the Company has analyzed the currency in which funds from financing activities are generated or held and the currency in which receipts from operating activities are usually retained.

Funds from financing activities were principally derived from significant funds raised in U.S. dollars in 2008 and 2011 from the Company’s major collaborators, Monsanto and Bayer. These funds were maintained mostly in U.S. dollars. A majority of the Company’s marketable securities are denominated in U.S. dollars as well.

The Company operates and plans its activities in U.S. dollars and accordingly its periodic budgets and internal management reports are prepared and monitored using the U.S. dollar as the primary currency and provides the basis for the determination of officers’ compensation. Further, the Company is mostly influenced by the U.S. regulatory environment.

This currency is used to separately measure each entity’s financial position and operating results.

 

  2. Transactions, assets and liabilities in foreign currency:

Transactions denominated in a foreign currency are recorded upon initial recognition at the exchange rate on the date of the transaction. After initial recognition, monetary assets and liabilities denominated in a foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate on that date. Non-monetary assets and liabilities measured at cost in foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date when the fair value was determined.

e. Cash and cash equivalents:

Cash equivalents are highly liquid investments, including unrestricted short-term bank deposits with an original maturity of three months or less from the date of deposit.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

f. Short-term deposits:

Short-term bank deposits are with a maturity of more than three months from the deposit day but less than one year.

g. Government grants:

Government grants are recognized when there is reasonable assurance that the grants will be received and the Company will comply with the attendant conditions.

Research and development grants received from the Office of the Chief Scientist in Israel (“OCS”), the Israel-U.S. Binational Industrial Research and Development Fund (“BIRD-F”) and the Canada-Israel Industrial Research and Development Foundation (“CIIRDF”) are recognized upon receipt as a liability if future economic benefits are expected from the project that will result in royalty-bearing sales.

A liability for the loan is first measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grant received and the fair value of the liability is accounted for as a Government grant and recognized as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Royalty payments are treated as a reduction of the liability. If no economic benefits are expected from the research activity, the grant receipts are recognized as a reduction of the related research and development expenses. In that event, the royalty obligation is treated as a contingent liability in accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets” (“IAS 37”).

At the end of each reporting period, the Company evaluates whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid (since the Company will not be required to pay royalties) based on the best estimate of future sales and if so, the appropriate amount of the liability is derecognized against a corresponding reduction in research and development expenses.

h. Leases:

The criteria for classifying leases as finance or operating leases depend on the substance of the agreements and are made at the inception of the lease in accordance with the following principles as set out in IAS 17, “Leases”.

The Company is only involved in operating lease transaction as a lessee.

Lease agreements are classified as an operating lease if they do not transfer substantially all the risks and benefits incidental to ownership of the leased asset. Lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term.

i. Property, plant and equipment:

Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and excluding day-to-day servicing expenses. Cost includes spare parts and auxiliary equipment that are used in connection with plant and equipment.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

Depreciation is calculated on a straight-line basis over the useful life of the assets at annual rates as follows:

 

     %    Mainly %

Laboratory equipment

   15-33.33    15

Computers and peripheral equipment

   33.33   

Office equipment and furniture

   6   

Motor vehicles

   15   

Leasehold improvements

   see below   

Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term (including the renewal options held by the Company or its subsidiaries which are expected to be exercised) and the expected life of the improvement.

The useful life, depreciation method and residual value of an asset are reviewed at least each year-end.

Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. An asset is derecognized on disposal or when no further economic benefits are expected from its use.

j. Intangible assets:

Separately acquired intangible assets with finite useful life are measured on initial recognition at cost.

Intangible assets are amortized over their useful life using the straight-line method and reviewed for impairment whenever there is an indication that the asset may be impaired.

Amortization expenses in respect of intangible assets in the statements of comprehensive income for 2012, 2011 and 2010 totaled $45, $37 and $46, respectively. The expenses were included in research and development expenses.

Research and development expenses:

Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale; the Company’s intention to complete the intangible asset and use or sell it; the Company’s ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company’s ability to measure reliably the expenditure attributable to the intangible asset during its development. Since Company research and development projects are often subject to regulatory approval procedures and other uncertainties, the conditions for the capitalization of costs incurred before receipt of approvals are not normally satisfied and, therefore, research and development expenses are recognized in profit or loss when incurred.

k. Impairment of non-financial assets:

The Company evaluates the need to record an impairment of the carrying amount of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable. If the carrying

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount is the higher of fair value less costs of sale and value in use. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs.

An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years, and its recoverable amount.

l. Revenue recognition:

Revenues are recognized in profit or loss when the revenues can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenues are measured at the fair value of the consideration received.

The following are the specific revenue recognition criteria which must be met before revenue is recognized:

 

   

Revenues from such agreements that do not contain a general right of return and are composed of multiple elements such as license, services, royalties and milestone events are allocated to the different elements and are recognized in respect of each element separately. An element constitutes a separate accounting unit if and only if it has a separate value to the customer. Revenue from the different element is recognized when the criteria for revenue recognition have been met and only to the extent of the consideration that is not contingent upon completion or performance of future services in the contract.

 

   

Revenues from the provision of research and development services as part of the Company’s collaboration agreements are recognized as service revenues. Recognition of the service is throughout the services period and is determined based on the proportion of actual costs incurred for each reporting period to the estimated total costs, subject to the enforceable rights.

 

   

Revenues from milestone events stipulated in the agreements are recognized upon the occurrence of a substantive element specified in the agreement.

Deferred revenues:

Deferred revenues are unearned amounts including up-front payments received from customers not yet recognized as revenues. Up-front payments received upon entering into the collaboration agreements are initially deferred when received and then recognized as service revenues over the duration of the relevant contract based on the proportion of actual costs incurred for each reporting period to the estimated total costs of the collaboration.

m. Taxes on income:

Taxes on income in profit or loss comprise current and deferred taxes. Current or deferred taxes are recognized in profit or loss, except to the extent that the tax arises from items which are recognized directly in other comprehensive income or in equity.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

  1. Current taxes:

The current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of reporting period as well as adjustments required in connection with the tax liability in respect of previous years.

 

  2. Deferred taxes:

Deferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes.

Deferred taxes are measured at the tax rates that are expected to apply when the asset is realized or the liability is settled, based on tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is not probable that they will be utilized. Temporary differences (such as carryforward losses) for which deferred tax assets had not been recognized are reviewed at the end of each reporting period and a respective deferred tax asset is recognized to the extent that their utilization is probable.

n. Financial instruments:

 

  1. Financial assets:

Financial assets within the scope of IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”) are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or loss in respect of which transaction costs are recorded in profit or loss.

After initial recognition, the accounting treatment of financial assets is based on their classification as follows:

Financial assets at fair value through profit or loss

This category includes financial assets designated upon initial recognition as at fair value through profit or loss.

Loans and receivables

The Company has receivables that are financial assets with fixed or determinable payments that are not quoted in an active market.

 

  2. Financial liabilities:

Financial liabilities within the scope of IAS 39 are initially measured at fair value.

After initial recognition, the accounting treatment of financial liabilities is based on their classification as follows:

Financial liabilities measured at amortized cost

Loans and other liabilities are measured at amortized cost using the effective interest method taking into account directly attributable transaction costs.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

Financial liabilities at fair value through profit or loss:

Financial liabilities at fair value through profit or loss include financial liabilities classified as held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

 

  3. Fair value:

The fair value of financial instruments that are traded in an active market is determined by reference to market prices at the end of the reporting period. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow or other valuation models.

 

  4. Offsetting financial instruments:

Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position if there is a legally enforceable right to set off the recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.

 

  5. Derecognition of financial instruments:

 

  a) Financial assets:

A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Company has transferred its contractual rights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows in full without material delay to a third party and has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

  b) Financial liabilities:

A financial liability is derecognized when it is extinguished, that is when the obligation is discharged or cancelled or expires. A financial liability is extinguished when the debtor (the Company) discharges the liability by paying in cash, other financial assets, goods or services or is legally released from the liability.

When the financial liability is to a controlling shareholder and the debtor (the Company) is legally released from the liability, the derecognition is accounted as an equity contribution and presented in a separate line item within the shareholders’ equity.

o. Provisions:

A provision in accordance with IAS 37 is recognized when the Company has a present (legal or constructive) obligation as a result of a past event, it is expected to require the use of economic resources to clear the obligation and a reliable estimate can be made of it.

p. Employee benefit liabilities:

The Company and its subsidiaries have several employee benefit plans:

 

  1. Short-term employee benefits:

Short-term employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in respect

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

of a cash bonus or a profit-sharing plan is recognized when the Company and its subsidiaries have a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.

 

  2. Post-employment benefits:

The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans.

The Company and its subsidiaries have defined contribution plans pursuant to Section 14 to the Severance Pay Law under which the Company and the subsidiaries pay fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed concurrently with performance of the employee’s services.

q. Share-based compensation:

The Company’s employees and other service providers are entitled to remuneration in the form of equity-settled share-based compensation.

Equity-settled transactions:

The cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using an acceptable option pricing model.

As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.

The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period which the performance and/or service conditions are to be satisfied, ending on the date on which the relevant employees become fully entitled to the award.

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.

r. Income (loss) per share:

Income (loss) per share is calculated by dividing the net income (loss) attributable to the Company shareholders by the weighted number of ordinary shares outstanding during the period. Potential ordinary shares are only included when their conversion decreases income per share or increases loss per share. Furthermore, potential ordinary shares converted during the period are included in diluted income (loss) per share only until the conversion date and from that date in basic income (loss) per share.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

s. Transactions with a controlling shareholder

Assets and liabilities derived from a transaction between the Company and a controlling shareholder are recognized at their fair value on the date of the transaction. The difference between the fair value and the consideration stipulated in the transaction is recorded within shareholders’ equity. A charge to equity essentially constitutes a dividend resulting in a reduction in retained earnings. A credit to equity essentially constitutes an investment by the shareholder which is presented as a separate component of shareholders’ equity, “Capital reserve from transactions with a controlling shareholder”.

The amount recorded in shareholders’ equity will not be transferred to the statement of income, even if in subsequent periods the items that were the subject of the transactions are derecognized from the financial statements.

NOTE 3:—SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUPMTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS

Judgments

Revenue:

The Company assesses the criteria for recognition of revenue related to up-front payments and multiple components as outlined by IAS 18, “Revenue”. Judgment is necessary to determine over which period the Company will satisfy its obligations related to up-front payments and when components can be recognized separately and the allocation of the related consideration to each component.

Estimates and assumptions

The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.

The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates computed by the Company and its subsidiaries that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

   

Determining the fair value of share-based compensation:

The fair value of share-based compensation is determined using an acceptable option pricing model.

The assumptions used in the model can include the expected volatility, expected life, expected dividend and risk-free interest rate.

 

   

Government grants:

Government grants received from the OCS, BIRD-F and CIIRDF are recognized as a liability if future economic benefits are expected from the research and development activity that will result in royalty-bearing sales. There is uncertainty regarding the estimated future cash flows and the estimated discount rate used to measure the amount of the liability.

 

   

Determining the fair value of the put option

The fair value of the put option is determined using an acceptable option pricing model and recorded as part of shareholders’ equity in accordance with IAS 32, “Financial Instruments: Presentation” (“IAS 32”).

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 3:—SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUPMTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS—(CONTINUED)

 

The assumptions used in the model include the expected volatility, expected life, expected dividend and risk-free interest rate (see also Note 5a).

NOTE 4:—DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION

IAS 32—Financial Instruments: Presentation and IFRS 7—Financial Instruments: Disclosure

The IASB issued certain amendments to IAS 32 (“the amendments to IAS 32”) regarding the offsetting of financial assets and liabilities. The IASB also issued amendments to IFRS 7 (“the amendments to IFRS 7”) regarding the offsetting of financial assets and liabilities.

The amendments to IAS 32 are to be applied retrospectively commencing from the financial statements for periods beginning on January 1, 2014, or thereafter. Earlier application is permitted. The amendments to IFRS 7 are to be applied retrospectively commencing from the financial statements for periods beginning on January 1, 2013, or thereafter.

The Company estimates that the amendments to IAS 32 are not expected to have a material impact on its financial statements. The required disclosures pursuant to the amendments to IFRS 7 will be included in the Company’s financial statements.

IFRS 9—Financial Instruments:

1. The IASB issued IFRS 9, “Financial Instruments”, the first part of Phase 1 of a project to replace IAS 39, “Financial Instruments: Recognition and Measurement”.

According to the IFRS 9, all financial assets should be measured at fair value upon initial recognition. In subsequent periods, debt instruments should be measured at amortized cost only if both of the following conditions are met:

 

   

The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.

 

   

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent measurement of all other debt instruments and financial assets should be at fair value.

Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or in other comprehensive income, in accordance with the election by the Company on an instrument-by-instrument basis. If equity instruments are held for trading, they should be measured at fair value through profit or loss.

IFRS 9 will be effective commencing from January 1, 2015. Earlier application is permitted.

2. The IASB issued certain amendments to IFRS 9 regarding derecognition and financial liabilities. According to those amendments, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has not been elected.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 4:—DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION—(CONTINUED)

 

Pursuant to the amendments, the amount of the adjustment to the liability’s fair value that is attributable to changes in credit risk should be presented in other comprehensive income. All other fair value adjustments should be presented in profit or loss.

The amendments will be effective beginning January 1, 2015. Earlier application is permitted.

The Company believes that the application of IFRS 9 is not expected to have a material effect on the financial statements.

IFRS 10, IFRS 11, IFRS 12, IFRS 13—Consolidated Financial Statements, Joint Arrangements, Disclosure of Interests in Other Entities, Fair Value Measurement:

The IASB issued four new standards: IFRS 10, “Consolidated Financial Statements”, IFRS 11, “Joint Arrangements”, IFRS 12, “Disclosure of Interests in Other Entities” (“the new Standards”) and IFRS 13, “Fair Value Measurement”, and amended two existing standards, IAS 27R (Revised 2011), “Separate Financial Statements”, and IAS 28R (Revised 2011), “Investments in Associates and Joint Ventures”.

The new standards are to be applied retrospectively in financial statements for annual periods commencing on January 1, 2013 or thereafter. Earlier application is permitted.

The Company believes that the adoption of IFRS 10, IFRS 11, IFRS 12, IFRS 13 are not expected to have a material effect on the financial statements.

NOTE 5:—MAJOR COLLABORATION AGREEMENTS

a. On August 27, 2008, the Company signed share purchase and collaboration agreements with Monsanto. Under the share purchase agreement, which closed on September 8, 2008, Monsanto invested $18 million for the issuance of 1,636,364 ordinary shares, NIS 0.02 par value each, and a put option exercisable at a fixed price of $13.89 per share for the issuance of additional 863,637 shares.

The collaboration agreement also included payments for research and development services of up to $35 million. Pursuant to the agreement, the Company agreed to use its proprietary computational platform to discover genes with the potential to improve specified plant traits, and to validate those genes in the Company’s model plant system. Monsanto received an exclusive license to use these genes for the purpose of research and to possibly commercialize seeds with improved traits.

In addition, Monsanto agreed to provide the Company with milestone payments upon the achievement of certain agreed results in the product development process, as well as with royalty payments on future income generated by the sale of seeds containing licensed genes. Monsanto was given the right to either expand or reduce the scope of the collaboration activities.

As the share purchase agreement and the collaboration agreement were signed in contemplation of each other and the execution of the collaboration agreement was stipulated as a condition to the closing of the share purchase agreement, the agreements were treated as a multiple-elements arrangement. Following the closing of the agreements, the Company determined that the total consideration under the share purchase agreement, comprised of the $18,000 in cash and the fair value of the put option, should be allocated to two identifiable

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 5:—MAJOR COLLABORATION AGREEMENTS—(CONTINUED)

 

elements within this multiple-elements arrangement: (1) an equity investment in the Company’s ordinary shares and (2) research and development services performed under the collaboration agreement. Share capital and premium were recorded based on the market price of the shares on the TASE on the closing date. The put option was considered an equity instrument reduced from the Company’s equity, and its fair value was calculated using the Black & Scholes option pricing model at the issuance of the option. The cash consideration Monsanto paid for the ordinary shares exceeding their market value along with the fair value of the put option were recorded as deferred revenues from research and development services to be recognized over the term of the agreement. Accordingly, the total consideration received under the share purchase agreement was allocated as follows: share capital and premium of $9,529 based on the market price of the ordinary shares on the TASE at the closing date, a put option of $4,433 and deferred revenue of $12,882.

On November 28, 2011, the Company signed an agreement to amend and restate the 2008 collaboration with Monsanto. Accordingly, the collaboration period was extended by one year, and collaboration activities were expanded as well to include the use of the Company’s gene-optimization platform. Monsanto agreed to pay the Company an additional $12,000 for research and development services over the life of the extended agreement.

In addition, as part of the amended and restated 2011 agreement, the original put option (“original put option”) was replaced by a new put option (“new put option”).

Under the new put option, the Company may require Monsanto to invest $12,000 against an issue of 500,000 ordinary shares of the Company, at $24.00 per share. The new put option is exercisable between February 1, 2014 and August 31, 2014.

The fair value of the new option and the original put option at the amendment date were also calculated using the Black & Scholes option pricing model, and were determined to be $7,764 and $5,160, respectively. While the additional increase in the value of the original put option of $727 was recorded as share premium, reflecting the benefit derived from the revaluation of an equity instrument within the Company’s equity, the increase in value as a result of the modification of the put option amounting to $2,604 was also attributed to deferred revenue from research and development services to be recognized over the term of the agreement because the modification was performed in conjunction with the extension of the collaboration period and expansion of the collaboration activities under the amended agreement with Monsanto.

Under the amended and restated 2011 agreement, the Company also granted Monsanto an option to extend the collaboration period by an additional two years, up to August 31, 2016. If the option is exercised, Monsanto will provide the Company with a one-time payment of $6,000 at the time of exercise, and pay an additional $26,000 for research and development services over the term of the extended collaboration.

Furthermore, if Monsanto exercises the extension option by February 2014, the new put option will be amended, such that Monsanto may be required to purchase only 214,286 ordinary shares at $28.00 per share, for an aggregate investment of $6,000.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 5:—MAJOR COLLABORATION AGREEMENTS—(CONTINUED)

 

The following table presents the various types of revenues recorded by the Company in connection with the agreements with Monsanto during all periods presented:

 

     Year ended December 31,      Three months ended
March  31,
 
     2010      2011      2012      2012      2013  
     (in thousands)  

Up-front payments

   $ 964       $ 905       $ 699       $ 175       $ 175   

Allocated revenues from share purchase agreement and put option

     2,483         2,557         2,700         675         675   

Periodic research and development service payments

     5,885         7,061         8,569         2,187         2,100   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,332       $ 10,523       $ 11,968       $ 3,037       $ 2,950   

b. On December 12, 2010, the Company signed share purchase and collaboration agreements with Bayer CropScience LP (“Bayer”). The collaboration agreement focuses on the improvement of yield, nitrogen use efficiency, and abiotic tolerance (or the increased resistance to conditions such as drought, heat and salinity) of wheat. Pursuant to the share purchase agreement, which closed on January 10, 2011, Bayer invested $12,000 in the Company in exchange for 863,310 ordinary shares at $13.90 per share, NIS 0.02 par value.

Over the course of the collaboration period, Bayer agreed to provide the Company with up-front payments and payments for research and development services amounting to €15,400 (or $21,000). In addition, Bayer agreed to provide the Company with milestone payments upon the achievement of agreed-upon results, as well as with royalty payments based on future revenue from the sale of improved wheat seeds. Under the agreement, the Company granted Bayer an exclusive license to research, develop and commercialize the sequences identified during the collaboration. The Company also agreed to not license any collaboration sequences to third parties during the course of the agreement.

As the share purchase agreement and the collaboration agreement were signed in contemplation of each other and the execution of the collaboration agreement was stipulated as a condition to the closing of the share purchase agreement, these agreements were treated as a multiple-elements arrangement. Following the closing of the agreements, the Company determined that the total consideration under the share purchase agreement of $12,000 should be allocated to two identifiable elements within this multiple-elements arrangement: (1) an equity investment in the Company’s ordinary shares and (2) research and development services performed under the collaboration agreement. Share capital and premium were recorded based on the market price of the shares on the TASE on the closing date. Accordingly, the consideration received under the share purchase agreement was allocated as follows: share capital and premium of $9,582 based on the market price of the ordinary shares on the Tel Aviv Stock Exchange on the closing date and the consideration Bayer paid for the ordinary shares exceeding their market value in the amount of $2,394 was recorded as deferred revenues from research and development services to be recognized over the term of the agreement.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 5:—MAJOR COLLABORATION AGREEMENTS—(CONTINUED)

 

The following table presents the various types of revenues recorded by the Company in connection with the agreements with Bayer during all periods presented:

 

     Year ended December 31,      Three months ended
March  31,
 
     2010      2011      2012      2012      2013  
     (in thousands)  

Up-front payments

   $ —        $ 83       $ 265       $ 68       $ 77   

Allocated revenues from share purchase agreement

     —          289         458         114         136   

Periodic research and development service payments

     —          2,488         3,197         783         1,129   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ 2,860       $ 3,920       $ 965       $ 1,342   

NOTE 6:—CASH AND CASH EQUIVALENTS

 

     December 31,  
     2011      2012  

Cash for immediate withdrawal in NIS

   $ 490       $ 217   

Cash for immediate withdrawal in U.S.$

     4,315         4,959   

Cash for immediate withdrawal in Euro and other currencies

     620         730   

Cash equivalents in NIS bank deposits(1)

     1,040         1,144   

Cash equivalents in U.S.$ bank deposits(1)

     —           17,212   
  

 

 

    

 

 

 
   $ 6,465       $ 24,262   
  

 

 

    

 

 

 

 

(1) As of reporting date, the NIS deposits bear interest, ranging from 1.53% to 1.75%, while the U.S.$ deposits bear interest ranging from 0.3%-0.6%. The bank deposits are for periods ranging from one week to one month.

NOTE 7:—MARKETABLE SECURITIES

 

     December 31,  
     2011      2012  

Financial assets measured at fair value through profit or loss:

     

Mutual funds

   $ 7,246       $ 1,072   

Corporate bonds and government treasury notes

     27,426         29,796   
  

 

 

    

 

 

 
   $ 34,672       $ 30,868   
  

 

 

    

 

 

 

NOTE 8:—OTHER RECEIVABLES

 

     December 31,  
     2011      2012  

Prepaid expenses and other

   $ 253       $ 313   

Government authorities

     310         182   

Accrued reimbursement

     418         155   
  

 

 

    

 

 

 
   $ 981       $ 650   
  

 

 

    

 

 

 

 

F-21


Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 9:—PROPERTY, PLANT AND EQUIPMENT

Balance at December 31, 2011:

 

     Laboratory
Equipment
    Computers
and
Peripheral
Equipment
     Office
Equipment
and
Furniture
     Leasehold
Improvements
    Total  

Cost:

            

Balance at January 1, 2011

   $ 1,890      $ 1,135       $ 178       $ 3,611      $ 6,814   

Additions

     569        298         12         3,534        4,413   

Disposals

     (27     —           —           (199     (226
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Balance at December 31, 2011

     2,432        1,433         190         6,946        11,001   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Accumulated Depreciation:

            

Balance at January 1, 2011

     856        581         39         1,218        2,694   

Additions

     354        285         11         732        1,382   

Disposals

     (14     —           —           (199     (213
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Balance at December 31, 2011

     1,196        866         50         1,751        3,863   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciated cost at December 31, 2011

   $ 1,236      $ 567       $ 140       $ 5,195      $ 7,138   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Balance at December 31, 2012:

 

     Laboratory
Equipment
    Computers
and
Peripheral
Equipment
     Office
Equipment
and
Furniture
     Leasehold
Improvements
    Vehicles      Total  

Cost:

               

Balance at January 1, 2012

   $ 2,432      $ 1,433       $ 190       $ 6,946      $ —         $ 11,001   

Additions

     250        296         9         1,450        49         2,054   

Disposals

     (43     —           —           (12     —           (55
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balance at December 31, 2012

     2,639        1,729         199         8,384        49         13,000   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Accumulated Depreciation:

               

Balance at January 1, 2012

     1,196        866         50         1,751        —           3,863   

Additions

     407        326         12         1,040        5         1,790   

Disposals

     (43     —           —           (11     —           (54
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balance at December 31, 2012

     1,560        1,192         62         2,780        5         5,599   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Depreciated cost at December 31, 2012

   $ 1,079      $ 537       $ 137       $ 5,604      $ 44       $ 7,401   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

NOTE 10:—OTHER PAYABLES

 

     December 31,  
     2011      2012  

Employees and payroll accruals

   $ 1,381       $ 1,959   

Government authorities

     433         672   

Accrued expenses

     265         508   
  

 

 

    

 

 

 
   $ 2,079       $ 3,139   
  

 

 

    

 

 

 

 

F-22


Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 11:—GRANTS FROM THE CHIEF SCIENTIST

 

     December 31,  
     2011     2012  

Balance at January 1

   $ 3,899      $ 3,944   

Grants received

     260        484   

Royalties paid

     (402     (892

Amounts recorded in profit or loss

     187        115   
  

 

 

   

 

 

 

Balance at December 31

   $ 3,944      $ 3,651   
  

 

 

   

 

 

 

The Company received research and development grants from the OCS, and undertook to pay royalties of 3%-3.5% of revenues derived from research and development projects that were financed by the OCS, of up to 100% of the grants received. As of December 31, 2012, the Company received grants amounting to $4,760, (including interest), while total royalties paid as of that date amounted to $1,394.

The Company received research and development grants from BIRD-F, and undertook to pay royalties of 5% of revenues derived from research and the development projects that were financed by BIRD-F, of up to 150% of all grants received. As of December 31, 2012, the Company received grants in the amount of $ 432.

According to an agreement with BIRD-F, during January 2012 the Company repaid the full amount of grants received, and accordingly, the Company will not be required to make any royalty payments in the future with respect to those grants.

During 2012, the Company entered into another agreement with BIRD-F, according to which it undertook to pay royalties, of up to 150% of the grants received. As of December 31, 2012, the Company received under the new agreement grants in the amount of $236. No royalty payments have yet been paid.

The Company received research and development grants from CIIRDF, and undertook to pay royalties of 2.5% of revenues derived from research and the development projects that were financed by CIIRDF, of up to 100% of all grants received. As of December 31, 2012, the Company received grants amounting to $237. No royalties have yet been paid and the Company has not accrued any liability for such royalties.

NOTE 12:—FINANCIAL INSTRUMENTS

a. Classification of financial assets:

The classification of financial assets according to financial instrument groups, in accordance with IAS 39, is as follows:

 

     December 31,  
     2011      2012  

Financial Assets

     

Financial assets at fair value through profit and loss Marketable securities

   $ 34,672       $ 30,868   
  

 

 

    

 

 

 

All of the Company’s financial assets are classified as level 1 in the fair value hierarchy.

 

F-23


Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 12:—FINANCIAL INSTRUMENTS—(CONTINUED)

 

b. Financial risk factors:

The Company and its subsidiaries’ operations are exposed to various financial risks, such as market risk (foreign currency risk, price risk), credit risk, and liquidity risk. The Company and its subsidiaries’ comprehensive risk management plan focuses on measures to minimize possible negative effects on the financial performance of the Company and its subsidiaries.

The Company’s Board of Directors has provided guidelines for risk management, and specific policies for various risk exposures, such as foreign currency risk, interest-rate risk, credit risk, and the use of derivative financial instruments, non-derivative financial instruments, and excess-liquidity investments.

 

  1. Market Risk:

 

  a. Foreign currency risk:

The Company operates primarily in Israel, and has an exchange rate risk as it incurs fixed expenses in New Israel Shekels, which differs from its functional currency.

 

  b. Price risk:

The Company has investments in bonds, classified as financial instruments, which are measured at fair value through profit and loss. Accordingly, the Company and its subsidiaries are exposed to a risk from changes in fair value, determined by Stock Exchange prices.

 

  2. Credit Risk:

The Company holds cash and cash equivalents, short-term investments and other financial instruments with various financial institutions. Its policy is to spread its investments among various institutions. In accordance with this policy, the Company invests its funds with stable financial institutions.

The Company has no trade receivables balances past due, and accordingly has not recognized any provision for doubtful accounts.

 

  3. Liquidity Risk:

The following table presents the repayment dates of the Company and its subsidiaries’ financial liabilities, by contractual terms, in nominal amounts (including interest payments):

Balance at December 31, 2011:

 

     Up to 1
Year
     1 Year
To 2
Years
     2 Years
To 3
Years
     3 Years
to 4
Years
     4 Years
to 5
Years
     Over 5
Years
     Total  

Trade payables

   $ 2,059       $ —         $ —         $ —         $ —         $ —         $ 2,059   

Other payables

     2,079         —           —           —           —           —           2,079   

Liabilities in respect of grants from the Chief Scientist

     911         541         626         668         667         994         4,407   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 5,049       $ 541       $ 626       $ 668       $ 667       $ 994       $ 8,545   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

F-24


Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 12:—FINANCIAL INSTRUMENTS—(CONTINUED)

 

Balance at December 31, 2012:

 

     Up to 1
Year
     1 Year
To 2
Years
     2 Years
To 3
Years
     3 Years
to 4
Years
     4 Years
to 5
Years
     Over 5
Years
     Total  

Trade payables

   $ 1,416       $ —         $ —         $ —         $ —         $ —         $ 1,416   

Other payables

     3,139         —           —           —           —           —           3,139   

Liabilities in respect of grants from the Chief Scientist

     745         501         605         511         525         1,175         4,062   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 5,300       $ 501       $ 605       $ 511       $ 525       $ 1,175       $ 8,617   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

c. Fair Value:

The carrying amounts of cash and cash equivalents, short-term investments, other receivables, trade payables and other payables approximate their fair values due to the short-term maturities of such instruments.

Liabilities in respect of grants from the Chief Scientist are capitalized using a discount rate that reflects the applicable market rate of interest at the date the grants are received which approximates the fair value at the respective balance sheet date.

d. Classification of financial instruments by fair value hierarchy

The financial instruments presented on the balance sheet at fair value are grouped into classes with similar characteristics using the following fair value hierarchy which is determined based on the source of input used in measuring fair value:

 

Level 1

    -       quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2

    -       inputs other than quoted prices included within Level 1 that are observable either directly or indirectly.

Level 3

    -       inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).

e. Sensitivity tests relating to changes in market factors:

 

     December 31,  
     2011     2012  

Sensitivity test to changes in the NIS exchange rate:

    

Gain (loss) from the change:

    

Increase of 5% in exchange rate

   $ 231      $ (121

Decrease of 5% in exchange rate

   $ (231   $ 121   

Sensitivity test to changes in the market price of listed securities:

    

Gain (loss) from the change:

    

Increase of 5% in market price

   $ 1,719      $ 1,544   

Decrease of 5% in market price

   $ (1,719   $ (1,544

The change in equity:

    

Increase of 5% in market price

   $ 1,719      $ 1,544   

Decrease of 5% in market price

   $ (1,719   $ (1,544

 

F-25


Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 12:—FINANCIAL INSTRUMENTS—(CONTINUED)

 

Sensitivity tests and principal work assumptions:

The selected changes in the relevant risk variables were determined based on management’s estimate as to reasonable possible changes in these risk variables.

The Company has performed sensitivity tests of principal market risk factors that are liable to affect its reported operating results or financial position. The sensitivity tests present the profit or loss and/or change in equity (before tax) in respect of each financial instrument for the relevant risk variable chosen for that instrument as of each reporting date. The test of risk factors was determined based on the materiality of the exposure of the operating results or financial condition of each risk with reference to the functional currency and assuming that all the other variables are constant.

NOTE 13:—SEVERANCE PAY LIABILITY

Labor laws and the Severance Pay Law in Israel (the “Severance Law”) require the Company to pay compensation to employees if they are dismissed or when they retire, or to make routine deposits with defined contribution plans under Section 14 of the Severance Pay Law, as described below. The Company’s liability for this is treated as a post-employment benefit. The Company’s liability for employee benefits is based on a valid labor agreement, the employee’s salary, and the applicable terms of employment, which together generate a right to severance compensation.

Post-employment employee benefits are financed by deposits with defined deposit plans, as detailed below.

Section 14 to the Severance Law applies to part of the compensation payments, pursuant to which the fixed contributions paid by the group into pension funds and/or policies of insurance companies release the group from any additional liability to employees for whom said contributions were made. These contributions and contributions for compensation represent defined contribution plans.

 

     Year ended December 31,  
    

 

      2010            2011            2012     

Expenses—defined contribution plan

      $ 309       $ 493       $ 556   
  

 

  

 

 

    

 

 

    

 

 

 

NOTE 14:—TAXES ON INCOME

a. Corporate tax rates in Israel:

Taxable income of Israeli companies is subject to tax at the rate of 25% in 2010, 24% in 2011 and 25% in 2012 and onwards.

b. Tax benefits under the Israel Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”):

Under the Investment Law, the Company has been granted “Approved Enterprise” and “Beneficiary Enterprise” status which provides certain benefits, including tax exemptions and reduced tax rates. Income not eligible for Approved Enterprise and Beneficiary Enterprise benefits is taxed at a regular rate.

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 14:—TAXES ON INCOME—(CONTINUED)

 

During the benefit period, the Company is tax exempt in the first two years of the benefit period and subject to tax at the reduced rate of 10%-25% for a period of five to eight years (depending on the level of foreign investments in the Company) of the benefit period.

The benefit entitlement period starts from the first year that the Approved/Beneficiary plant first earned taxable income, and is limited to 14 years from the year in which the approval was obtained, or 12 years from completion of the investment or commencement of production.

In the event of distribution of dividends from the said tax-exempt income, the amount distributed will be subject to corporate tax at the rate ordinarily applicable to the Approved and Beneficiary Enterprise’s income. The tax-exempt income attributable to the “Approved Enterprise” program mentioned above can be distributed to shareholders without subjecting the Company to taxes only upon the complete liquidation of the Company. Tax-exempt income generated under the Company’s “Beneficiary Enterprise” program will be subject to taxes upon dividend distribution or complete liquidation.

The entitlement to the above benefits is conditional upon the Company’s fulfilling the conditions stipulated by the Law and regulations published thereunder. Should the Company fail to meet such requirements in the future, income attributable to its Approved Enterprise and Privileged Enterprise programs could be subject to the statutory Israeli corporate tax rate and the Company could be required to refund a portion of the tax benefits already received, with respect to such programs.

In December 2010, the “Knesset” (Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation), 2011 (“the Amendment”), which prescribes, among others, amendments in the Law for the Encouragement of Capital Investments, 1959 (“the Law”). The Amendment became effective as of January 1, 2011. According to the Amendment, the benefit tracks in the Law were modified and a flat tax rate applies to the Company’s entire preferred income under its status as a preferred company with a preferred enterprise. Commencing from the 2011 tax year, the Company will be able to opt to apply (the waiver is non-recourse) the Amendment and from the elected tax year and onwards, it will be subject to the amended tax rates that are: 2011 and 2012—15%, 2013 and 2014—12.5% and in 2015 and thereafter—12%.

The Company has examined the effect of the adoption of the Amendment on its financial statements, and as of the date of the publication of the financial statements, the Company estimates that it will not apply the Amendment. The Company’s estimate may change in the future.

c. The Law for the Encouragement of Industry (Taxation), 1969:

The Company has the status of an “industrial company”, as implied by this law. According to this status and by virtue of regulations published thereunder, the Company is entitled to claim a deduction of accelerated depreciation on equipment used in industrial activities, as determined in the regulations issued under the Inflationary Law. The Company is also entitled to amortize a patent or a patent or know-how usage right that are used in the enterprise’s development or promotion, to deduct listed share issuance expenses and to file consolidated financial statements under certain conditions.

d. Tax assessments:

The Company received assessments that are considered final, up to and including the 2007 tax year.

 

F-27


Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 14:—TAXES ON INCOME—(CONTINUED)

 

e. Net operating carry-forward losses for tax purposes and other temporary differences:

As of December 31, 2012, the Company and its Israeli subsidiary have carry-forward losses amounting to approximately $15 million, which can be carried forward for an indefinite period.

f. Deferred taxes:

The Company did not recognize deferred tax assets for carry-forward losses and other temporary differences, because their utilization in the foreseeable future is not probable.

g. Current taxes on income

The Company did not record any current taxes for years ended December 31, 2011 and 2010 as a result of its carry-forward losses.

The Company recorded current taxes in the amount of $74 for the year ended December 31, 2012, as a result of foreign withholding taxes.

h. Theoretical tax:

The reconciliation between the tax expense, assuming that all the income and expenses, gains and losses in the statement of income were taxed at the statutory tax rate and the taxes on income recorded in profit or loss does not provide significant information and therefore was not presented.

NOTE 15:—COMMITMENTS AND CONTINGENT LIABILITIES

The Company leases office space and motor vehicles under operating leases. Future minimum lease payments under non-cancelable operating leases for the years ended December 31, are as follows:

 

2013

   $ 467   

2014

     431   

2015

     383   

2016 and after

     22   
  

 

 

 
   $ 1,303   
  

 

 

 

The Company has provided a NIS 842 thousand bank guarantee to secure compliance with office rental payment requirements.

As of December 31, 2012, the Company has deposited $66, in respect of vehicle operating leases.

NOTE 16:—SHAREHOLDERS’ EQUITY

 

a. General:

All ordinary shares, options, warrants, per share data and exercise prices included in these financial statements for all periods presented have been retroactively adjusted to reflect the 1-for-2 reverse share split to be effective immediately prior to the effectiveness of the registration statement.

b. Share capital:

 

     December 31, 2011      December 31, 2012  
     Authorized      Issued and
Outstanding
     Authorized      Issued and
Outstanding
 
     Number of Shares  

Ordinary shares of NIS 0.02 par value each

     150,000,000         18,311,603         150,000,000         18,738,290   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

F-28


Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 16:—SHAREHOLDERS’ EQUITY—(CONTINUED)

 

c. Changes in share capital:

Share capital issued and outstanding:

 

     Number of
Shares
     NIS Par
Value
 

Outstanding at January 1, 2011

     15,131,261         302,625   

Issuances of Share capital following the collaboration agreement

     863,310         17,266   

Exercise of Series 2 warrants

     2,147,877         42,958   

Exercise of options

     169,155         3,383   
  

 

 

    

 

 

 

Outstanding at December 31, 2011

     18,311,603         366,232   

Exercise of options

     426,687         8,534   
  

 

 

    

 

 

 

Outstanding at December 31, 2012

     18,738,290         374,766   
  

 

 

    

 

 

 

d. Rights attached to shares:

 

  1. Voting rights at the general meeting, rights to dividends, rights upon liquidation of the Company and the right to appoint directors of the Company

 

  2. The shares are traded on the TASE.

e. Capital management in the Company:

The Company’s objectives in managing capital are as follows:

To maintain its ability to ensure the continuity of the business, and thus to generate a return to equity holders, investors and other parties.

The Company manages its capital structure and makes adjustments following changes in economic conditions and the risk-nature of its operations. In order to maintain or to adjust the necessary capital structure, the Company takes various steps, such as raising funds by capital issues.

f. Reserve—transaction with a former controlling shareholder

The capital reserve included as part of the Company’s shareholders’ equity is a result of prior years’ transactions with Compugen, which was formerly the controlling shareholder of the Company.

Those transactions included the receipt of a loan in the amount of $900 and a license to use Compugen’s technology. Eventually, the loan—including the accrued interest—was forgiven and the license was extended several times in consideration of the issuance of the Company’s ordinary shares with a total fair value of $185.

The terms of those transactions were a result of the relationship between the Company and Compugen and did not represent a transaction that may have been entered into between unrelated parties. Therefore, the benefit of these transactions for the Company resulting from both the forgiveness of the loan and the issuance of the ordinary shares for the license rights was recorded as a capital contribution to shareholders’ equity with a total amount of $1,156.

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 16:—SHAREHOLDERS’ EQUITY—(CONTINUED)

 

g. Capital issuances:

 

  1. On December 12, 2010, the Company signed with Bayer a collaboration agreement for the genetic improvement of wheat, combined with a share purchase agreement, as described in Note 5(b). On January 10, 2011, and in accordance with the collaboration agreement, the Company issued 863,310 ordinary shares, NIS 0.02 par value each.

 

  2. During 2011, 2,147,877 Series 2 warrants were exercised for total consideration of $15,700. Upon the Series 2 warrants exercise, an additional amount of $5,500, which was previously recorded as a liability, was converted into equity. The Series 2 warrants were issued as part of the Company’s initial public offering on the TASE in 2007 and as part of the Company’s share purchase agreement with AquAgro venture fund in 2008.

The exercise price of these warrants was NIS 11.05 linked to the Israeli consumer price index (“CPI”) (or $2.73 and $3.16 based on the exchange rate reported by the Bank of Israel on the issuance dates in 2007 and 2008, respectively). In total, 99.9% of all Series 2 warrants that were issued in the Company’s initial public offering on the TASE were exercised for an exercise price of NIS 11.05 linked to the Israeli CPI. The remaining unexercised warrants as of May 31, 2011 expired. The Company accounted for those warrants as financial liability as they were not considered instruments which can be settled by a fixed amount of cash. Accordingly, those warrants were accounted at fair value through profit and loss in accordance with IAS 39 provisions. Upon the exercise or expiration of those warrants, the financial liability was extinguished, and the revaluated carrying amount of the warrants at that date was contributed into the Company’s shareholders’ equity.

NOTE 17:—SHARE-BASED COMPENSATION

a. Expenses recognized in the financial statements:

The expense recognized in the Company’s financial statements for services provided by employees and service-providers is as follows:

 

     Year Ended December 31,  
    

 

   2010      2011      2012  

Share-based compensation

      $ 2,562       $ 2,129       $ 1,173   
  

 

  

 

 

    

 

 

    

 

 

 

Share-based payment transactions that were granted by the Company to its employees are as described below.

b. Share-based payment plan for employees and service-providers:

 

  1. Under the Company’s 2002 option plan (“2002 Plan”) the Company may grant options to its directors and consultants. Options granted under the 2002 Plan may be exercised up to 10 years from the grant date, or until the expiry date (as defined by the Plan), whichever is earlier. The plan expired on March 13, 2012, however, on May 14, 2012 the Company’s Board of Directors approved an extension of the plan’s term in respect solely of consultants up to March 13, 2017.

 

  2. In December 2003, an additional option plan was approved (“2003 Plan”), under which, the Company may grant options to its directors and employees. Options granted under the 2003 Plan may be exercised up to 10 years from the grant date, or until the expiry date (as defined by the Plan) whichever is earlier.

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 17:—SHARE-BASED COMPENSATION—(CONTINUED)

 

 

  3. In January 2013, a third plan was approved (“2013 Plan”), under which the Company may grant options to its directors and employees. To date, no options have been granted under this plan.

The vesting period of the options is four years, unless otherwise determined for a specific grant. Each option may be exchanged for 1 ordinary share, NIS 0.02 par value. Options forfeited or not exercised prior to expiry, may be granted in the future.

During 2010, the Company issued 1,262,400 options exercisable into 1,262,400 ordinary shares, NIS 0.02 par value each of the Company, for exercise prices ranging from NIS 28.66 to NIS 36.95 per share, to employees, officers and consultants (excluding options granted to the Company’s directors and the Chief Executive Officer). The fair value of the options determined upon grant date was $3,600.

During 2011, the Company issued 247,500 options, exercisable into 247,500 ordinary shares, NIS 0.02 par value each of the Company, for exercise prices ranging from NIS 29.19 to NIS 33.92 per share, to new employees. The fair value of the options determined upon grant date was $ 715.

During 2012, the Company issued 324,000 options exercisable into 324,000 ordinary shares, NIS 0.02 par value each of the Company, for exercise prices ranging from NIS 33.48 to NIS 35.84 per share, to various employees and consultants. The fair value of the options determined upon grant date was $1,085.

c. Option grants to key officers and directors:

During 2010, the Company issued 50,000 options exercisable into 50,000 ordinary shares, NIS 0.02 par value each of the Company, for exercise prices ranging from NIS 19.94 to NIS 33.86 per share. The fair value of the options determined upon grant date was $220.

On June 2, 2010, the Company’s board of directors approved a grant of 200,000 options to the Company’s CEO and President, exercisable into 200,000 ordinary shares, NIS 0.02 par value each of the Company, for an exercise price of NIS 28.66 per share. The fair value of the options determined upon grant date was $591.

On August 8, 2011, the Company issued 17,500 options, exercisable into 17,500 ordinary shares, NIS 0.02 par value each of the Company, for exercise prices ranging from NIS 28.70 to NIS 33.80 per share, to serving directors. The fair value of the options determined upon grant date was $58.

On October 24, 2012, the Company issued 17,500 options, exercisable into 17,500 ordinary shares, NIS 0.02 par value each of the Company, for exercise prices ranging from NIS 31.52 to NIS 33.41 per share, to serving directors. The fair value of the options determined upon grant date was $76.

d. Options exercised:

During 2010, 2011, and 2012 employees and consultants exercised 282,940, 169,155 and 426,687 options, respectively, into 878,782 ordinary shares, NIS 0.02 par value each of the Company, for a total consideration of $458, $378 and $1,519, respectively.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 17:—SHARE-BASED COMPENSATION—(CONTINUED)

 

e. Share options activity:

The following table summarizes the number of share options, the weighted average exercise price, and the changes that were made in the option plans to employees, consultants and directors:

 

     2010      2011      2012
     Number of
Options
    Weighted
Average
Exercise
Prices ($)
     Number of
Options
    Weighted
Average
Exercise
Prices ($)
     Number of
Options
    Weighted
Average
Exercise
Prices ($)
    

 

Outstanding at January 1

     1,892,261        3.12         3,013,304        4.18         3,015,900        5.78      

Grants

     1,512,400        8.20         265,000        8.28         341,500        9.22      

Exercised

     (282,940)        1.62         (169,155     2.10         (426,687     3.70      

Forfeited

     (108,417     6.10         (93,249     7.24         (118,772     8.20      
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

Outstanding at December 31

     3,013,304        4.18         3,015,900        5.78         2,811,941        6.56      
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

Exercisable at December 31

     1,244,868        3.38         1,696,739        4.46         1,825,445        5.64      
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

The following table summarizes information about share options outstanding at December 31, 2012:

 

     Options outstanding  
Range of exercise prices ($)    Number
outstanding
     Average
remaining
contractual
life
     Weighted
average
exercise
price
 

0.40-1.72

     147,805         2.62         0.56   

2.26-4.18

     510,124         4.78         2.64   

6.76-7.80

     1,640,012         7.36         7.46   

8.44-9.90

     514,000         9.1         9.24   
  

 

 

    

 

 

    

 

 

 

Total

     2,811,941         6.97         6.56   
  

 

 

    

 

 

    

 

 

 

f. The weighted average outstanding remaining contractual term of the options as of December 31, 2012 is 6.97 years (as of December 31, 2011, it is 7.41 years).

g. The weighted average fair value of options granted during 2012 was NIS 12.70 ($3.40) (for options granted during 2011, the fair value was NIS 12.98 ($3.40)).

h. The fair value of the Company’s share options granted to employees and directors for the years ended December 31, 2012, 2011 and 2010 was estimated using binomial model using the following assumptions:

 

     2010      2011      2012  

Dividend yield (%)

     —           —           —     

Expected volatility of the share prices (%)

     41-76         33-69         25-65   

Risk-free interest rate (%)

     2.17-7.14         3.01-6.93         1.87-6.81   

Expected life of the options (years)

     3.95         4.27         4.12   

Share price (U.S.$/NIS)

     8.18/29.10         8.28/31.64         9.34/35.98   

The expected life of the options is based on historical data and is not necessarily indicative of the future exercise patterns of the options.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 17:—SHARE-BASED COMPENSATION—(CONTINUED)

 

The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative of expected future trends.

NOTE 18:—STATEMENTS OF COMPREHENSIVE INCOME—ADDITIONAL INFORMATION

a. Cost of revenues:

 

     Year Ended December 31,  
     2010      2011      2012  

Salaries and benefits

   $ 3,188       $ 4,586       $ 5,443   

Share-based compensation

     785         681         364   

Sub-contractors and consultants

     419         842         1,307   

Materials

     681         902         951   

Depreciation

     284         528         912   

Patents and related costs

     140         249         80   

Rentals and maintenance

     314         459         495   
  

 

 

    

 

 

    

 

 

 
   $ 5,811       $ 8,247       $ 9,552   
  

 

 

    

 

 

    

 

 

 

b. Research and development:

 

     Year Ended December 31,  
     2010     2011     2012  

Salaries and benefits

   $ 2,535      $ 3,265      $ 3,915   

Share-based compensation

     784        682        364   

Materials and subcontractors

     944        518        675   

Plant growth and greenhouse maintenance

     204        238        275   

Rentals and office maintenance

     369        472        638   

Patents

     180        73        72   

Depreciation

     659        891        923   

Consulting

     279        249        279   

Other

     133        253        229   

Participation by the Chief Scientist and other parties

     (543     (257     (118
  

 

 

   

 

 

   

 

 

 
   $ 5,544      $ 6,384      $ 7,252   
  

 

 

   

 

 

   

 

 

 

c. Business development:

 

     Year Ended December 31,  
     2010      2011      2012  

Salaries and benefits

   $ 556       $ 645       $ 732   

Share-based compensation

     307         230         164   

Travel

     59         98         103   

Legal

     86         103         50   

Other

     54         60         110   
  

 

 

    

 

 

    

 

 

 
   $ 1,062       $ 1,136       $ 1,159   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 18:—STATEMENTS OF COMPREHENSIVE INCOME—ADDITIONAL INFORMATION—(CONTINUED)

 

d. General and administrative:

 

     Year Ended December 31,  
     2010      2011      2012  

Salaries and benefits

   $ 845       $ 1,160       $ 1,354   

Share-based compensation

     686         536         281   

Consultation

     62         59         96   

Professional fees

     231         218         239   

Other

     299         344         265   
  

 

 

    

 

 

    

 

 

 
   $ 2,123       $ 2,317       $ 2,235   
  

 

 

    

 

 

    

 

 

 

e. Financing income and expenses

Financing income:

 

     Year Ended December 31,  
       2010          2011          2012    

Exchange differences, net

   $ 386       $ —         $ 61   

Change in the fair value of marketable securities

     159         911         42   

Interest income

     179         383         869   

Revaluation of Series 2 warrants

     —           3,729         —     
  

 

 

    

 

 

    

 

 

 
   $ 724       $ 5,023       $ 972   
  

 

 

    

 

 

    

 

 

 

Financing expenses:

 

     Year Ended December 31,  
     2010      2011      2012  

Bank expenses and commissions

   $ 10       $ 7       $ 89   

Exchange differences, net

     —           1,032         —     

Revaluation of Series 2 warrants

     5,393         —           —     

Revaluation of liabilities to the Chief Scientist

     314         156         205   
  

 

 

    

 

 

    

 

 

 
   $ 5,717       $ 1,195       $ 294   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 19:—NET INCOME (LOSS) PER SHARE

Details of the number of shares and income (loss) used in the computation of net income (loss) per share:

 

     Year ended December 31,  
     2010     2011      2012  
     Weighted
number of
shares *)
     Loss     Weighted
number of
shares *)
     Net
income
     Weighted
number of
shares *)
     Loss  

Number of shares and net income (loss) for the computation of basic net income (loss) per share

     14,824,703         (6,970     17,505,136         645         18,421,568         (2,522
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Number of shares and net income (loss) for the computation of diluted net income (loss) per share

     14,824,703         (6,970     18,731,118         645         18,421,568         (2,522
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

*) To compute diluted net income (loss) per share, potential ordinary shares, detailed below, have not been taken into account due to their anti-dilutive effect:

 

     2010      2011      2012  

Options to employees and consultants under share-based payment plans

     3,013,304         —           2,811,941   

Warrants

     2,150,599         —           —     
  

 

 

    

 

 

    

 

 

 
     5,163,903         —           2,811,941   
  

 

 

    

 

 

    

 

 

 

Reconciliation of the weighted average shares used to compute basic and diluted earnings per share Year ended December 31, 2011:

 

Number of shares for the computation of basic net income per share

     17,505,136   

Effect of dilutive securities:

  

Options to employees and consultants under share-based payment plans

     1,225,727  

Warrants

     255  
  

 

 

 

Number of shares for the computation of basic net income per share

     18,731,118   
  

 

 

 

NOTE 20:—OPERATING SEGMENTS

a. General:

Commencing January 1, 2012, the Company operates in two segments. The segments were determined on the basis of information considered by the Chief Operating Decision-Maker (“CODM”) for purposes of decision-making on the allocation of resources and evaluation of performance. The following Company’s segments are engaged in business activities for which they earn revenues and incur expenses, their results are reviewed by the CODM and discrete financial information is available:

 

Evogene segment

      Services for the development of gene sequence technology (D.N.A. sequences responsible for the production of proteins—“genes”) and other D.N.A. sequences in plants (“D.N.A. sequences”).

Evofuel segment

      Services for the development of improved species of the castor oil plant, which may serve as a source for extracting oil for the bio diesel fuel industry.

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 20:—OPERATING SEGMENTS—(CONTINUED)

 

Segments performance (segment income (loss)) is determined based on operating income (loss) reported in the financial statements. The results of a segment reported to the CODM include items attributed directly to a segment, as well as other items, which are indirectly attributed using reasonable assumptions.

b. The following table presents our revenues and operating loss by segments:

 

     Evogene     Evofuel     Adjustments      Total  

For the Year Ended December 31, 2012

         

Revenues

   $ 17,072      $ —        $ —         $ 17,072   
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating loss

   $ (1,993   $ (1,133   $ —         $ (3,126
  

 

 

   

 

 

   

 

 

    

 

 

 

Net financing income

            678   
         

 

 

 

Loss before taxes on income

          $ (2,448
         

 

 

 

c. Major customers:

Revenues from major customers each of whom amounts to 10% or more, of total revenues:

 

     Year Ended December 31,  
     2010     2011     2012  

Customer A (shareholder)

     74     71     70

Customer B (shareholder)

     —   *)      23     24

Customer C

     17     —   *)      —   *) 

 

*) Represents revenues that are lower than 10% of total revenues

d. Geographical information:

Revenues based on the location of the customers, are as follows:

 

     Year Ended December 31,  
       2010         2011         2012    

Israel

     1     1     —     

United States

     76     71     72

Germany

     4     23     24

France

     17     5     4

Others

     2     —          —     
  

 

 

   

 

 

   

 

 

 
     100     100     100
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 21:—BALANCES AND TRANSACTIONS WITH KEY OFFICERS AND CERTAIN SHAREHOLDERS

a. The certain shareholders refer to Monsanto and Bayer, which hold 8.7% and 4.6%, respectively, of the Company’s ordinary shares, as of December 31, 2012, and are also major customers (see also Notes 5 and 20(c)).

b. Balances:

Balance at December 31, 2011:

 

     Key
Officers
     Certain
Shareholders
 

Receivables

   $ —         $ 1,094   
  

 

 

    

 

 

 

Other payables

   $ 278       $ 14   
  

 

 

    

 

 

 

c. Benefits to directors:

Balance at December 31, 2012:

 

     Key
Officers
     Certain
Shareholders
 

Receivables

   $ —         $ 1,698   
  

 

 

    

 

 

 

Other payables

   $ 296       $ 20   
  

 

 

    

 

 

 

 

     Year ended December 31,  
       2010          2011          2012    

Remuneration to directors who are not employed by the Company or on its behalf

   $ 59       $ 51       $ 71   
  

 

 

    

 

 

    

 

 

 

Number of directors not employed by the Company

     3         3         3   
  

 

 

    

 

 

    

 

 

 

d. Benefits to key officers:

 

     Year ended December 31,  
     2010      2011      2012  

Short term benefits

   $ 982       $ 1,225       $ 1,188   

Share-based compensation

     1,248         986         441   
  

 

 

    

 

 

    

 

 

 
   $ 2,230       $ 2,211       $ 1,629   
  

 

 

    

 

 

    

 

 

 

Number of people that received salary and benefits

     5         5         5   
  

 

 

    

 

 

    

 

 

 

e. Transactions:

For the year ended December 31, 2010

 

     Key
Officers
     Certain
Shareholders
 

Revenues

   $ —         $ (9,856

Cost of revenue

     721         (392

Research and development expenses

     110         —     

Business development expenses

     688         —     

General and administrative expenses

     711         —     
  

 

 

    

 

 

 
   $ 2,230       $ (10,248
  

 

 

    

 

 

 

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 21:—BALANCES AND TRANSACTIONS WITH KEY OFFICERS AND CERTAIN SHAREHOLDERS—(CONTINUED)

 

For the year ended December 31, 2011

 

     Key
Officers
     Certain
Shareholders
 

Revenues

   $ —         $ (14,006

Cost of revenue

     677         (575

Research and development expenses

     315         —     

Business development expenses

     623         —     

General and administrative expenses

     596         —     
  

 

 

    

 

 

 
   $ 2,211       $ (14,581
  

 

 

    

 

 

 

For the year ended December 31, 2012

 

     Key
Officers
     Certain
Shareholders
 

Revenues

   $ —         $ (16,083

Cost of revenue

     302         (225

Research and development expenses

     390         —     

Business development expenses

     440         —     

General and administrative expenses

     497         —     
  

 

 

    

 

 

 
   $ 1,629       $ (16,308
  

 

 

    

 

 

 

NOTE 22:—SUBSEQUENT EVENT

 

  a. On February 4, 2013, the Company signed an agreement with a private Israeli company (the “Private Company”), according to which the Company undertook to provide the Private Company with rights to use its greenhouses and facilities, including support for the Private Company’s development process for the following consideration:

 

  i. 15% of the Private Company’s shares on an outstanding basis. The shares are subject to reverse vesting over a period of 36 months.

 

  ii. The Company also was granted with anti-dilution option up to an aggregate investment of $4 million in the Private Company.

 

  iii. A three years access to the system being developed by the Private Company, including an option to purchase the system which is exercisable over the term of the agreement.

 

  b. During the six months ended June 30, 2013, 141,697 options were exercised by employees into 141,697 ordinary shares of NIS 0.02 par value each for a total consideration of $828.

 

  c. On May 29, 2013, the Company signed a cooperation agreement with Beijing Dabeinong Technology Co. (“DBN”), a leading Chinese company in the field of development and commercialization of rice seeds and other agricultural products. According to the agreement, the Company will receive payments based on milestones stated in the agreement. In addition, the Company will receive sales-based royalties based on the stated terms in the agreement.

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 22:—SUBSEQUENT EVENT—(CONTINUED)

 

 

  d. On July 17, 2013, the board of directors of the Company approved an issuance to its officers and employees of 1,000,000 options exercisable into 1,000,000 ordinary shares of the Company, NIS 0.02 par value each, for an exercise price of NIS 44.28 ($12.52) per share. The estimated fair value of the options at their grant date using the binomial model was approximately $3,825. The main assumptions used by the Company in determining the fair value were: dividend yield, 0%; expected volatility of the share price, 26-60%; risk free interest rate, 1.14-6.34%; and share price of NIS 43.62 ($12.20).

On September 22, 2013, the board of directors of the Company approved an issuance to the Company’s President and Chief Executive Officer of 215,000 options exercisable into 215,000 ordinary shares of the Company, NIS 0.02 par value each, for an exercise price of NIS 48.18 ($13.62) per share. The grant is subject to shareholder approval at a general meeting of the Company. The current estimate of the fair value of these options using the binomial model is approximately $1,108. The main assumptions used by the Company in determining the fair value were: dividend yield, 0%; expected volatility of the share price, 26.70-58.51%; risk free interest rate, 1.22-6.25%; and share price of NIS 51.18 ($14.46).

 

  e. On July 30, 2013, the Israeli Parliament (the “Knesset”) approved the second and third readings of the Economic Plan for 2013-2014 (“Amended Budget Law”) which consists, among others, of fiscal changes whose main aim is to enhance long-term collection of taxes.

These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%, cancelling the lowering of the tax rates applicable to preferred enterprises (9% in development area A and 16% in other areas), taxing revaluation gains and increasing the tax rates on dividends within the scope of the Law for the Encouragement of Capital Investments to 20%, and are effective from January 1, 2014.

The Company estimates that the effect of the change in tax rates will not have a material effect on the Company’s financial statements.

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

     As of
December 31,
2012
    As of June 30,  
       2012     2013  
     Audited     Unaudited  

CURRENT ASSETS:

      

Cash and cash equivalents

   $ 24,262      $ 11,558      $ 16,884   

Marketable securities

     30,868        30,643        33,657   

Short-term bank deposits

     —          10,600        —     

Trade receivables

     1,542        3,911        1,853   

Other receivables

     650        681        1,573   
  

 

 

   

 

 

   

 

 

 
     57,322        57,393        53,967   
  

 

 

   

 

 

   

 

 

 

LONG-TERM ASSETS:

      

Long term deposits

     43        47        33   

Plant, property and equipment, net

     7,401        7,825        7,572   

Other investment

     —          —          365   

Intangible assets, net

     89        111        67   
  

 

 

   

 

 

   

 

 

 
     7,533        7,983        8,037   
  

 

 

   

 

 

   

 

 

 
   $ 64,855      $ 65,376      $ 62,004   
  

 

 

   

 

 

   

 

 

 

CURRENT LIABILITIES:

      

Trade payables

   $ 1,416      $ 1,299      $ 1,873   

Liabilities in respect of grants from the Chief Scientist

     733        493        528   

Deferred revenues and other advances

     4,211        4,374        3,968   

Other payables

     3,139        1,866        2,677   
  

 

 

   

 

 

   

 

 

 
     9,499        8,032        9,046   
  

 

 

   

 

 

   

 

 

 

LONG-TERM LIABILITIES:

      

Liabilities in respect of grants from the Chief Scientist

     2,918        2,947        3,101   

Deferred revenues and other advances

     4,168        6,027        2,539   

Severance pay liability, net

     11        9        19   
  

 

 

   

 

 

   

 

 

 
     7,097        8,983        5,659   
  

 

 

   

 

 

   

 

 

 

SHAREHOLDERS’ EQUITY:

      

Ordinary shares of NIS 0.02 par value: authorized—150,000,000 ordinary shares; issued and outstanding—18,879,987, 18,403,376 and 18,738,290 shares at June 30, 2013 and 2012 and December 31, 2012, respectively

     102        100        103   

Share premium

     90,746        89,063        92,147   

Put option

     (7,764     (7,764     (7,764

Capital reserve—transaction with a former controlling shareholder

     1,156        1,156        1,156   

Accumulated deficit

     (35,981     (34,194     (38,343
  

 

 

   

 

 

   

 

 

 
     48,259        48,361        47,299   
  

 

 

   

 

 

   

 

 

 
   $ 64,855      $ 65,376      $ 62,004   
  

 

 

   

 

 

   

 

 

 

The accompanying Notes are an integral part of the Consolidated Financial Statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

U.S. dollars in thousands (except share and per share data)

 

     Year  ended
December 31,
2012
    Six months ended
June 30,
 
       2012     2013  
     Audited     Unaudited  

Revenues

   $ 17,072      $ 8,287      $ 8,934   

Cost of revenues

     9,552        4,483        4,688   
  

 

 

   

 

 

   

 

 

 

Gross profit

     7,520        3,804        4,246   
  

 

 

   

 

 

   

 

 

 

Operating expenses:

      

Research and development, net

     7,252        3,308        4,666   

Business development

     1,159        544        532   

General and administrative

     2,235        1,069        1,197   
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     10,646        4,921        6,395   
  

 

 

   

 

 

   

 

 

 

Operating loss

     (3,126     (1,117     (2,149

Financing income

     972        510        776   

Financing expenses

     (294     (76     (989
  

 

 

   

 

 

   

 

 

 

Loss before taxes on income

     (2,448     (683     (2,362

Taxes on income

     74        52        —     
  

 

 

   

 

 

   

 

 

 

Loss

   $ (2,522   $ (735   $ (2,362
  

 

 

   

 

 

   

 

 

 

Total comprehensive loss

   $ (2,522   $ (735   $ (2,362
  

 

 

   

 

 

   

 

 

 

Basic and diluted loss per share

   $ (0.14   $ (0.04   $ (0.12
  

 

 

   

 

 

   

 

 

 

The accompanying Notes are an integral part of the Consolidated Financial Statements

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

U.S. dollars in thousands

 

    Share
Capital
    Share
Premium
    Put
Option
    Capital
reserve—
transaction
with a  former
controlling
shareholder
    Accumulated
Deficit
    Total  

Balance as of January 1, 2012 (audited)

  $ 100      $ 88,056      $ (7,764   $ 1,156      $ (33,459   $ 48,089   

Total comprehensive loss

    —          —          —          —          (2,522     (2,522

Exercise of options

    2        1,517        —          —          —          1,519   

Share-based compensation

    —          1,173        —          —          —          1,173   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2012 (audited)

  $ 102      $ 90,746      $ (7,764   $ 1,156      $ (35,981   $ 48,259   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Share
Capital
    Share
Premium
    Put
Option
    Capital
reserve—
transaction
with a  former
controlling
shareholder
    Accumulated
Deficit
    Total  
    Unaudited  

Balance as of January 1, 2012 (audited)

  $ 100      $ 88,056      $ (7,764   $ 1,156      $ (33,459   $ 48,089   

Total comprehensive loss

    —          —          —          —          (735     (735

Exercise of options

    *     433        —          —          —          433   

Share-based compensation

    —          574        —          —          —          574   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2012

  $ 100      $ 89,063      $ (7,764   $ 1,156      $ (34,194   $ 48,361   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Share
Capital
    Share
Premium
    Put
Option
    Capital
reserve—
transaction
with a  former
controlling
shareholder
    Accumulated
Deficit
    Total  
    Unaudited  

Balance as of January 1, 2013 (audited)

  $ 102      $ 90,746      $ (7,764   $ 1,156      $ (35,981   $ 48,259   

Total comprehensive loss

    —          —          —          —          (2,362     (2,362

Exercise of options

    1        827        —          —          —          828   

Share-based compensation

    —          574        —          —          —          574   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2013

  $ 103      $ 92,147      $ (7,764   $ 1,156      $ (38,343   $ 47,299   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

*) Represent amount lower than $1

The accompanying Notes are an integral part of the Consolidated Financial Statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

     Year  ended
December 31,
2012
    Six months ended
June 30,
 
       2012     2013  
     Audited     Unaudited  

Cash Flows from Operating Activities

      

Loss

   $ (2,522   $ (735   $ (2,362

Adjustments to reconcile loss to net cash used in operating activities:

      

Adjustments to the profit or loss items:

      

Depreciation and amortization

     1,835        874        1,007   

Share-based compensation

     1,173        574        574   

Net financing expenses (income)

     (678     (434     213   

Taxes on income

     74        —          —     

Gain on disposal of property, plant and equipment

     (33     —          —     
  

 

 

   

 

 

   

 

 

 
     2,371        1,014        1,794   
  

 

 

   

 

 

   

 

 

 

Changes in asset and liability items:

      

Decrease (increase) in trade receivables

     (742     (3,096     (323

Decrease (increase) in other receivables

     336        251        (94

Increase (decrease) in trade payables

     231        (138     (255

Increase (decrease) in other payables

     974        (192     (502

Decrease in deferred revenues and other advances

     (3,331     (1,309     (2,202

Increase in severance pay liability, net

     —          —          8   

Increase in liabilities in respect of grants from the Chief Scientist

     —          (90     —     
  

 

 

   

 

 

   

 

 

 
     (2,532     (4,574     (3,368
  

 

 

   

 

 

   

 

 

 

Cash received (paid) during the period for:

      

Interest received

     869        626        634   

Taxes paid (withheld by customers)

     (74     (52     —     
  

 

 

   

 

 

   

 

 

 

Net cash used in operating activities

   $ 1,888   $ (3,721   $ (3,302
  

 

 

   

 

 

   

 

 

 

The accompanying Notes are an integral part of the Consolidated Financial Statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

     Year  ended
December 31,
2012
    Six months ended
June 30,
 
       2012     2013  
     Audited     Unaudited  

Cash Flows from Investing Activities

      

Purchase of property, plant and equipment

   $ (2,963   $ (2,127   $ (731

Proceeds from disposal of property, plant and equipment

     34        —          —     

Proceeds from sale of marketable securities

     15,697        8,917        13,291   

Purchase of marketable securities

     (11,935     (5,097     (16,831

Proceeds from bank deposits, net

     17,652        7,052        —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     18,485        8,745        (4,271
  

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities

      

Proceeds from exercise of options

     1,519        433        828   

Proceeds from the Chief Scientist grants

     484        230        155   

Repayment of the Chief Scientist grants

     (892     (664     (255

Issuance expenses

     —          —          (550
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,111        (1     178   
  

 

 

   

 

 

   

 

 

 

Exchange rate differences—cash and cash equivalent balances

     89        70        17   
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     17,797        5,093        (7,378
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, beginning of the period

     6,465        6,465        24,262   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of the period

   $ 24,262      $ 11,558      $ 16,884   
  

 

 

   

 

 

   

 

 

 

Significant non-cash transactions

      

Acquisition of property, plant and equipment in credit

   $ 101      $ 420      $ 526   
  

 

 

   

 

 

   

 

 

 

Other investment

   $ —        $ —        $ 365   
  

 

 

   

 

 

   

 

 

 

Issuance expenses

   $ —        $ —        $ 259   
  

 

 

   

 

 

   

 

 

 

The accompanying Notes are an integral part of the Consolidated Financial Statements.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data)

NOTE 1:—GENERAL

a. These Financial Statements have been prepared in a condensed format as of June 30, 2013 and for the six months then ended (“interim consolidated financial statements”).

These financial statements should be read in conjunction with the Company’s annual financial statements as of December 31, 2012 and for the year then ended and the accompanying notes (“annual consolidated financial statements”) as issued on September 23, 2013.

b. The Company principally derives its revenues from collaboration arrangements. Revenues from its major collaborators accounted together for 97.7% and 99.3% for the six months ended June 30, 2013 and 2012, respectively. Revenues from its major collaborators accounted together for 94.2% for the year ended December 31, 2012. As to major customers, see Note 4(c). If a major customer decides to terminate its collaboration agreement with the Company, the Company may not be able to make up the lost revenue and it may have a material adverse effect on its results of operations.

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES

a. Basis of preparation of the interim consolidated financial statements:

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, “Interim Financial Reporting.”

b. New standards, interpretations and corrections first applied by the Company

The accounting policies applied in preparing the interim consolidated financial statements consistent to those applied in the preparation of the annual consolidated financial statements, except for the following:

IAS 39 - Financial Assets

Financial assets within the scope of IAS 39 are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or loss in respect of which transaction costs are recorded in profit or loss.

After initial recognition, the accounting treatment of financial assets is based on their classification as follows:

 

  1. This category includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss.

Embedded derivatives are separated from the host contract and accounted for separately if: (a) the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contract; (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and (c) the combined instrument is not measured at fair value through profit or loss.

The Company assesses whether embedded derivatives are required to be separated from host contracts when the Company first becomes party to the contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

 

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Table of Contents

Derivatives, including separated embedded derivatives, are classified as held for trading unless they are designated as effective hedging instruments. In the event of a financial instrument that contains one or more embedded derivatives, the entire combined instrument may be designated as a financial asset / liability at fair value through profit or loss only upon initial recognition

 

  2. Available-for-sale financial assets:

Available-for-sale financial assets are (non-derivative) financial assets that are designated as available for sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value. Gains or losses from fair value adjustments, except for interest and exchange rate differences that relate to debt instruments, are recognized in other comprehensive income. When the investment is disposed of or in case of impairment, the other comprehensive income (loss) is recognized in profit or loss. Revenues from dividends from investments in equity instruments are recognized when the right to receive the dividends is established.

IAS 19 (Revised)—Employee Benefits

In June 2011, the IASB issued IAS 19 (Revised) to be applied from January 1, 2013 which included a number of amendments to the accounting for defined benefit plans.

The adoption of IAS 19 (Revised) did not have a material effect on the Company’s financial statements.

IFRS 13—Fair value measurement

IFRS 13 establishes guidance for the measurement of fair value, to the extent that such measurement is required according to IFRS. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. IFRS 13 also specifies the characteristics of market participants and determines that fair value is based on the assumptions that would have been used by market participants. According to IFRS 13, fair value measurement is based on the assumption that the transaction will take place in the asset’s or the liability’s principal market, or in the absence of a principal market, in the most advantageous market. The new disclosures are to be applied prospectively beginning on January 1, 2013, and they do not apply to comparative figures.

The adoption of IFRS 13 did not have a material effect on the Company’s financial statements.

c. Functional currency and reporting currency

The reporting currency of the financial statements is the U.S. dollar.

The Company and its subsidiaries determine the functional currency of each entity based on the currency in which they primarily generate and expend cash. The Company determined that its functional currency is the U.S. dollar since most of its sales are generated in U.S. dollar and its funds are mostly held in U.S. dollar.

This currency is used to separately measure each entity’s financial position and operating results.

d. Transactions, assets and liabilities in foreign currency

Transactions denominated in a foreign currency are recorded upon initial recognition at the exchange rate on the date of the transaction. After initial recognition, monetary assets and liabilities denominated in a foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate at that date. Non-monetary assets and liabilities measured at cost in foreign currency are translated at the exchange rate

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES—(CONTINUED)

 

on the date of the transaction. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date when the fair value was determined.

NOTE 3:—SIGNIFICANT EVENT DURING THE PERIOD

a. During the six months ended June 30, 2013, 141,697 options were exercised by employees into 141,697 ordinary shares of NIS 0.02 par value each for a total consideration of $828.

b. On May 29, 2013, the Company signed a cooperation agreement with Beijing Dabeinong Technology Co. (“DBN”), a leading Chinese company in the field of development and commercialization of rice seeds and other agricultural products. According to the agreement the Company will receive payments based on milestones stated in the agreement. In addition, the Company shall receive sales based royalties based on the terms stated in the agreement.

NOTE 4:—OPERATING SEGMENTS

a. General:

Commencing January 1, 2012, the Company operates in two segments. The segments were determined on the basis of information considered by the Chief Operating Decision-Maker (“CODM”) for purposes of decision-making on the allocation of resources and evaluation of performance. The following Company’s segments are engaged in business activities for which they earn revenues and incur expenses, their results are reviewed by the CODM and discrete financial information is available:

 

Evogene segment       Services for the development of gene sequence technology (D.N.A. sequences responsible for the production of proteins—“genes”) and other D.N.A. sequences in plants (“D.N.A. sequences”).
Evofuel segment       Services for the development of improved species of the castor oil plant, which may serve as a source for extracting oil for the bio diesel fuel industry.

Segments performance (segment income (loss)) is determined based on operating income (loss) reported in the financial statements. The results of a segment reported to the CODM include items attributed directly to a segment, as well as other items, which are indirectly attributed using reasonable assumptions.

 

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Table of Contents

EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 4:—OPERATING SEGMENTS—(CONTINUED)

 

b. The following table presents our revenues and operating loss by segments:

 

     Evogene     Evofuel     Total  
     Audited  

For the Year Ended December 31, 2012

      

Revenues

   $ 17,072      $ —        $ 17,072   
  

 

 

   

 

 

   

 

 

 

Operating loss

   $ (1,993   $ (1,133   $ (3,126
  

 

 

   

 

 

   

 

 

 

Net financing income

         678   
      

 

 

 

Loss before taxes on income

       $ (2,448
      

 

 

 

 

     Evogene     Evofuel     Total  
     Unaudited  

For the six months period ended June 30, 2012

      

Revenues

   $ 8,287      $ —        $ 8,287   
  

 

 

   

 

 

   

 

 

 

Operating loss

   $ (596   $ (521   $ (1,117
  

 

 

   

 

 

   

 

 

 

Net financing income

         434   
      

 

 

 

Loss before taxes on income

       $ (683
      

 

 

 

 

     Evogene     Evofuel     Total  
     Unaudited  

For the six months period ended June 30, 2013

      

Revenues

   $ 8,934      $ —        $ 8,934   
  

 

 

   

 

 

   

 

 

 

Operating loss

   $ (1,588   $ (561   $ (2,149
  

 

 

   

 

 

   

 

 

 

Net financing expenses

         (213
      

 

 

 

Loss before taxes on income

       $ (2,362
      

 

 

 

c. Major customers:

Revenues from major customers each of whom amounts to 10% or more, of total revenues:

 

     Year ended
December 31,
    Six months  ended
June 30,
 
     2012     2012     2013  

Customer A (shareholder)

     70     74     66

Customer B (shareholder)

     24     26     32

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

NOTE 5:—OTHER INVESTMENT

On February 4, 2013, the Company signed an agreement with a private Israeli company, according to which the Company undertook to provide the private Israeli company with rights to use its greenhouses and facilities, including support for the private Israeli company’s development process for the following consideration:

 

  1. 15% of the private Israeli company’s shares on an outstanding basis. The shares are subject to reverse vesting over a period of 36 months.

 

  2. The Company also was granted with anti-dilution option up to an aggregate investment of $4,000 in the private Israeli company.

 

  3. A three years access to the system being developed by the private Israeli company including an option to purchase the system for $200 which is exercisable over the term of the agreement.

The Company recorded as other investment the total value of the above three elements of the consideration amounting to $365, which was determined based on a third party valuation. The total consideration of $365 was deferred and will be recognized over a period of 36 months. The investment in the private Israeli company will be accounted for as an available for sale investment under the provisions of IAS 39 and accordingly changes in fair value will be recorded in other comprehensive income (loss). Gains or losses from changes in fair value of the anti-dilution option and the option to purchase the system will be recorded in profit or loss. The three elements are financial assets classified as level 3 in the fair value hierarchy in IFRS 13.

NOTE 6:—SHAREHOLDERS’ EQUITY

All ordinary shares, options, warrants, per share data and exercise prices included in these financial statements for all periods presented have been retroactively adjusted to reflect the 1-for-2 reverse share split to be effective immediately prior to the effectiveness of the registration statement.

NOTE 7:—SUBSEQUENT EVENT

 

  a. On July 17, 2013, the board of directors of the Company approved an issuance to its officers and employees of 1,000,000 options exercisable into 1,000,000 ordinary shares of the Company, NIS 0.02 par value each, for an exercise price of NIS 44.28 ($12.52) per share. The estimated fair value of the options at their grant date using the binomial model was approximately $3,825. The main assumptions used by the Company in determining the fair value were: dividend yield, 0%; expected volatility of the share price, 26-60%; risk free interest rate, 1.14-6.34%; and share price of NIS 43.62 ($12.20).

On September 22, 2013, the board of directors approved an issuance to the Company’s President and Chief Executive Officer of 215,000 options exercisable into 215,000 ordinary shares of the Company, NIS 0.02 par value each, for an exercise price of NIS 48.18 ($13.62) per share. The grant is subject to shareholder approval at a general meeting of the Company. The current estimate of the fair value of these options using the binomial model is approximately $1,108. The main assumptions used by the Company in determining the fair value were: dividend yield, 0%; expected volatility of the share price, 26.70-58.51%; risk free interest rate, 1.22-6.25%; and share price of NIS 51.18 ($14.46).

 

  b. On July 30, 2013, the Israeli Parliament (the “Knesset”) approved the second and third readings of the Economic Plan for 2013-2014 (“Amended Budget Law”) which consists, among others, of fiscal changes whose main aim is to enhance long-term collection of taxes.

 

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EVOGENE LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

U.S. dollars in thousands (except share and per share data)

 

These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%, cancelling the lowering of the tax rates applicable to preferred enterprises (9% in development area A and 16% in other areas), taxing revaluation gains and increasing the tax rates on dividends within the scope of the Law for the Encouragement of Capital Investments to 20% and are effective from January 1, 2014.

The Company estimates that the effect of the change in tax rates will not have a material effect on the Company’s financial statements.

 

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LOGO

 

 


Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 6. Indemnification of Directors and Officers.

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association to be effective following this offering include such a provision. The company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.

Under the Companies Law and the Israeli Securities Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:

 

   

a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria;

 

   

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and

 

   

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent.

Under the Companies Law and the Israeli Securities Law, a company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:

 

   

a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

 

   

a breach of the duty of care to the company or to a third party, including a breach arising out of the negligent conduct of the office holder;

 

   

a financial liability imposed on the office holder in favor of a third party;

 

   

a financial liability imposed on the office holder in favor of a third party harmed by a breach in an administrative proceeding; and

 

   

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her.


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Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:

 

   

a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

 

   

a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

 

   

an act or omission committed with intent to derive illegal personal benefit; or

 

   

a fine or forfeit levied against the office holder.

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board of directors and, with respect to directors and the chief executive officer (subject to certain exemptions), also by the shareholders.

Our articles of association permit us to exculpate, indemnify and insure our office holders for any liability imposed on them as a consequence of an act which was performed by virtue of being an office holder. We intend to ask our shareholders to approve, prior to consummation of this offering, an amendment to our articles of association that will extend such exculpation, indemnification and insurance to cover omissions by our office holders (in their role as such) as well. Our office holders are currently covered by a directors’ and officers’ liability insurance policy.

We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.

Effective as of the date of this offering, the maximum indemnification amount set forth in such agreements is limited to an amount equal to 25% of our shareholders’ equity as reflected in our most recent consolidated financial statements prior to the date on which the indemnity payment is made. We intend to ask our shareholders to approve, prior to consummation of this offering, an amendment to such indemnification agreements pursuant to which, to the extent that the amount equal to equal to 25% of our shareholders’ equity is insufficient to cover all indemnity amounts payable with respect to all indemnifiable directors and executive officers, such amount will be allocated among our directors and executive officers pro rata, in accordance with their relative culpabilities, as finally determined by a court with respect to a particular claim. The maximum amount set forth in such agreements is in addition to any amount paid (if paid) under insurance and/or by a third party pursuant to an indemnification arrangement.

In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act is against public policy and therefore unenforceable.

There is no pending litigation or proceeding against any of our office holders as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any office holder.

Item 7. Recent Sales of Unregistered Securities.

During the past three years (that is, from the start of 2010 through the date of this registration statement), we have issued securities in transactions that have not been registered under the Securities Act as set forth below. We believe that each such issuance has been exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, Rule 701 and/or Regulation S under the Securities Act.


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We have granted 2,118,900 share options, in the aggregate, to employees, directors and consultants under our 2002 Plan and 2003 Plan during the foregoing period. The following table sets forth information with respect to the option and share awards from the start of 2010 through September 18, 2013. The U.S. dollar exercise price reflects a convenience translation at the rate of $1.00 = NIS 3.54, the representative exchange rate published by the Bank of Israel as of September 18, 2013.

 

Date of grant

   Number of
Options/Awards(1)
     Exercise Price  
      NIS      $  

April 11, 2010

     15,000         25.20         7.12   

April 11, 2010

     2,500         19.94         5.64   

April 11, 2010

     5,000         25.58         7.23   

April 11, 2010

     25,000         31.50         8.91   

June 20, 2010

     1,361,150         28.66         8.10   

September 19, 2010

     12,500         32.26         9.12   

September 19, 2010

     12,500         28.02         7.92   

September 19, 2010

     2,500         33.86         9.57   

November 17, 2010

     76,250         36.96         10.45   

May 25, 2011

     127,500         33.92         9.59   

September 18, 2011

     12,500         33.80         9.56   

September 18, 2011

     5,000         28.70         8.11   

September 22, 2011

     120,000         29.12         8.23   

June 25, 2012

     184,000         33.48         9.47   

November 11, 2012

     12,500         33.42         9.45   

November 11, 2012

     5,000         31.52         8.91   

December 6, 2012

     140,000         35.84         10.13   

July 17, 2013 (2)

     1,000,000         44.28         12.52   

 

(1) Represents option awards unless otherwise indicated.
(2) Does not include 215,000 options to our President and Chief Executive Officer, Ofer Haviv, which were approved in September 2013 by our compensation and nominating committee and board of directors but are subject to shareholder approval at our general shareholders meeting.

We have issued an aggregate of 968,473 ordinary shares pursuant to the exercise of share options by our employees and directors from the start of 2010 through the date of this registration statement.

Item 8. Exhibits and Financial Statement Schedules.

(a) The Exhibit Index is hereby incorporated herein by reference.

(b) Financial Statement Schedules.

All schedules have been omitted because they are not required, are not applicable or the information is otherwise set forth in the Consolidated Financial Statements and related notes thereto.

Item 9. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 6 hereof, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.


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The undersigned Registrant hereby undertakes:

 

  1. To provide the underwriters specified in the Underwriting Agreement, at the closing, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

 

  2. That for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

  3. That for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.


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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Rehovot, Israel on this 23rd day of September, 2013.

 

EVOGENE LTD.
By:  

/s/ Ofer Haviv

  Name:   Ofer Haviv
  Title:   President and Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Ofer Haviv and Sigal Fattal, and each of them, as attorney-in-fact with full power of substitution, for him or her in any and all capacities, to do any and all acts and all things and to execute any and all instruments which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act, and any rules, regulations and requirements of the SEC thereunder, in connection with the registration under the Securities Act of ordinary shares of the registrant (the “Shares”), including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated below to the Registration Statement on Form F-1 (the “Registration Statement”) to be filed with the SEC with respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before or after the effective date of such Registration Statement, and each of the undersigned hereby ratifies and confirms all that such attorney and agent shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signatures

 

Title

 

Date

/s/ Ofer Haviv

Ofer Haviv

  President and Chief Executive Officer
(Principal Executive Officer)
  September 23, 2013

/s/ Sigal Fattal

Sigal Fattal

  Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
  September 23, 2013

/s/ Martin Gerstel

Martin Gerstel

  Chairman of the Board   September 23, 2013

/s/ Michael Anghel

Dr. Michael Anghel

  Director   September 23, 2013

/s/ Adina Makover

Dr. Adina Makover

  Director   September 23, 2013


Table of Contents

Signatures

 

Title

 

Date

/s/ Leon Recanati

Leon Recanati

  Director   September 23, 2013

/s/ Simcha Sadan

Dr. Simcha Sadan

  Director   September 23, 2013

/s/ Kinneret Livnat Savitzky

Dr. Kinneret Livnat Savitzky

  Director   September 23, 2013


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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant’s duly authorized representative in the United States has signed this registration statement on Form F-1 in Newark, Delaware on September 23, 2013.

 

By:

  /s/ Donald J. Puglisi
  Name: Donald J. Puglisi
 

Title: Managing Director, Puglisi & Associates


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EXHIBIT INDEX

 

Exhibit
No.

  

Description

  1.1    Form of Underwriting Agreement*
  3.1    Articles of Association of the Registrant**
  3.2    Form of Amended and Restated Articles of Association of the Registrant to become effective upon closing of this offering**
  5.1    Opinion of Meitar Liquornik Geva Leshem Tal, Israeli counsel to the Registrant, as to the validity of the ordinary shares (including consent)*
10.1    Amended & Restated 2008 Collaboration and License Agreement, by and between Monsanto Company and the Registrant, dated November 28, 2011 †
10.2    Share Purchase Agreement, by and between Monsanto Company and the Registrant, dated August 27, 2008
10.3    Amendment to Share Purchase Agreement, by and between Monsanto Company and the Registrant, dated September 21, 2011**
10.4    Second Amendment to Share Purchase Agreement, by and between Monsanto Company and the Registrant, dated November 14, 2011**
10.5    3rd Amendment to Share Purchase Agreement, by and between Monsanto Company and the Registrant, dated November 28, 2011**
10.6    Wheat Collaboration and License Agreement, by and between Bayer CropScience AG and the Registrant, dated December 10, 2010 †
10.7    Amendment to Wheat Collaboration and License Agreement, by and between Bayer CropScience AG and the Registrant, dated October 14, 2012 †
10.8    Share Purchase Agreement, by and between Bayer CropScience AG and the Registrant, dated December 10, 2010
10.9    Form of Indemnification Agreement**
10.10    Evogene Share Option Plan (2002)**
10.11    Evogene Ltd. Key Employee Share Incentive Plan, 2003**
10.12    The Evogene Ltd. 2013 Share Option Plan**
10.13    English summary of lease agreements dated May 9, 2010, and July 22, 2010, respectively, by and between Reuven Zahari and the Registrant**
10.14    English summary of the lease agreement dated May 14, 2008, by and between Nachum Levi and the Registrant**
10.15    English summary of the lease agreement dated March 12, 2001, by and among Africa Israel Properties Ltd., as successor by assignment to Kiryat Weizmann Science Park Ltd., Ilot Investments (Ramat Vered) 1994 Ltd., Sardeh Ltd. and the Registrant, as successor by assignment to Compugen Ltd. via an assignment agreement dated January 1, 2002, by and between Compugen Ltd. and the Registrant, as supplemented by various addendums and supplements**
10.16    English summary of the Memorandum of Understanding, dated as of June 1, 2011, by and between Asifey Bar (AGSH) and the Registrant, as amended by Amendments dated June 14, 2012 and October 27, 2012, with respect to land and services provided to the Registrant for its scientific and agricultural experiments**
10.17    Investors’ Rights Agreement, by and among the Registrant and the investors named therein, dated January 3, 2006**
21.1    List of subsidiaries of the Registrant**
23.1    Consent of Kost Forer Gabbay and Kasierer, a member of Ernst & Young


Table of Contents

Exhibit
No.

  

Description

23.2    Consent of Meitar Liquornik Geva Leshem Tal (included in Exhibit 5.1)*
23.3    Consent of Symbiotic Engineering, LLC
23.4    Consent of Phillips McDougall
24.1    Power of Attorney (included in signature page to Registration Statement)

 

* To be filed by amendment.
** Included with prior confidential submission.
Confidential treatment has been requested for portions of this document. The omitted portions of this document have been filed with the Securities and Exchange Commission.
EX-10.1 2 d518283dex101.htm EX-10.1 EX-10.1

Exhibit 10.1

Execution Copy – Nov. 28, 2011

AMENDED & RESTATED 2008 COLLABORATION AND LICENSE AGREEMENT

MONSANTO COMPANY

and

EVOGENE LTD.

November 28, 2011

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – Nov. 28, 2011

 

1.      DEFINITIONS

     2   

2.       COLLABORATION

     32   

2.1    Funded Project & Research Plan

     32   

2.2    Steering Committee

     32   

2.3    Research Committee

     35   

2.4    Patent Committee

     39   

2.5    Manpower and Costs

     40   

2.6    Allocated FTE Activity. Evogene shall allocate the following FTEs to performance of the Funded Project

     41   

2.7    Records; Information Security

     41   

2.8    Reports

     42   

2.9    Materials Transfer

     43   

2.10 Publication

     43   

3.       LICENSES

     45   

3.1    To Monsanto

     45   

3.2    To Evogene

     52   

3.3    Sublicenses

     54   

4.       EXCLUSIVITY

     55   

4.1    Exclusivity

     55   

4.2    Independent Discovery Rounds

     57   

4.3    Encumbered Special Collaboration Hits

     75   

4.4    Patent Applications Arising from Independent Discovery Rounds and Internal Non-Field Discovery Rounds

     80   

4.4A Patent Applications Arising from Independent G2P Rounds

     80   

4.5    Non-Disclosure Period

     80   

4.6    Non-Compete; Non-Solicitation

     81   

5.       RESEARCH & DILIGENCE OBLIGATIONS

     82   

5.1    Diligence Obligations; General

     82   

5.2    Evogene Diligence Obligations – ATHLETE

     82   

5.3    Research Extension Option

     85   

5.4    [Intentionally omitted.]

     87   

5.5    Minimum Collaboration Hits Per Project Discovery Round

     87   

5.5A Evogene Diligence Obligations – G2P Enhancement Rounds

     87   

5.5B Evogene Diligence Obligations – G2P Optimization Rounds

     91   

5.5C Monsanto Provision of Monsanto Testing Data

     94   

5.5D Evogene Data Generation in Collaboration Years 4 and 5

     94   

 

a

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Execution Copy – Nov. 28, 2011

 

5.5E   Monsanto Report Prior to a Project G2P Round

     94   

5.5F  Monsanto Nominated Hits, Monsanto Nominated PlaNet Gene Stacks and Monsanto Nominated RePack Recommendations

     94   

5.6    Monsanto Diligence Obligations

     95   

5.7    Diligence Failures

     101   

5.8    Diligence Limitations

     103   

6.      PAYMENTS

     104   

6.1    Technology Access and License Fees

     104   

6.2    Research Payments to Evogene

     104   

6.3    Data Generation Payments

     106   

6.4    Milestone Fees

     106   

6.5    Royalty Payments

     107   

6.6    Patent Coverage

     110   

6.7    Special Collaboration Hits, Monsanto Nominated Hits, Monsanto Nominated PlaNet Gene Stacks and Monsanto Nominated RePack Recommendations

     110   

6.8    Third Party Offsets

     111   

6.9    Recoupment

     111   

6.10 Milestone Fees and Royalties on Certain Collaboration Hit Homologs

     111   

6.11 Model Plant Validation Costs

     111   

6.12 Disclaimer

     111   

6.13 Regulatory Citation Fees

     111   

7.      PAYMENTS; BOOKS AND RECORDS

     111   

7.1    Monsanto Royalty Reports

     111   

7.2    Additional Net Trait Revenue Information

     112   

7.3    Payment; Payment Method

     113   

7.4    Interest on Late Payments

     113   

7.5    Records; Inspection

     113   

7.6    Tax Matters

     114   

8.      REGULATORY

     115   

8.1    Regulatory Requirements

     115   

8.2    Regulatory and Product Stewardship

     115   

8.3    Consultation

     115   

8.4    Monsanto Regulatory Data and Data Compensation

     116   

8.5    Monsanto Protocols

     116   

9.      INTELLECTUAL PROPERTY

     117   

9.1    Inventorship and Title

     117   

9.2    Patent Rights

     119   

 

b

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Execution Copy – Nov. 28, 2011

 

10.    CONFIDENTIALITY

     124   

10.1 Confidential Information

     124   

10.2 Permitted Disclosures

     124   

10.3 Data Sharing and Restrictions; Ownership

     126   

10.4 Press Releases

     128   

11.    REPRESENTATIONS, WARRANTIES AND COVENANTS; DISCLAIMERS

     129   

11.1 Representations and Warranties

     129   

11.2 Third-Party Beneficiaries

     130   

11.3 Disclaimer of Warranties

     130   

12.    INDEMNIFICATION

     131   

12.1 Indemnification of Evogene

     131   

12.2 Indemnification of Monsanto

     131   

12.3 Procedure

     132   

12.4 Disputes Regarding Indemnification

     132   

13.    EXCLUSION OF DAMAGES; LIMITATION OF LIABILITY

     133   

13.1 Exclusion of Damages

     133   

13.2 Limitation of Liability

     133   

13.3 Allocation of Risk

     133   

14.    TERM AND TERMINATION

     133   

14.1 Term

     133   

14.2 [* * *] Early Termination of Funded Project by Monsanto

     134   

14.3 Termination of Certain Provisions of this Agreement for Cause

     134   

14.4 Termination of Funded Project

     134   

14.5 Accrued Obligations

     134   

14.6 Effect of Breach; Survival

     135   

15.    DISPUTE RESOLUTION

     136   

15.1 Informal Negotiation; Mediation

     136   

15.2 Arbitration

     136   

15.3 Infringement Claims

     142   

15.4 Export Control

     142   

 

c

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Execution Copy – Nov. 28, 2011

 

16.     CONDITION PRECEDENT

     143   

17.     MISCELLANEOUS

     143   

17.1 Governing Law

     143   

17.2 Language

     144   

17.3 Waiver

     144   

17.4 Amendment

     144   

17.5 Assignment; Change of Control to a Monsanto Competitor

     144   

17.6 Notices

     145   

17.7 Force Majeure

     146   

17.8 Independent Contractors

     147   

17.9 Employees and Agents of Each Party

     147   

17.10 Other Relationships

     148   

17.11 Advice of Counsel

     148   

17.12 Compliance with Laws

     148   

17.13 Other Obligations

     148   

17.14 Severability

     148   

17.15 Remedies Not Exclusive

     149   

17.16 Further Assurances

     149   

17.17 Entire Agreement

     149   

17.18 Limited Agent for Service of Process

     149   

17.19 Headings

     149   

17.20 Construction

     150   

17.21 Counterparts

     150   

Exhibits

 

Exhibit A       Illustration of Collaboration Hit
Exhibit B       Research Plan
Exhibit C       Evogene Patent Rights
Exhibit D       Harvestable Yield Formulas
Exhibit E       Form of Materials Transfer Agreement and Transmittal
Exhibit F       Monsanto-Funded Evogene Data
Exhibit G       Monsanto Improvement Patent Rights
Exhibit H       Determination of Net Trait Revenue
Exhibit I       Evogene Report Criteria
Exhibit J       Monsanto Report Criteria
Exhibit K       Phase Advancement Criteria
Exhibit L       Activity Points
Exhibit M       Monsanto Patent Reimbursement Cap
Exhibit N       Patent Prosecution Countries
Exhibit O       Information Technology Issues

 

d

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Execution Copy – Nov. 28, 2011

 

Exhibit P       Form of Press Release
Exhibit Q       Procedures for FTO Analysis
Exhibit R       Set-up & Pilot towards Monsanto Provision of Monsanto Testing Data
Exhibit S       Monsanto Testing Data
Exhibit T       Research Extension Option
Exhibit U       High Impact Royalty – Example
Exhibit V       Method for Determining Transformational Yield
Exhibit W       Expression Patterns Matrix

 

e

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


2008 COLLABORATION AND LICENSE AGREEMENT

This AMENDED & RESTATED 2008 COLLABORATION AND LICENSE AGREEMENT (“Agreement”) dated November 28, 2011, by and between Monsanto Company, a Delaware corporation (“Monsanto”), and Evogene Ltd., an Israeli company (“Evogene”), shall be effective as of the Effective Date.

BACKGROUND

A. Monsanto is in the business, among other things, of developing and commercializing transgenic plants and related agricultural products.

B. Evogene has developed and possesses certain technologies, including a proprietary discovery platform and model plant validation capabilities, which can be used to identify and test genes for among other things, the potential to convey improved or sustained yield and abiotic stress tolerance in plants, and is currently in the process of developing certain additional technologies, including proprietary computational platform and model plant validation capabilities, which can be used to enhance and optimize the development of products incorporating such genes.

C. Monsanto desires to fund and Evogene desires to undertake a research project, in which Evogene will apply its proprietary discovery platform, product-development enhancement and optimization platform and model plant validation capabilities to identify genes with the potential to improve yield and abiotic stress tolerance in certain agricultural crops and to identify certain parameters with the potential to enhance and/or optimize the development of products incorporating such genes, and which the parties expect will generate valuable know-how, including patentable inventions;

D. Monsanto and Evogene further desire that the valuable know-how, including patentable inventions, resulting from such research project be licensed by Evogene to Monsanto, so that Monsanto can apply its proprietary process of phase-based testing of genes, to develop and commercialize transgenic plants that exhibit improved or sustained yield and abiotic stress tolerance, all subject to and in accordance with the terms herein.

E. On August 27, 2008 the parties entered into the “2008 Collaboration and License Agreement” (the “Original 2008 Collaboration Agreement”). As a condition precedent to the execution and delivery of the Original 2008 Collaboration Agreement, the parties executed and delivered the “Share Purchase Agreement” defined below, and the Original 2008 Collaboration Agreement was executed and delivered as a condition precedent to the Share Purchase Agreement.

G. The parties now desire to amend the Original 2008 Collaboration Agreement as set forth herein, and as of the Signing Date, to replace the Original 2008 Collaboration Agreement, in its entirety, including its Exhibits, with this amended & restated Agreement.

 

1

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


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

1. DEFINITIONS.

For purposes of this Agreement and all Exhibits hereto, terms defined in this Section 1 shall have the meanings set forth herein. Certain definitions unique to Exhibit H (Net Trait Revenue) are defined therein without reference in this Section 1.

1.1 “Activity Points” has the meaning set forth in Section 5.6.3.

1.1A “Additional Hits” means the following Evogene Hits previously delivered to Monsanto pursuant to that certain Collaboration and License Agreement dated as of September 24, 2007, by and between the parties: [* * *].

1.2 “Agreement” has the meaning set forth in the Preamble.

1.3 “Affiliate” means any Person which directly or indirectly Controls, is Controlled by, or is under common Control with the party in question.

1.4 “[* * *]” means [* * *].

1.5 “Annual Research Payment” has the meaning set forth in Section 6.2.

1.6 “Annual Research Plan” has the meaning set forth in Section 2.3.3(d).

1.7 “ATHLETE” means Evogene’s computational Hit discovery platform, as modified, improved and supplemented, and any successor thereto.

1.8 “Average Exchange Rate” means, for any Collaboration Year starting with Collaboration Year [* * *], the average exchange rate of Dollars to NIS, based on rates reported by The Bank of Israel at http://www.bankisrael.gov.il/eng.shearim/select_cur/index.htm or any successor website, for the forty-five (45) days ending on the last day of the second quarter of the preceding Collaboration Year.

1.9 “Bare Sublicense” means a license of patent and/or know-how rights where the licensor does not engage in any substantial research, product development or other work, whether by itself or in collaboration with the licensee, in connection with the license or the subject matter of the license.

1.10 “[* * *]” means [* * *].

1.11 “Biological Material” means RNA, DNA and protein stocks, tissues, seeds, Germplasm, and other material.

 

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1.11A “[* * *] Model Plant Validation” means the model plant validation conducted in [* * *], as set forth in the Research Plan.

1.11B “Branded Sales” has the meaning set forth in Exhibit H. For the avoidance of doubt, the sale of a particular unit of seed (or other type of product) comprising a Product shall be included among either Licensed Sales or Branded Sales, but not both.

1.12 “Canola” means, collectively, Brassica napus, Brassica napus var. napobrassica, and Brassica rapa spp.

1.13 “Change of Control” means the acquisition of Control of Evogene by any Person, acting alone or as part of a group acting in concert.

1.14 “Collaboration” means the collaboration between Monsanto and Evogene contemplated by the terms of this Agreement.

1.15 “Collaboration Hit” means (a) each Evogene Project Hit, (b) each Special Collaboration Hit or Internal Non-Field Hit that becomes a Collaboration Hit pursuant to Section 4.2.1 and 4.2.2, respectively, (c) each GeneSpec Gene that becomes a Collaboration Hit [* * *].

1.16 “Collaboration Hit Data Backpack” means data on a Collaboration Hit or Special Collaboration Hit that is generated during the Discovery Round in which such Collaboration Hit or Special Collaboration Hit was identified, [* * *].

1.16A “Collaboration Hit G2P Data Backpack” means data on a Collaboration Hit Homolog or on a Special Collaboration Hit that is generated during a Project G2P Round performed in respect of such Collaboration Hit Homolog or Special Collaboration Hit, [* * *].

1.17 “Collaboration Hit Homolog” means, with respect to any Collaboration Hit, any Homolog of such Collaboration Hit individually (including, for the avoidance of doubt, such Collaboration Hit itself).

1.18 “Collaboration Hit Set” means, with respect to any Collaboration Hit such Collaboration Hit and all of its Homologs, collectively.

1.19 “Collaboration Year” means the period of twelve consecutive months (divided into and composed of four quarters) beginning on the first day of the first full calendar month following the Effective Date, and ending on the last day of the twelfth full calendar month following the Effective Date; provided, however that the first Collaboration Year, and the first quarter thereof, shall include the stub period from the Effective Date to the first day of the first full calendar month following the Effective Date. Thereafter, each twelve complete calendar months shall be a subsequent Collaboration Year.

 

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1.20 “Commercial License” has the meaning set forth in Section 3.1.3.

1.20A “Commercial Transfer” means the sale of a Product, or grant of a right to use a Product, for which Monsanto recognizes revenue, in compliance with GAAP.

1.21 “Commercially Exploit” or “Commercial Exploitation” means to make, have made, use, have used, import, export, and to sell, offer for sale or have sold a Product.

1.22 “Commercial Sale” means, in respect of each Product that is a Main Monsanto Crop or [* * *], the commercial sale of units of such Product sufficient to plant at least 10,000 acres of such Product, determined based upon a reasonable planting rate, and in respect of each Product that is not one of the foregoing Monsanto Crops, any commercial sale of such Product.

1.23 “Conceived” is defined as it is defined under applicable United States patent law.

1.24 “Confidential Information” means (i) the terms and conditions of this Agreement (but not its existence), (ii) any information or material, including all know-how and trade secrets, in tangible form disclosed hereunder that is marked as “Confidential” at the time it is delivered to the receiving party, (iii) information or material, including all know-how and 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, or (iv) information which is deemed Confidential Information pursuant to the terms of this Agreement; 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:

1.24.1 was already known to the receiving party, other than under an obligation of confidentiality owed to the disclosing party, at the time of disclosure, and without breach of any legal or contractual obligation to any party;

1.24.2 was generally available to the public or otherwise part of the public domain, other than through a breach of a legal obligation by the receiving party, at the time of its disclosure hereunder to the receiving party;

1.24.3 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;

 

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

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

1.25 “Construct” means the combination of one or more Collaboration Hit Homologs, Special Collaboration Hits and/or PlaNet Gene Homologs and the respective expression elements for such Collaboration Hit Homologs, Special Collaboration Hits and/or PlaNet Gene Homologs.

1.125A “Contingent High Impact Royalties” has the meaning set forth in Section 6.5.2B.

1.125B”Contingent Transformational Product” has the meaning set forth in Section 6.5.2B.

1.26 “Control” means:

1.26.1 as to Intellectual Property, any Intellectual Property that is owned by a party, or in-licensed by a party from a Third Party with the right 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 (including the terms of any such in-license or in-license agreement) or any applicable law and without the need for any consent (or further consent) from such Third Party;

1.26.2 as to the preparation and prosecution of patent applications, the maintenance of patent rights, and the enforcement and/or defense of patent rights, Control means the authority to select legal counsel, solicit other expert advice and assistance, and to make decisions pertaining to the preparation of patent applications and to the conduct of patent prosecution, interferences, appeals, patent issuance, maintenance, abandonment, reissue, reexamination, oppositions, patent enforcement or defense, as applicable; and

1.26.3 as to a Person, (a) ownership, directly or indirectly, beneficially or of record, of fifty percent (50%) or more of the equity interests representing fifty percent (50%) or more of the aggregate ordinary voting power represented by the issued and outstanding equity interests of such Person, or (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of such Person by individuals who were nominated by another Person or by a group acting in concert; or (c) the possession, directly or indirectly, by another Person or by a group acting in concert, of the power to direct or cause the direction of the management or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.

 

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1.27 “Core Validation” means the model plant validation assays that Evogene may conduct on Special Collaboration Hits pursuant to Section 4.2.1 and on Non-Field Hits pursuant to Section 4.2.2, as set forth in the Research Plan.

1.28 “Corn” means Zea mays.

1.29 “Cotton” means Gossypium spp.

1.30 “Covered Vegetables” means [* * *].

1.31 “Credit Genes” has the meaning set forth in Section 5.6.1(b).

1.32 “Data Generation” means the generation of Datasets.

1.33 “Database” means a database used by Evogene as the basis for the data-mining activity in a Discovery Round or in any other Gene discovery activities performed by Evogene.

1.34 “Dataset” means a set of raw data which originates from biological material (plant organs or other organisms) and which, after being processed into a Database by Evogene, may be data-mined for Hit discovery through a Discovery Round.

1.35 “Deadlock” has the meaning set forth in Section 2.2.5.

1.35A “Delivered Hit” means a Replacement Homolog designated in place of an Evogene Hit and Evogene Project Hit in accordance with Section 5.2.2(e), or in place of a Collaboration Hit in accordance with Section 5.2.2(f).

1.36 “Diligence Failure” has the meaning set forth in Section 5.7.

1.37 “Diligence Obligations” has the meaning set forth in Section 5.1.

1.38 “Discovery Program” means any of the research programs to identify Hits that confer specific Traits within the Monsanto Field for use in the Monsanto Crops, as set forth in the Research Plan.

1.39 “Discovery Round” means any and all research and development activities that are conducted by Evogene utilizing ATHLETE and that are targeted at identifying Hits for given Traits, which Hits, when and if claimed in a patent application filed by Evogene, would constitute Evogene Hits.

1.40 “Discovery Round Jointly-Owned Patent Rights” has the meaning set forth in Section 9.1.5(a).

 

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1.40A “Discovery Validation Data Backpack” means validation data from the Model Plant Validation, [* * *] Model Plant Validation or Core Validation conducted by Evogene on a Collaboration Hit (or on a Collaboration Hit Homolog thereof if approved by the Research Committee), in substantially the form set forth in the Research Plan.

1.41 “Discovery, Enhancement and Optimization Tools and Preferred Modes of Use Improvements” has the meaning set forth in Section 9.1.4.

1.42 “Dispute Resolution” has the meaning set forth in Section 15.

1.43 “Dollars” or “$” means the lawful currency of the United States of America.

1.44 “Effective Date” means August 27, 2008.

1.44A “Encumbered Discovered Hit” means a Hit that either:

(i) meets both of the following criteria:

(A) it is identified in a Project Discovery Round; and

(B) if such Hit were a Collaboration Hit, then a part of its Collaboration Hit Set, but not the Hit itself, would be licensed to a Third Party pursuant to an Existing Encumbering Agreement, or would be subject to license to a Third Party pursuant to a Future Encumbering Agreement. For clarification, if the Hit itself would be licensed to a Third Party pursuant to an Existing Encumbering Agreement, or would be subject to license to a Third Party pursuant to a Future Encumbering Agreement, then such Hit could not be considered an Encumbered Discovered Hit hereunder;

or

(ii) meets both of the following alternative criteria:

(A) it is an Observed Sequence; and

(B) a part of its Collaboration Hit Set (determined based on its Observed Sequence), but not the Hit itself, is licensed to a Third Party pursuant to an Existing Encumbering Agreement, or is subject to license to a Third Party pursuant to a Future Encumbering Agreement. For clarification, if the Observed Sequence itself would be licensed to a Third Party pursuant to an Existing Encumbering Agreement, or would be subject to license to a Third Party pursuant to a Future Encumbering Agreement, then such Hit could not be considered an Encumbered Discovered Hit hereunder.

 

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1.45 “Encumbered Special Collaboration Hit” means each Special Collaboration Hit that originates from an Existing Evogene Hit, or that is identified after the Effective Date, and that in either case is licensed to a Third Party pursuant to an Existing Encumbering Agreement, or may be licensed to a Third Party pursuant to a Future Encumbering Agreement.

1.46 “Event” means (A) each instance of a modification of a plant genome through the transgenic introduction of a Collaboration Hit Homolog or a Special Collaboration Hit, whether alone or as part of a Construct, (B) each instance of a modification of a plant genome through the transgenic introduction of all or part of a PlaNet Gene Stack, whether alone or as part of a Construct, and (C) each instance of a modification of a plant genome through the transgenic introduction of a PlaNet Gene Homolog, whether alone or as part of a Construct. For example, the same Collaboration Hit Homolog (or Construct) inserted into a given plant genome at two different loci within that plant’s DNA would be considered two different Events. Alternatively, two different Collaboration Hit Homologs or Constructs inserted into the same locus of two same-species plants would also be considered two different Events.

1.47 “Evogene” has the meaning set forth in the Preamble.

1.48 “Evogene Defense or Enforcement Matter” has the meaning set forth in Section 9.2.1(b).

1.49 “Evogene Diligence Obligations” has the meaning set forth in Section 5.1.

1.50 “Evogene Diligence Failure Notice” has the meaning set forth in Section 5.7.1(a).

1.51 “Evogene Discovery Round Patent Rights” shall mean patents or patent applications filed on inventions Conceived or Reduced to Practice by or on behalf of Evogene or any of its Affiliates in the framework of a Project Discovery Round or Independent Discovery Round, including any continuations, divisionals, continuations-in-part, reissues, or foreign equivalents based on any of the foregoing patents, patent applications or claims in respect thereof, and any subsequent patents or patent applications claiming priority to the filing date of any of the foregoing patents or patent applications, and any supplementary protection certificates, any other patent term extensions and exclusivity periods and the like of any such patents and patent applications, but specifically excluding any claim of any such patent or patent application to the extent that such claim (i) constitutes part of the Evogene Patent Rights; (ii) covers ATHLETE or any part thereof, including any improvement and/or modification of, or addition to, ATHLETE or any other computational gene discovery method or tool; (iii) covers the G2P Platform or any G2P Platform Component or any part thereof, including any improvement and/or modification of, or addition to, the G2P Platform or any G2P Platform Component, or any other computational product development enhancement or

 

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optimization method or tool, or (iv) claims any specific regulatory element or the use thereof. It is understood that (A) Evogene shall determine, in its discretion, the content of all such patent applications, and (B) any claim of any patent or patent application covering the modification of the expression of any particular Collaboration Hit Homolog or Special Collaboration Hit is included within the Evogene Patent Rights.

1.51A “Evogene G2P Round Patent Rights” shall mean patents or patent applications filed on inventions Conceived or Reduced to Practice by or on behalf of Evogene or any of its Affiliates in the framework of a G2P Round, including any continuations, divisionals, continuations-in-part, reissues, or foreign equivalents based on any of the foregoing patents, patent applications or claims in respect thereof, and any subsequent patents or patent applications claiming priority to the filing date of any of the foregoing patents or patent applications, and any supplementary protection certificates, any other patent term extensions and exclusivity periods and the like of any such patents and patent applications, but specifically excluding any claim of any such patent or patent application to the extent that such claim (i) constitutes part of the Evogene Patent Rights; (ii) covers ATHLETE or any part thereof, including any improvement and/or modification of, or addition to, ATHLETE or any other computational gene discovery method or tool; (iii) covers the G2P Platform or any G2P Platform Component or any part thereof, including any improvement and/or modification of, or addition to, the G2P Platform or any G2P Platform Component, or any other computational product development enhancement or optimization method or tool, or (iv) claims any specific regulatory element or the use thereof. It is understood that (A) Evogene shall determine, in its discretion, the content of all such patent applications, and (B) any claim of any patent or patent application covering the modification of the expression of any particular Collaboration Hit Homolog or Special Collaboration Hit is included within the Evogene Patent Rights.

1.52 “Evogene-Funded Evogene Data” means Datasets developed by or on behalf of Evogene that do not constitute Monsanto-Funded Evogene Data.

1.53 “Evogene Hit” means a Hit, including an Observed Sequence, claimed in a patent application (including a provisional patent application) that was filed by Evogene.

1.54 “Evogene Know-How” means any and all Know-How that is necessary or useful for the identification, evaluation, development, manufacture, production, optimization, use or sale of any Product, that is (i) Controlled by Evogene on the Effective Date or during the Research Period, including Evogene’s interest in any jointly-owned Know-How, and (ii) provided from time to time by or on behalf of Evogene to Monsanto or its Affiliates in connection with the Collaboration; provided, however, that Evogene Know-How shall not include Know-How that as of the date of a Change of Control, is (a) Controlled by any Affiliate that becomes an Affiliate as the result of such Change of Control, or (b) Controlled by any Person with which Evogene merges or combines in connection with such Change of Control.

 

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1.54A “Evogene Net Trait Revenue” (or “ENTR”) means, [* * *].

1.55 “Evogene Non-Project Hit” means any Evogene Hit identified in an Independent Discovery Round or Non-Field Discovery Round and designated as such by Evogene.

1.56 “Evogene Patent Rights” means any and all patents and patent applications that are Controlled by Evogene and its Affiliates (other than patents and patent applications that, as of the date of a Change of Control, are (a) Controlled by any Affiliate that becomes an Affiliate as the result of such Change of Control, or (b) Controlled by any Person with which Evogene merges or combines in connection with such Change of Control) on and after the Effective Date, including Evogene’s interest in Jointly-Owned Patent Rights, in each case solely to the extent claiming (i) any Collaboration Hit Homolog or Special Collaboration Hit or PlaNet Gene Homolog, the use of such Collaboration Hit Homolog or Special Collaboration Hit or PlaNet Gene Homolog, or any modification of the expression of such particular Collaboration Hit Homolog or Special Collaboration Hit or PlaNet Gene Homolog, and/or (ii) any RePack Recommendation and/or PlaNet Gene Stack, and including any continuations, divisionals, continuations-in-part, reissues, or foreign equivalents based on any of the foregoing patents, patent applications or claims in respect thereof, and any subsequent patents or patent applications claiming priority to the filing date of any of the foregoing patents or patent applications, and any supplementary protection certificates, any other patent term extensions and exclusivity periods and the like of any such patents and patent applications. The patent applications Controlled by Evogene on the Signing Date include those set forth on the attached Exhibit C, as the same may be amended from time to time by the parties as additional Evogene Patent Rights are identified.

1.57 “Evogene Project Hit” means (i) any Evogene Hit identified in a Project Discovery Round and designated as such in the applicable Collaboration Hit Data Backpack and (ii) any Delivered Hit designated as an Evogene Project Hit in the applicable Collaboration Hit Data Backpack.

1.57A “Evogene Trait” has the meaning set forth in Exhibit H.

1.58 “Existing Encumbering Agreement” means any agreement between Evogene and a Third Party executed prior to the Effective Date pursuant to which Evogene licenses, agrees to license, or agrees to negotiate in good faith the license of, any one or more Existing Evogene Hits, other Encumbered Special Collaboration Hits, or other Hits (including, for the avoidance of doubt, any Hit that would otherwise fall within the Collaboration Hit Set of any Collaboration Hit) to such Third Party, as such agreement is in effect as of the Effective Date, without giving effect to any amendments, modifications or supplements thereto made after the Effective Date.

 

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1.59 “Excluded Collaboration Hit” means a Collaboration Hit and its Collaboration Hit Homologs whose Exclusive Research License, Commercial License and Non-Assert License have terminated with respect to one or more Monsanto Crops due to Monsanto’s failure to advance a Collaboration Hit Homolog of such Collaboration Hit in the Monsanto Pipeline in such Monsanto Crop(s) pursuant to Section 5.6.2.

1.59A “Excluded PlaNet Gene Stack” means a PlaNet Gene Stack whose Research License and PlaNet Genes License have terminated with respect to one or more Monsanto Crops due to Monsanto’s failure to advance a PlaNet Gene Stack in the Monsanto Pipeline in such Monsanto Crop(s) pursuant to Section 5.6.2.

1.60 “Exclusive Research License” has the meaning set forth in Section 3.1.1.

1.60A “Exclusivity Extension Fee” has the meaning set forth in Section 6.1.2.

1.61 “Exclusivity Period” means the period of time beginning on the Effective Date and ending on the last day of Collaboration Year 6, as may be extended in accordance with Section 5.3, if Monsanto exercises the Research Extension Option.

1.62 “Existing Evogene Hit” means an Evogene Hit identified by Evogene prior to the Effective Date in a Discovery Round directed towards identifying Hits conferring one or more Traits in the Monsanto Field.

1.62A “Existing Evogene Patent Rights in the Excluded Countries” has the meaning set forth in Section 9.2.1(a).

1.62B “Expected Sequence” means the DNA sequence of a Collaboration Hit that is identified in the Collaboration Hit Data Backpack for such Collaboration Hit at the time Evogene delivers such Collaboration Hit Data Backpack to Monsanto.

1.62C “Expression Pattern” means any one of the expression patterns specifically defined by application of the Expression Patterns Matrix, as set forth in Exhibit W.

1.62D “Extended Funded Project” has the meaning set forth in Section 5.3.

1.62E “Extended Exclusivity Period” has the meaning set forth in Section 5.3.

1.62F “Extended Phase I Testing Period” has the meaning set forth in Section 5.6.1(a)(iii).

1.62G “Extended Period Annual Research Payments” has the meaning set forth in Section 5.3.

1.62H “Extended Period Evogene Deliverables” has the meaning set forth in Section 5.3.

 

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1.62I “Extension Option Last Exercise Date” has the meaning set forth in Section 5.3.

1.63 “FTE” or “Full Time Equivalent” means an employee working full time on research or research management activities directed to the performance of the Funded Project, or that number of employees working less than full-time on the Funded Project that collectively equal one such full-time employee.

1.64 “Funded Project” means those activities to be performed, conducted, or undertaken by Evogene during the Research Period in accordance with, and in fulfillment of, the Research Plan.

1.65 “Future Encumbering Agreement” means any agreement between Evogene and a Third Party that Evogene enters into after the Effective Date pursuant to an obligation, or an obligation to negotiate, set forth in any Existing Encumbering Agreement, and pursuant to which Evogene licenses, or agrees to license, any one or more Existing Evogene Hits, Encumbered Special Collaboration Hits, or other Hits (including, for the avoidance of doubt, any Hit that would otherwise fall within the Collaboration Hit Set of any Collaboration Hit) to such Third Party within or outside the Monsanto Crops.

1.65A “GAAP” means the currently generally accepted accounting practices in the United States, at the time of evaluation

1.65B “G2P Activity” – means any and all research and development activities that are conducted by Evogene utilizing the G2P Platform.

1.65C “G2P Enhancement Round” means RePack Analyses, GeneSpec Analyses, PlaNet Analyses and/or GeneDex Analyses conducted for a set of specific Collaboration Hit Homologs and/or Special Collaboration Hits, for which Evogene has delivered to Monsanto Collaboration Hit Data Backpacks and for which Monsanto has not provided Evogene with Monsanto Testing Data, which activities are directed to identifying Preferred Modes of Use of said Collaboration Hit Homologs and/or Special Collaboration Hits in respect of which Evogene delivers Collaboration Hit G2P Data Backpacks, for the specific Traits targeted in the Discovery Program from which such Collaboration Hits and/or Special Collaboration Hits were originally identified. For purposes hereof, a G2P Enhancement Round ends when Evogene delivers the number of Collaboration Hit G2P Data Backpacks that are required to be delivered in such G2P Enhancement Round, in accordance with Section 5.5A.2.

1.65D “G2P Genes” means PlaNet Genes and/or GeneSpec Genes, as applicable.

1.65E “G2P Recommendation” means with respect to a particular Gene, any recommendation made by Evogene pertaining to: (i) Genes for stacking with such Gene pursuant to G2P Activity conducted by Evogene using PlaNet, (ii) the preferred homolog of such Gene to be used in the development of a product in a particular plant species as a

 

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means of conferring a specific Trait, pursuant to G2P Activity conducted by Evogene using GeneSpec; (iii) the preferred pattern of expression of such Gene to be used in the development of a product in a particular plant species as a means of conferring a specific Trait pursuant to G2P Activity using RePack, or (iv) a prediction as to the stability of a specific Trait conferred by such Gene in a product of a particular plant species in different germplasm and/or under different environmental conditions, pursuant to G2P Activity using GeneDex.

1.65F “G2P Optimization Round” means RePack Analyses, GeneSpec Analyses, PlaNet Analyses and/or GeneDex Analyses conducted for a set of specific Collaboration Hit Homologs and/or Special Collaboration Hits, as to which Evogene has delivered to Monsanto Collaboration Hit Data Backpacks and as to which Monsanto has provided Evogene with Monsanto Testing Data, which activities are directed to identifying Preferred Modes of Use of said Collaboration Hit Homologs and/or Special Collaboration Hits for which Evogene delivers Collaboration Hit G2P Data Backpacks, for the specific Traits which were targeted in the Discovery Program from which such Collaboration Hits and/or Special Collaboration Hits were originally identified. For purposes hereof, a G2P Optimization Round ends when Evogene delivers the number of Collaboration Hit G2P Data Backpacks that are required to be delivered in such G2P Optimization Round, in accordance with Section 5.5B.2.

1.65G “G2P Platform” means Evogene’s computational Gene development enhancement and optimization platform comprised of all four G2P Platform Components, as modified, improved and supplemented, and any successor thereto.

1.65H “G2P Platform Component” means RePack, PlaNet, GeneSpec or GeneDex.

1.65I “G2P Round” means a G2P Enhancement Round, G2P Optimization Round or Independent G2P Round.

1.66 “Gene” means a sequence of DNA consisting of nucleotides that encode functional RNA, which DNA may also contain non-coding introns, and any protein encoded by such sequence of DNA.

1.66A “GeneDex”—means Evogene’s computational Gene analysis platform that is targeted at determining a relative score representing the relative level of stability of the Trait conferred by a Gene in different germplasm and/or under different environmental conditions.

1.66B “GeneDex Analysis” means any and all research and development activities that are conducted by Evogene in respect of a specific Collaboration Hit Homolog or Special Collaboration Hit, utilizing GeneDex.

 

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1.66 C “GeneDex Patent Rights” means any and all patents and patent applications that are Controlled by Evogene and its Affiliates (other than patents and patent applications that, as of the date of a Change of Control, are (a) Controlled by any Affiliate that becomes an Affiliate as the result of such Change of Control, or (b) Controlled by any Person with which Evogene merges or combines in connection with such Change of Control) on and after the Effective Date, including Evogene’s interest in Jointly-Owned Patent Rights, in each case solely to the extent claiming any GeneDex Recommendation, and including any continuations, divisionals, continuations-in-part, reissues, or foreign equivalents based on any of the foregoing patents, patent applications or claims in respect thereof, and any subsequent patents or patent applications claiming priority to the filing date of any of the foregoing patents or patent applications, and any supplementary protection certificates, any other patent term extensions and exclusivity periods and the like of any such patents and patent applications.

1.66D “GeneDex Recommendation” means a recommendation made by Evogene in a Collaboration Hit G2P Data Backpack, which is delivered to Monsanto pursuant to a GeneDex Analysis of the respective Collaboration Hit Homolog or Special Collaboration Hit of such Collaboration Hit G2P Data Backpack.

1.67 “Gene Group” means all Collaboration Hits (including those originating from Independent Discovery Rounds or Internal Non-Field Discovery Rounds that become Collaboration Hits pursuant to the terms hereof) whose Discovery Validation Data Backpacks are provided to Monsanto in a given Collaboration Year. For purposes of this Agreement:

Gene Group 1” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 1.

Gene Group 2” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 2. In addition, the Additional Hits shall be deemed Collaboration Hits included in Gene Group 2 for all purposes of this Agreement.

Gene Group 3” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 3.

Gene Group 4” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 4.

Gene Group 5” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 5.

Gene Group 6” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 6.

 

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Gene Group 7” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 7.

Gene Group 8” means all Collaboration Hits whose Discovery Validation Data Backpacks are delivered to Monsanto in Collaboration Year 8.

1.67A “GeneSpec” means Evogene’s computational Gene analysis platform that is targeted at determining the preferred homolog of any particular Gene, which is to be used in the development of one or more products, of a specific plant species, containing or based on such Gene, for conferring a specific Trait.

1.67B “GeneSpec Analysis” means any and all research and development activities that are conducted by Evogene in respect of a specific Collaboration Hit Homolog or Special Collaboration Hit, utilizing GeneSpec.

1.67C “GeneSpec Collaboration Hit” means a Collaboration Hit which originated from a GeneSpec Gene pursuant to Section 1.67D, and which is identical to any other Collaboration Hit for all purposes of this Agreement, except with respect to certain purposes set forth in Section 1.67D. For clarification, if at any time after the delivery of a GeneSpec Collaboration Hit to Monsanto, Evogene identifies in a Project Discovery Round an Evogene Hit that is identical to such GeneSpec Collaboration Hit and delivers it to Monsanto as a Collaboration Hit pursuant to Section 5.2.2, then thereafter such GeneSpec Collaboration Hit shall automatically constitute an ordinary Collaboration Hit for all purposes of this Agreement. For clarification, all definitions and provisions of this Agreement that apply to Collaboration Hits shall apply fully also to GeneSpec Collaboration Hits, except as set forth otherwise in Section 1.67D.

1.67D “GeneSpec Gene” means each Gene that is delivered by Evogene to Monsanto in a Collaboration Hit G2P Data Backpack or in an Independent Collaboration Hit G2P Data Backpack pursuant to a GeneSpec Analysis in a Project G2P Round or in an Independent G2P Round, respectively. Each such GeneSpec Gene shall be a homolog of the Collaboration Hit of the Collaboration Hit Set to which the Collaboration Hit Homolog for which Evogene conducted the GeneSpec Analysis, which Evogene recommends Monsanto to use in the development of a Product, predicted to exhibit a specific desirable Trait within the Monsanto Field.

A “GeneSpec Gene” shall automatically constitute a Collaboration Hit for all purposes of this Agreement except that: (i) Evogene’s provision of such GeneSpec Genes shall not count towards fulfillment of the Evogene Diligence Obligations under Section 5.2.2 and will not be taken into account for purposes of determining the number of Collaboration Hits within the applicable Gene Group; (ii) as set forth in Section 6.6 with respect to Patent Coverage; (iii) the Monsanto Diligence Obligations in respect of Collaboration Hits delivered to Monsanto pursuant to a Project Discovery Round shall not apply to GeneSpec Genes; provided, however, that GeneSpec Genes shall be subject to the

 

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Monsanto Diligence Obligations in respect of Preferred Modes of Use set forth in Section 5.6, and to the consequences of Monsanto Diligence Failures in respect of such Monsanto Diligence Obligations; and (iv) upon termination of the Research Licenses and Commercial License to the Collaboration Hit Homolog and/or Special Collaboration Hit in respect of which the GeneSpec Analysis which lead to the discovery of the GeneSpec Gene was performed, the Research Licenses and Commercial License to such GeneSpec Gene and all of its Homologs, shall automatically terminate as set forth in Section 5.6.7(a).

1.67E “GeneSpec Collaboration Hit Homolog” means, with respect to any GeneSpec Collaboration Hit, any Homolog of such GeneSpec Collaboration Hit individually (including, for the avoidance of doubt, such GeneSpec Collaboration Hit itself). For clarification, all definitions and provisions of this Agreement that apply to Collaboration Hit Homologs shall apply fully also to GeneSpec Collaboration Hit Homologs, except as set forth otherwise in Section 1.67D.

1.67F “GeneSpec Special Product” means each Product which contains a GeneSpec Collaboration Hit Homolog, which does not constitute a Collaboration Hit Homolog of the original Collaboration Hit for which Evogene conducted the GeneSpec Analysis which lead to the identification and delivery of the GeneSpec Collaboration Hit, which such GeneSpec Collaboration Hit Homolog is a Homolog thereof.

1.68 “Germplasm” means the genetic makeup of an organism which is used for breeding new organisms or is sold as commercial lines or varieties.

1.69 “Harvestable Yield” means the actual measured weight per unit field area of the relevant article of commerce of each of the Monsanto Crops (e.g., grain for each of the Main Monsanto Crops and [* * *]) with determinations of such measured weight made in a standardized and controlled manner. The particular formula to be applied to each Monsanto Crop is set forth on Exhibit D.

1.70 “Hit” means a sequence of DNA consisting of nucleotides that encode functional RNA, which DNA may also contain non-coding introns, and any protein encoded by such sequence of DNA. (N.B., this definition is intended to be identical to “Gene”.)

1.70A “High Impact Royalties has the meaning set forth in Section 6.5.2A.

1.71 “Homolog” means any Gene, the encoded protein of which meets the following test with respect to an encoded protein of an [* * *] or a [* * *], as the case may be: comparing the longest of the protein sequences, the sequences are more than [* * *] percent ([* * *]%) identical using a global alignment of the two sequences [* * *]: [* * *]= [* * *], [* * *] = [* * *], [* * *] = [* * *], provided that the [* * *] percent ([* * *]%) identity in sequence is distributed across at least [* * *] percent ([* * *]%) of the length of the longer of the two proteins.

 

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1.72 “Improvement” means, with respect to an Excluded Collaboration Hit or an Excluded PlaNet Gene Stack, a patentable invention that: (i) was developed by or on behalf of Monsanto or any of its Affiliates after the disclosure by Evogene to Monsanto of the Collaboration Hit underlying that Excluded Collaboration Hit or the Excluded PlaNet Gene Stack, as the case may be; (ii) that falls, in whole or in part, within the scope of a Valid Claim in an Evogene Patent Right covering that Excluded Collaboration Hit or Excluded PlaNet Gene Stack, as the case may be, to the extent that such Valid Claim was issued at the time the applicable Collaboration Hit or PlaNet Gene Stack, as the case may be, became an Excluded Collaboration Hit or Excluded PlaNet Gene Stack, or was applied for at such time and was issued at any time thereafter; and (iii) the practice of all or any part of which would be necessary in the practice of the Evogene Patent Right described in the preceding clause (ii).

1.72A “Independent Collaboration Hit G2P Data Backpack” means data on a Collaboration Hit Homolog and/or a Special Collaboration Hit that is generated during an Independent G2P Round performed in respect of such Collaboration Hit Homolog and/or a Special Collaboration Hit, including genomic data and additional information as specified in the Research Plan with respect to Collaboration Hit G2P Data Backpacks. Said data shall include the Special G2P Recommendation that is made by Evogene to be utilized in respect of such Collaboration Hit Homolog or a Special Collaboration Hit, pursuant to the specific G2P Platform Component used in such Independent G2P Round, to the extent such Special G2P Recommendation is identified by Evogene in the Independent G2P Round, and shall also include PlaNet Genes or GeneSpec Genes, to the extent such PlaNet Genes or GeneSpec Genes are discovered by Evogene pursuant to the specific G2P Platform Component used in such Independent G2P Round. The content of Independent G2P Data Backpack shall be the same as the content of a Collaboration Hit G2P Data Backpack.

1.73 “Independent Discovery Round” means a Discovery Round conducted by Evogene during the Exclusivity Period that is directed toward discovering Evogene Hits conferring Traits in the Monsanto Field but not intentionally targeting use in the Monsanto Crops, it being understood that Hits identified through any such Discovery Round may be useful in the Monsanto Crops, provided that commencing on the first day of Collaboration Year 6 and thereafter, [* * *] shall be excluded from the Monsanto Crops for purposes of this definition of “Independent Discovery Round”, subject, however, to the Non-Exclusive Negotiation Requirement set forth in Section 4.1.

1.73A “Independent G2P Round” means G2P Activity conducted by Evogene during the Exclusivity Period not constituting a G2P Enhancement Round or G2P Optimization Round, and conducted for a set of specific Collaboration Hit Homologs and/or Special Collaboration Hits, which activities are directed to identifying Special G2P Recommendations for said Collaboration Hit Homologs or Special Collaboration Hits.

 

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1.73B “Independent G2P Validation” means the model plant validation that Evogene may conduct on Special G2P Recommendation and which will be identical in process to Project G2P Validation.

1.73C “Independent G2P Validation Data Backpack” means validation data from an Independent G2P Validation conducted by Evogene on Special G2P Recommendation.

1.74 “Intellectual Property” means inventions, discoveries, ideas, know-how, works of authorship and confidential information, including copyrights, patents and patent applications, trade secrets, trademarks, service marks, design marks, moral rights, any registrations or applications relating to any of the foregoing, whether now existing or hereafter created, developed, arising or otherwise coming into being.

1.75 “Internal Independent Discovery Round” means an Independent Discovery Round that is not a Third-Party Independent Discovery Round.

1.75A “Internal Independent G2P Round” means an Independent G2P Round that is not a Third Party Independent G2P Round.

1.76 “Internal Non-Field Discovery Round” means a Non-Field Discovery Round conducted by Evogene during the Exclusivity Period that is not a Third-Party Non-Field Discovery Round.

1.77 “Internal Non-Field Hit” has the meaning set forth in Section 4.2.2(a).

1.78 “Issued Claim” means a claim in a patent that has been granted, regardless of whether such claim has thereafter expired or otherwise ceased to be enforceable, provided that Issued Claim shall not include any such claim that has been held unenforceable in a final and unappealable decision by a court of competent jurisdiction due to inequitable conduct.

1.79 “Jointly-Owned Patent Rights” has the meaning set forth in Section 9.1.5.

1.80 “Know-How” means methods, techniques, processes, specifications, materials, recipes, formulae, designs, plans, drawings, data, trade secrets, publications or any other technical or scientific information that, in each case, derive independent economic value, actual or potential, from not being generally known to, and not being easily ascertainable by proper means, by other Persons who can obtain economic value from their disclosure or use, and are the subject of efforts that are reasonable under the circumstances to maintain their secrecy or confidentiality.

1.81 “License Fee” has the meaning set forth in Section 6.1.

 

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1.81A “Licensed Sales” has the meaning set forth in Exhibit H. For the avoidance of doubt, the sale of a particular unit of seed (or other type of product) comprising a Product shall be included among either Licensed Sales or Branded Sales, but not both.

1.82 “Main Monsanto Crops” means Corn, Soybean, Cotton and Canola.

1.83 “Materials Transfer Agreement” means a separate written contract between the parties executed to effect, pursuant to this Agreement, a transfer between the parties of Biological Materials, a form of which is attached as Exhibit E.

1.84 “Milestone Fee” has the meaning set forth in Section 6.4.

1.85 “Milestones” has the meaning set forth in Section 6.4.

1.86 “Minimum R&D Activity” has the meaning set forth in Section 5.6.3.

1.87 “Model Plant Validation” means the model plant validation set forth in the Research Plan, that Evogene is to conduct on each Collaboration Hit (or on a Collaboration Hit Homolog thereof if approved by the Research Committee) or may conduct on Special Collaboration Hits pursuant to Section 4.2.1.

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

1.89 “Monsanto Competitor” means [* * *].

1.90 “Monsanto Crops” means Corn, Cotton, Soybean, Canola and [* * *], except that beginning in Collaboration Year 6, on certain terms and conditions and for certain purposes as set forth within this Agreement, [* * *] is excluded from the definition of “Monsanto Crops”, all as further set forth herein.

1.90A “Monsanto Data” means, collectively, Monsanto Datasets and Monsanto Testing Data.

1.91 “Monsanto Dataset” means one or more Datasets that are developed solely by Monsanto, or by one or more Third Parties on Monsanto’s behalf, and provided to Evogene during the Exclusivity Period.

1.92 “Monsanto Diligence Obligations” has the meaning set forth in Section 5.1.

1.92A “Monsanto Exercise Notice” has the meaning set forth in Section 5.3.

1.93 “Monsanto Field” means (i) the increase of Harvestable Yield under standard growth conditions (non-biotic stress environment), (ii) the increase or maintaining of Harvestable Yield under abiotic stress conditions, (iii) the increase or maintaining of Harvestable Yield under sub-optimal nutrient conditions (i.e. deficiency of macro elements and micro-elements), (iv) the increase of cotton fiber length, and (v) the

 

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increase of the quantity of stored oil in seeds (on a per-seed basis), and, in each case, creating these Traits transgenically. Monsanto Field shall not include the improvement of any biotic stress tolerance (e.g., insect, disease or pathogen resistance) or quality Traits (e.g., amino acid or fatty acid composition, vitamin content, sugar composition, improvement of digestibility, lignin or cellulose composition, secondary metabolites, aroma, flavor or color).

1.94 “Monsanto Fiscal Year” means the twelve (12) month period starting on September 1 of each calendar year, and ending on August 31 of the subsequent calendar year, unless changed by Monsanto in the ordinary course of its business.

1.95 “Monsanto-Funded Evogene Data” means one or more Datasets developed by Evogene, or by one or more Third Parties on Evogene’s behalf, under the Funded Project as specified and directed by the Research Plan and funded by Monsanto. Monsanto-Funded Evogene Data includes certain Datasets developed by Evogene before the Effective Date, as described in Exhibit F.

1.96 “Monsanto Improvement Patent Rights” means, as to a particular Excluded Collaboration Hit or Excluded PlaNet Gene Stack, any and all patents and patent applications that are Controlled by Monsanto and its Affiliates at the time a Collaboration Hit or PlaNet Gene Stack becomes such Excluded Collaboration Hit or Excluded PlaNet Gene Stack, as the case may be, or, if Evogene does not have an issued Valid Claim in an Evogene Patent Right covering such Excluded Collaboration Hit or Excluded PlaNet Gene Stack, as the case may be at the time such Hit or PlaNet Gene Stack becomes an Excluded Collaboration Hit or Excluded PlaNet Gene Stack, as the case may be, then the time that Evogene notifies Monsanto that a patent has issued which contains a Valid Claim in an Evogene Patent Right covering that Excluded Collaboration Hit or Excluded PlaNet Gene Stack, as the case may be, including Monsanto’s interest in Jointly-Owned Patent Rights to the extent not licensed to Evogene pursuant to Section 3.2.3, solely to the extent claiming inventions by or on behalf of Monsanto or a Monsanto Affiliate (solely or jointly with Monsanto or Third Parties) that are Improvements, including any continuations, divisionals, continuations-in-part, reissues, or foreign equivalents based on any of the foregoing patents, patent applications or claims in respect thereof, and any subsequent patents or patent applications claiming priority to the filing date of any of the foregoing patents or patent applications. The Monsanto Improvement Patent Rights shall be set forth on the attached Exhibit G, as the same shall be amended from time to time by the parties as additional Monsanto Improvement Patent Rights are identified.

1.97 “Monsanto Nominated Hit” means [* * *].

1.97A “Monsanto Nominated PlaNet Gene Stack” means [* * *].

1.97B “Monsanto Nominated Repack Recommendation” means [* * *].

 

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1.98 “Monsanto Pipeline” means Monsanto’s proprietary process of phase-based testing of Hits in plants for the development of products into which such Hits are transgenically introduced, including Phase I, Phase II and Phase III and subsequent phases.

1.98A “Monsanto Testing Data” means Monsanto data generated from experiments conducted within the laboratory, automated greenhouse or field trials by or on behalf of Monsanto in its testing of specific Collaboration Hits in the Monsanto Pipeline, as further detailed in Exhibit S and which is only provided hereunder for Collaboration Hits for which a G2P Optimization Round is to be conducted by Evogene.

1.98B “Net Seed Revenue” means [* * *].

1.99 “Net Trait Revenue” has the meaning set forth in Exhibit H attached hereto.

1.100 “NIS” means the lawful currency of the State of Israel.

1.100A “Non-Assert License” has the meaning set forth in Section 3.1.3.

1.101 “Non-Disclosure Period” means, (a) for any Special Collaboration Hit together with all of its Homologs, or any Collaboration Hit together with all its Collaboration Hit Homologs, the longer of (i) the [* * *] starting on the date the Collaboration Hit Data Backpack for such Special Collaboration Hit or Collaboration Hit is delivered to Monsanto, or (ii) the period from the date the Collaboration Hit Data Backpack for such underlying Special Collaboration Hit or Collaboration Hit is delivered to Monsanto until the date [* * *] such Special Collaboration Hit or Collaboration Hit (the “[* * *]”), and (b) for any Project G2P Recommendation or Special G2P Recommendation, the [* * *] starting on the date which such Project G2P Recommendation [* * *]. Notwithstanding the foregoing, with respect to any Collaboration Hit or Special Collaboration Hit originating from an Existing Evogene Hit, or any of the Collaboration Hit Homologs of such Collaboration Hit or Special Collaboration Hit, (i) there shall be no Non-Disclosure Period if the applicable [* * *] occurred before the Effective Date, and (ii) the Non-Disclosure Period shall end on the [* * *] if the applicable [* * *] occurs on or after the Effective Date.

1.101A “Non-Exclusive Negotiation Requirement” has the meaning set forth in Section 4.1.

1.102 “Non-Exclusive Research License” has the meaning set forth in Section 3.1.2.

1.103 “Non-Field Discovery Round” means a Discovery Round conducted by Evogene during the Exclusivity Period, whether or not for the benefit of a Third Party, that does not constitute an Independent Discovery Round and that is directed towards identifying Evogene Hits conferring Traits outside of the Monsanto Field.

 

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1.104 “Non-Field Hits” has the meaning set forth in Section 4.2.2.

1.105 “Non-Negotiation Period” has the meaning set forth in Section 4.1.1.

105A “Non-Project G2P Claim” means, with respect to each patent or patent application (including any continuations, divisionals, continuations-in-part, reissues, or foreign equivalents based on any of the foregoing patents or patent applications, and any subsequent patents or patent applications claiming priority to the filing date of any of the foregoing patents or patent applications, and any supplementary protection certificates, any other patent term extensions and exclusivity periods and the like of any such patents and patent applications) which claims one or more Project G2P Recommendations or Special G2P Recommendations, any claim in such patent or patent application which does not cover a Project G2P Recommendations or a Special G2P Recommendation.

1.105B “Observed Sequence” means the DNA sequence of a Collaboration Hit that is observed after such Collaboration Hit has been cloned and sequenced for purposes of transgenically introducing it into a model plant genome.

1.106 “Office Actions” shall mean actions taken in response to rejections of claims by patent offices, including responses filed in connection with requests for continued examination. Office Actions shall not include: a) filing a patent application, or any continuation, divisional, or continuation in part, a request for continued examination or any fees associated therewith; b) responding to an allowance of the application or any fees associated therewith; or c) paying any maintenance or annuity fees.

1.106A “Original 2008 Collaboration Agreement” has the meaning set forth in the preamble to this Agreement.

1.106B “Permitted Homolog” means a Homolog of an Encumbered Discovered Hit that is neither licensed to a Third Party pursuant to an Existing Encumbering Agreement nor subject to license to a Third Party pursuant to a Future Encumbering Agreement.

1.107 “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership or other legal entity.

1.108 “Phase” means any of Phase I, Phase II or Phase III in the Monsanto Pipeline.

1.109 “Phase Advancement Criteria” has the meaning set forth in Section 5.6.2.

 

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1.110 “Phase Advancement Failure” has the meaning set forth in Section 5.6.2(b).

1.111 “Phase Advancement Failure Fee” means, for each Collaboration Hit (together with all of its Collaboration Hit Homologs) or PlaNet Gene Stack that is subject to a Phase Advancement Failure pursuant to Section 5.6.2 and with respect to each Main Monsanto Crop in which such failure occurred, a fee determined by mutual agreement of Monsanto and Evogene or, absent such agreement, by the procedure set forth in Section 5.6.2.

1.112 “Phase I” means the proof-of-concept phase in the Monsanto Pipeline, during which Hits are proposed to be nominated, and are tested in Monsanto Crops (as well as the Research Plants), and assays and validations are performed to screen for desired performance to seek to determine which Hits show potential to produce commercial products in the Monsanto Crops.

1.113 “Phase I Testing” means completion of the research and testing activities in Phase I necessary to earn one (1) Activity Point with respect to a Collaboration Hit Homolog, as set forth in Exhibit L

1.113A “Phase I Testing of Preferred Modes of Use Resulting from G2P Optimization Rounds” has the meaning set forth in Section 5.3.3.

1.114 “Phase I Testing Period” means, for each Gene Group, the period beginning when the first Collaboration Hit in such Gene Group is delivered to Monsanto, and ending on the [* * *] that falls more than [* * *] ([* * *]) months after the end of the Collaboration Year in which the Discovery Validation Data Backpacks for such Gene Group were originally delivered to Monsanto.

1.115 “Phase II” means, with respect to any Collaboration Hit, the earliest to occur of:

1.115.1 the initiation of a large-scale transformation of Germplasm of one or more Monsanto Crops with DNA comprising any Collaboration Hit Homolog of such Collaboration Hit, such transformation being conducted in a manner so as to generate a sufficient number of Events that there is a reasonable likelihood that a sufficient number of commercially viable Events will be generated to allow selection of a suitably efficacious Event for production of Products. Such large-scale transformation shall not occur prior to the initiation of [* * *] of the same Event following a [* * *] of such Event for which there was observed a statistically significant level of desired Trait performance in multi-location field trials with [* * *] seen when compared to the appropriate non-transgenic controls; or

1.115.2 [* * *] containing any Collaboration Hit Homolog of such Collaboration Hit, following a [* * *] of the same Event for which there was observed a statistically-significant level of desired Trait performance in multi-location field trials with [* * *] seen when compared to the appropriate non-transgenic controls.

 

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1.116 “Phase II Completion Milestone Fee” has the meaning set forth in Section 6.4.1.

1.117 “Phase II Testing” has the meaning set forth in Section 5.6.4.

1.118 “Phase III” means, with respect to any Collaboration Hit that has completed Phase II, the stage of advanced development in the Monsanto Pipeline in which Monsanto develops and executes the regulatory strategy for US and global approvals for the lead Event containing such Collaboration Hit, and the [* * *]. This includes preparation of [* * *].

1.119 “PlaNet” means Evogene’s computational Gene analysis platform that is targeted at identifying Genes for stacking with a specific Gene, such that said Gene stack is predicted to convey a favorable impact on a targeted Trait in a specific plant species.

1.119A “PlaNet Analysis” means any and all research and development activities that are conducted by Evogene in respect of a specific Collaboration Hit Homolog or Special Collaboration Hit, utilizing PlaNet.

1.119B “PlaNet Gene” means each Gene that is delivered by Evogene to Monsanto in a Collaboration Hit G2P Data Backpack or in an Independent Collaboration Hit G2P Data Backpack pursuant to a PlaNet Analysis conducted by Evogene in a Project G2P Round or in an Independent G2P Round, respectively. Each such PlaNet Gene shall be a Gene that Evogene recommends to Monsanto to stack with the Collaboration Hit Homolog for which Evogene conducted the PlaNet Analysis.

A “PlaNet Gene” shall not constitute a Collaboration Hit unless and until: (i) at any time after delivery of the respective Collaboration Hit G2P Data Backpack, such PlaNet Gene is identified by Evogene as an Evogene Project Hit in a Project Discovery Round, and pursuant thereto delivered to Monsanto as a Collaboration Hit; or (ii) Monsanto notifies the Research Committee in writing of Monsanto’s election that such PlaNet Gene shall constitute a Collaboration Hit, such notification being provided at any time during the longer period of (1) the Exclusivity Period or (2) 18 months after the delivery of the respective Collaboration Hit G2P Data Backpack. If a PlaNet Gene becomes a Collaboration Hit pursuant to subsection (i) above, such PlaNet Gene shall constitute a Collaboration Hit for all purposes of this Agreement, and all provisions of this Agreement that are applicable specifically to PlaNet Genes, shall immediately cease to apply to such PlaNet Gene. If a PlaNet Gene becomes a Collaboration Hit pursuant to subsection (ii) above, such PlaNet Gene shall constitute a Collaboration Hit for all purposes of this Agreement and all provisions of this Agreement that are applicable specifically to PlaNet Genes shall immediately cease to apply to such PlaNet Gene, except that: (i) Evogene’s provision of such PlaNet Gene shall not count towards fulfillment of

 

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the Evogene Diligence Obligations under Section 5.2.2 and will not be taken into account for purposes of determining the number of Collaboration Hits within the applicable Gene Group, and (ii) the Monsanto Diligence Obligations in respect of Collaboration Hits delivered to Monsanto pursuant to a Project Discovery Round shall not apply to PlaNet Genes; provided, however, such PlaNet Genes shall be subject to the Monsanto Diligence Obligations in respect of Preferred Modes of Use set forth in Section 5.6, and to the consequences of Monsanto Diligence Failures in respect of such Monsanto Diligence Obligations.

1.119C “PlaNet Gene Homolog” means, with respect to any PlaNet Gene, any Homolog of such PlaNet Gene, individually (including, for the avoidance of doubt, such PlaNet Gene itself).

1.119D “PlaNet Genes License” has the meaning set forth in Section 3.1.3(a1).

1.119E “PlaNet Gene Stack” means a combination of one or more Collaboration Hit Homologs or Special Collaboration Hits with one or more of the following: a PlaNet Gene Homologs, a Collaboration Hit Homolog or a Special Collaboration Hits as recommended by Evogene in a Collaboration Hit G2P Data Backpack.

1.119F “Preferred Mode of Use” means a recommendation submitted by Evogene to Monsanto in a Collaboration Hit G2P Data Backpack as set forth in Exhibit B for the use of a specific Collaboration Hit Homolog for conferring a specific Trait in the Monsanto Field, in the development of one or more Products, as a result of Evogene’s analysis of such Collaboration Hit Homolog through a Project G2P Round using either a RePack Analysis, a GeneSpec Analysis, a PlaNet Analysis or a GeneDex Analysis. The Preferred Mode of Use resulting from a RePack Analysis shall be a RePack Recommendation. The Preferred Mode of Use resulting from a PlaNet Analysis shall be one or more PlaNet Gene Stacks. The Preferred Mode of Use resulting from a GeneSpec Analysis shall be a GeneSpec Gene. The Preferred Mode of Use resulting from a GeneDex Analysis shall be a GeneDex Recommendation.

1.119G “Prime Rate” means the US Prime Rate as published from time to time in The Wall Street Journal.

1.120 “Product” means any plant of a Monsanto Crop, including progeny, or plant component therefrom (e.g. seed, grain, grain component, or tissue) (i) which contains one or more Events; and/or (ii) in which the expression of any Collaboration Hit Homolog or a Special Collaboration Hit has been modified, which modification, in the case of a Collaboration Hit Homolog, is subject to an Issued Claim of an Evogene Patent Right, and in the case of a Special Collaboration Hit, is subject to a Valid Claim of an Evogene Patent Right, as provided in Sections 6.6(a) and 6.7, respectively; and/or (iii) which uses a Repack Recommendation, which Repack Recommendation is subject to an Issued Claim or Valid Claim, as applicable, of an Evogene Patent Right, as provided in Sections 6.6(b) and 6.7.3, respectively.

 

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1.120A “Product Channel Costs/Marketing Programs” means, for a particular Product, those costs incurred by Monsanto or its Affiliates in preparing and utilizing distribution channels for such Product in Branded Sales (e.g., [* * *], [* * *], and other marketing and incentive programs, which are added and subtracted from time to time by Monsanto, in all cases allocated to such Product in accordance with established Monsanto methodologies (as the same may be amended from time to time by Monsanto, upon notice to Evogene, in accordance with general changes in Monsanto methodologies) consistently applied by Monsanto in the ordinary course of its business, and in all cases solely to the extent such costs are included in the calculation of “Net Sales” on Monsanto’s quarterly and annual Statements of Consolidated Operations in accordance with GAAP.

1.121 “Product Royalties” means the royalties payable by Monsanto to Evogene pursuant to Section 6.

1.122 “Program Managers” means Evogene employees principally responsible for managing a Discovery Program.

1.123 “Project Discovery Round” means a Discovery Round performed under the Funded Project to identify Hits that confer one or more Traits in the Monsanto Field for use in one or more Monsanto Crops, as set forth in the Research Plan. For purposes hereof, a Project Discovery Round ends when Evogene delivers Collaboration Hit Data Backpacks for all Collaboration Hits identified in such Project Discovery Round.

1.123A “Project G2P Recommendation” means PlaNet Gene Stacks, RePack Recommendations, GeneDex Recommendations, G2P Genes and their respective Homologs.

1.123B “Project G2P Round” means a G2P Enhancement Round or G2P Optimization Round.

1.123C “Project G2P Validation” means the model plant validation as set forth in the Research Plan, that Evogene conducts on a Preferred Mode of Use, pursuant to Sections 5.5A.3 and 5.5B.3.

1.123D “Project G2P Validation Data Backpack” means validation data from Project G2P Validation conducted by Evogene on a Preferred Mode of Use that was recommended by Evogene for a specific Collaboration Hit Homolog, in the form set forth in the Research Plan.

1.123E “Promoter Expression Pattern” means the Expression Pattern that is designated and documented by Monsanto for a particular promoter.

 

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1.124 “Publish” means to publish in a scientific journal, present at a scientific conference, or any similar activity. Correlative terms, e.g. Publication, shall have corresponding meanings.

1.124A “Recommended Expression Pattern” has the meaning set forth in Section 1.131C.

1.125 “Reduced to Practice” is defined as it is defined under United States patent law.

1.126 “Regulatory Approval” means, with respect to a Product for any jurisdiction, approval by a Regulatory Authority in such jurisdiction which permits sale of such Product in such jurisdiction, without further submissions in such jurisdiction.

1.127 “Regulatory Approval Milestone Fee” has the meaning set forth in Section 6.4.3(a).

1.128 “Regulatory Authority” means the United States Environmental Protection Agency, United States Department of Agriculture, or any successor agency, and any foreign governmental equivalent, having the authority over the deregulation and/or commercialization of plants and agricultural products.

1.129 “Regulatory Citation Fee” has the meaning set forth in Section 6.13.

1.130 “Regulatory Data” has the meaning set forth in Section 8.4.

1.131 “Regulatory Submission” means submission of the dossier described in the definition of “Submitted for Regulatory Approval” to appropriate Regulatory Authorities whose purpose is to allow for the sale of a Product in any country.

1.131A “RePack” means Evogene’s computational Gene analysis platform that is targeted at determining the preferred pattern of expression to be used in respect of a specific Gene, i.e. how such Collaboration Hit should be expressed.

1.131B “RePack Analysis” means any and all research and development activities that are conducted by Evogene in respect of a specific Collaboration Hit Homolog or Special Collaboration Hit, utilizing RePack.

1.131C “RePack Recommendation” means a recommendation made by Evogene in a Collaboration Hit G2P Data Backpack, which (i) is delivered to Monsanto pursuant to a RePack Analysis of the respective Collaboration Hit Homolog or Special Collaboration Hit of such Collaboration Hit G2P Data Backpack, in respect of the preferred pattern of expression of such Collaboration Hit Homolog or Special Collaboration Hit and (ii) specifies the recommended Expression Pattern for such Collaboration Hit Homolog or Special Collaboration Hit (“Recommended Expression Pattern”).

 

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1.131D “Replacement Homolog” means a Homolog of an Encumbered Discovered Hit, where no part of the Collaboration Hit Set of such Homolog (if such Homolog were a Collaboration Hit) would be licensed to a Third Party pursuant to an Existing Encumbering Agreement, or would be subject to license to a Third Party pursuant to a Future Encumbering Agreement.

1.131E “Reporting Period” has the meaning set forth in Section 7.1.

1.132 “Research Committee” has the meaning set forth in Section 2.3.1.

1.133 [Intentionally omitted.]

1.134 [Intentionally omitted.]

1.135 “Research Extension Option” has the meaning set forth in Section 5.3.

1.136 [Intentionally omitted.]

1.137 “Research License” has the meaning set forth in Section 3.1.2.

1.138 “Research Payments” means each, any, and all of the Annual Research Payments.

1.139 “Research Period” has the meaning set forth in Section 2.1.

1.140 “Research Plan” has the meaning set forth in Section 2.1.

1.141 “Research Purposes” means to study, perform tests, evaluate, copy, modify, propagate, create derivatives from and otherwise make, use, import or export a Product, but not to Commercially Exploit such Product.

1.142 “Research Species” means all species of plants and microbes [* * *] and the Covered Vegetables. Commencing on the first day of Collaboration Year 6 and thereafter, [* * *] shall be added to the species of plants that are excluded from the “Research Species”.

1.142A “Royalty Bearing Component” means, with respect to each Product for which Product Royalties are payable in a given Reporting Period pursuant to Section 6 but excluding Section 6.5.3, any and all of the Collaboration Hit Homologs, Special Collaboration Hits, PlaNet Gene Homologs, PlaNet Gene Stacks, and RePack Recommendations comprising such Product for which Product Royalties are payable during such Reporting Period in accordance with Section 6.

1.143 “Semi-Annual Pool” has the meaning set forth in Section 4.2.1(a)(vi) .

1.144 “Sensitive Material” has the meaning set forth in Section 2.10.1.

 

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1.144A “Signing Date” means November 28, 2011.

1.145 “Share Purchase Agreement” means that certain Share Purchase Agreement of even date herewith between Evogene and Monsanto.

1.146 “Solely-Owned IP” has the meaning set forth in Section 9.1.2.

1.147 “Soybean” means Glycine L. max.

1.148 “Special Collaboration Hit” means an Evogene Non-Project Hit (for clarification, not including any Homologs thereof) that (i) is identified through an Independent Discovery Round described in Section 4.2.1 and (ii) has not undergone Core Validation or Model Plant Validation.

1.149 “Special Dispute Notice” has the meaning set forth in Section 15.2.2(a).

1.150 “Special Gene Group” has the meaning set forth in Section 4.2.1(a)(vii) (2) (2).

1.150A “Special G2P Recommendation” means G2P Recommendations arising from any Independent G2P Round, submitted by Evogene to Monsanto in an Independent Collaboration Hit G2P Data Backpack.

1.151 “Steering Committee” has the meaning set forth in Section 2.2.1.

1.152 “Sublicense” means any sublicense granted to a Third Party under Section 3 by Monsanto or Evogene (as the case may be), or any of their respective Affiliates.

1.153 “Sublicensee” means a Third Party that receives a grant of a Sublicense under Section 3 by Monsanto or Evogene (as the case may be), or any of their respective Affiliates.

1.154 “Submitted for Regulatory Approval” means a dossier has been submitted to the appropriate Regulatory Authority or Regulatory Authorities in any country containing sufficient information that, if approved by the Regulatory Authority or Regulatory Authorities based on guidelines and requirements in effect on the date of submission, would permit sale of the applicable Product in the applicable jurisdiction, without further submissions. Whether or not the relevant Regulatory Authority approves such Product or requires additional information is not relevant in determining such Product’s status as “Submitted for Regulatory Approval.”

1.155 “Subsidiary” means any Person which is directly or indirectly Controlled by the party in question.

1.155A “Surrogate Per-Unit Net Seed Revenue” means [* * *].

 

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1.156 “Terminate the Funded Project”, or any correlative term, means that (i) the Research Period shall terminate, (ii) Sections 5.2, 5.3, 5.5, 5.7.1 (except with respect to any Evogene Diligence Failures that have occurred prior to the date of such termination), 6.2 (except with respect to any Research Payments that have accrued as of the date of such termination), and 6.3 (except with respect to any Data Generation Payments that have accrued as of the date of such termination) shall terminate, and (iii) Evogene’s obligations under Sections 2.1, 2.5.1, 2.6, 2.8.1 and 2.8.3 shall terminate. Termination of the Funded Project does not include the termination of any of the parties’ rights or obligations under Section 4, except to the extent expressly provided in this Agreement, or any of Monsanto’s Diligence Obligations.

1.156A “Terminate the G2P Optimization Part of the Funded Project”, or any correlative term, means that (i) the Research Period shall continue, (ii) Sections 5.5B and 5.5C shall terminate, (iii) the Annual Research Payment and Data Generation Payments pursuant to Sections 6.2 and 6.3 shall continue unchanged, and (iv) the Research Committee shall propose to the Steering Committee, and the Steering Committee shall approve, the Evogene Diligence Obligations that Evogene shall conduct during the remainder of the Research Period in place of the Evogene Diligence Obligations pursuant to Section 5.5B that terminate pursuant to Subsection (ii)—according to the types of activities and ‘price list’ set forth in Exhibit T, and the Monsanto Diligence Obligation in respect of the deliverables of such new Evogene Diligence Obligations—according to the principals set forth in the current provisions of this Agreement regarding Monsanto Diligence Obligations, and this Agreement and the Research Plan shall be amended to reflect such changes in the Evogene Diligence Obligations and Monsanto Diligence Obligations. Termination of the G2P Optimization Part of the Funded Project does not include the termination of any of Monsanto’s Diligence Obligations, including in respect of any Preferred Modes of Use already delivered by Evogene to Monsanto pursuant to a G2P Optimization Round prior to such Termination of the G2P Optimization Part of the Funded Project.

1.157 “Territory” means worldwide.

1.158 “Third Party” means a Person or entity other than Monsanto or its Affiliates, and other than Evogene or its Affiliates.

1.159 “Third-Party Independent Discovery Round” means an Independent Discovery Round that, from its inception, is conducted with, or for the benefit of, a Third Party and that is governed by a bona fide written agreement with such Third Party.

1.159A “Third-Party Independent G2P Round” means an Independent G2P Round that is conducted with, or for the benefit of, a Third Party and that is governed by a bona fide written agreement with such Third Party, and is directed solely to applications outside of the Monsanto Crops.

 

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1.160 “Third-Party Non-Field Discovery Round” means a Non-Field Discovery Round that, from its inception, is conducted with, or for the benefit of, a Third Party and that is governed by a bona fide written agreement with such Third Party.

1.161 “Third-Party Non-Field Hit” has the meaning set forth in Section 4.2.2(a).

1.161A “Total Net Seed Revenue” (or “TNSR”) means [* * *].

1.162 [Intentionally omitted]

1.163 “Trait” means any biochemical, physiological, physical or other attribute or phenotype of a cell, plant, or other plant component.

1.163A “Transformational Product” has the meaning set forth in Section 6.5.2A.

1.163B “Transformational Yield” has the meaning set forth in Exhibit V.

1.164 “Valid Claim” means (a) a claim of an issued and unexpired patent which has not been held unenforceable or invalid by a court or other governmental agency of competent jurisdiction in an unappealed or unappealable decision and which has not been abandoned, disclaimed or admitted to be invalid or unenforceable, through reissue or otherwise, or (b) a claim of a pending patent application that (i) has been asserted and continues to be prosecuted in good faith and (ii) has not been abandoned or finally rejected without the possibility of appeal or refiling.

1.165 “Validated Hit” means a Collaboration Hit, Special Collaboration Hit or Non-Field Hit that has met the criteria for validation set forth in the Research Plan.

For purposes of this Agreement, (i) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation,” (ii) the word “or” is not exclusive, (iii) the words “herein”, “hereof”, “hereby”, “hereto” and “hereunder” refer to this Agreement as a whole, and (iv) each definition shall be equally applicable to the singular and plural forms of the terms defined. Unless the context otherwise requires, references herein: (A) to Sections and Schedules mean the Sections of and Schedules to this Agreement; (B) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement; and (C) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. The Schedules referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein.

 

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  2. COLLABORATION.

2.1 Funded Project & Research Plan. The Funded Project is directed to identifying Genes in the Monsanto Field for application in the Monsanto Crops, and as of Collaboration Year 4, also to identifying certain types of parameters for enhancing and/or optimizing the development of products containing such Genes. As of the Signing Date of this Agreement, the parties have agreed upon an amended research plan for the Funded Project (the “Research Plan”, the initial form of which is attached hereto as Exhibit B), which Funded Project work and Research Plan have started as of the Effective Date, and unless terminated early pursuant to the terms hereof, shall continue until the end of the latest-to-end Non-Disclosure Period but in any event not later than the end of Collaboration Year 8 (the “Research Period”), as may be extended in accordance with Section 5.3 if Monsanto exercises the Research Extension Option. The Research Plan may include a general overview and timetable for development and implementation of the Funded Project, details regarding the Evogene Diligence Obligations and the Monsanto Diligence Obligations, schedules for deliverables, test protocols and procedures, thresholds for determination of a Validated Hit, procedures for disclosing and delivering Collaboration Hits, Special Collaboration Hits, and Preferred Modes of Use to Monsanto, and descriptions of other research activities. Monsanto may, subject to and in accordance with Section 5.3, determine to extend the research performed by Evogene and funded by Monsanto under this Agreement, and in such event the Research Plan shall be amended as provided in Section 5.3. The Research Plan may be amended or supplemented by the Steering Committee from time to time, as provided below; provided, however, that to the extent any terms in the Research Plan shall at any time conflict with the terms of this Agreement, this Agreement shall control.

2.2 Steering Committee

2.2.1 Establishment. The parties establish a joint “Steering Committee” that will be responsible for overseeing and managing the Collaboration.

2.2.2 Membership. The Steering Committee shall be comprised of two (2) members appointed by Monsanto and two (2) members appointed by Evogene, all of whom are and shall be full time employees of the appointing party and shall have appropriate authority to make the decisions assigned to the Steering Committee hereunder. The chairperson of the Steering Committee (having no special or additional voting power) shall be one of the members, in annual rotation between the parties. Each of Monsanto and Evogene may replace its Steering Committee representatives at any time, upon written notice to the other party. From time to time, the Steering Committee may establish subcommittees to oversee particular activities. The subcommittees shall also be comprised of an equal number of representatives from each party.

 

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2.2.3 Responsibilities. Subject to the terms and conditions hereof, the Steering Committee shall have ultimate supervisory authority over the Collaboration. Its responsibilities shall include, without limitation:

(a) Making final decisions on matters recommended by the Research Committee pursuant to Section 2.3.3 (with or without modifications thereto);

(b) Approval of any amendments or modifications to the Research Plan approved by the Research Committee pursuant to Section 2.3.3(c), which amendments and modifications shall be incorporated into Exhibit B by reference;

(c) Reviewing and discussing all reports, notices and other materials relating to the Collaboration delivered to it hereunder;

(d) Approval of the Annual Research Plans proposed by the Research Committee pursuant to Section 2.3.3(d) (with or without modifications thereto, including any modifications to Evogene’s budget allocations for the performance thereof);

(e) Discussing possible expansion of the Collaboration and other possible strategic cooperation that the parties may engage in, and without limiting the foregoing, the Steering Committee shall use reasonable efforts to arrange a meeting between senior executives of Monsanto and Evogene at each annual meeting of the Steering Committee in St. Louis, Missouri;

(f) The decisions contemplated by Sections 5.2.4(c), 5.3.3(v), 5.5, 5.6.1(f) and 10.3.3; and

(g) Delegating any additional responsibilities to the Research Committee or the Patent Committee, as contemplated by Sections 2.3.3(q) and 2.4.3(f).

2.2.4 Meetings. The Steering Committee shall meet at least semi-annually, and otherwise on an as-needed basis as shall be required in order to make decisions, carry out its duties hereunder and approve recommendations

 

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of the Research Committee. Meetings shall be in-person or by telephone or video conference, as the Steering Committee agrees, but with at least one (1) in-person meeting per year in St. Louis, Missouri. Members of the Steering Committee may participate in and vote at meetings in person, by telephone or by video conference, and may vote at meetings by proxy; provided, however, that Monsanto and Evogene shall use reasonable efforts to cause their respective Steering Committee members to attend in person each scheduled in-person meeting. Additional employees of either party may be permitted to attend Steering Committee or its sub-committees’ meetings, subject to prior notice to and the approval of the other party, not to be unreasonably withheld. At each such Steering Committee meeting (or sub-committee meeting), whether in-person or otherwise, the Steering Committee chairperson shall, or shall have a delegate who is not a member, prepare written minutes which shall document all Steering Committee discussions and decisions. Draft minutes shall be distributed to the Steering Committee members within one (1) week following the particular Steering Committee meeting, revised as necessary, and promptly approved in writing by all Steering Committee members. Thereafter, the approved minutes of each Steering Committee meeting shall be distributed to each member.

2.2.5 Decision-Making. All decisions of the Steering Committee shall be made by unanimous consent. In the event the Steering Committee is unable to reach agreement on a matter (a “Deadlock”), then either party may notify the other of the Deadlock in writing, such notice to describe the subject of the Deadlock in reasonable detail. Subject to the limitations in the following paragraph, Monsanto shall retain ultimate decision-making authority over the Deadlocked matter, such authority to be exercised by Monsanto in good faith and notified to Evogene within thirty (30) days after delivery of the applicable Deadlock notice. If Monsanto fails to notify Evogene how Monsanto has elected to exercise its authority on the Deadlocked matter, then Evogene may take such action with respect to the Deadlocked matter as Evogene deems appropriate. If Monsanto is not entitled to exercise ultimate decision-making authority with respect to any Deadlock, then such Deadlock shall be resolved pursuant to Section 15. When Sections 5.2.4(c), 5.5, and 5.6.1(f) permit the Steering Committee to make a decision requiring unanimous agreement and the Steering Committee is unable to agree unanimously, then the absence of such agreement shall not constitute a Deadlock hereunder.

2.2.6 Limits on Decision-Making Authority. Monsanto shall not have the authority under this Section to make unilaterally any decision that: (i) violates any term or provision of this Agreement; (ii) materially and adversely impacts Evogene’s rights or its ability to meet its obligations under this Agreement and/or the Research Plan; (iii) materially amends or alters the

 

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Evogene Diligence Obligations (including the criteria for satisfaction thereof) or impacts the achievability of such obligations; (iv) materially amends the Monsanto Diligence Obligations (including the criteria for satisfaction thereof); (v) would exceed the agreed budget for the Funded Project that is covered by the Research Payments or would modify Evogene’s budget allocations for the performance of any Annual Research Plan; (vi) materially amends either party’s reporting obligations under Section 2.8; or (vii) the Steering Committee is entitled to make under Section 5.5. For the avoidance of doubt, only Evogene will have ultimate decision-making authority with respect to any decisions relating to approaches to computational gene discovery, Project G2P Rounds, and Evogene’s generation of data to be included in Databases

2.3 Research Committee.

2.3.1 Establishment. The parties establish a joint “Research Committee” that will be responsible for administering the research and development activities to be performed by the parties hereunder, as set forth in Section 2.3.3.

2.3.2 Membership. The Research Committee shall be comprised of an equal number of representatives, initially four (4), all of whom are and shall be full time employees of the appointing party. Two (2) members shall be appointed by Monsanto and two (2) members shall be appointed by Evogene. Each of Monsanto and Evogene may replace its Research Committee representatives at any time, upon written notice to the other party. From time to time, the Research Committee may establish subcommittees to oversee particular activities. The subcommittees shall also be comprised of an equal number of representatives from each party.

2.3.3 Responsibilities. The Research Committee shall supervise the execution of the Research Plan and administer the Funded Project, and its responsibilities shall include, without limitation:

(a) To periodically review whether there is need to amend or supplement the Research Plan and to recommend changes thereto to the Steering Committee, as may be reasonably required to meet the goals of the Research Plan and the Collaboration, and in the event of Monsanto’s exercise of the Research Extension Option;

(b) To recommend to the Steering Committee changes in assays and validation processes for Collaboration Hit Homologs, Special Collaboration Hits and Preferred Mode of Use;

 

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(c) To recommend to the Steering Committee amendments, modifications and supplements to the Research Plan, and changes to validation criteria of Collaboration Hit Homologs Special Collaboration Hits and Preferred Modes of Use;

(d) At least sixty (60) days prior to the commencement of each Collaboration Year, to review and approve, subject to final approval by the Steering Committee, a detailed research plan for the subsequent Collaboration Year to be prepared and proposed by Evogene (including determining the Discovery Programs to be conducted and the Monsanto-Funded Evogene Data to be generated) (each an “Annual Research Plan”), each of which, upon approval by the Steering Committee shall automatically constitute an amendment to and part of the Research Plan;

(e) To discuss ways for Monsanto to assist the gene discovery and identification of Preferred Modes of Use processes, such as by providing Evogene with certain know-how and Monsanto Data;

(f) To monitor the parties’ performance of their respective Diligence Obligations (based on the reports to be provided by each party as set forth in Sections 2.8.1 and 2.8.2) and to review and amend the format of the parties’ reports, as may be reasonably required in order to enable the Research Committee to monitor the parties’ performance of their respective Diligence Obligations;

(g) To discuss, at a general level, information provided on Collaboration Hit Homologs and Special Collaboration Hits, such as the Collaboration Hit Data Backpacks, the Discovery Validation Data Backpacks, , the Collaboration Hit G2P Data Backpacks, and the Project G2P Validation Data Backpacks and to make recommendations with respect to the validation of the Collaboration Hit Homologs, Special Collaboration Hits and Preferred Modes of Use in the Monsanto Pipeline;

 

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(g1) To recommend to the Steering Committee Monsanto diligence obligations in respect of Phase I Testing of Preferred Modes of Use Resulting from G2P Optimization Rounds upon Monsanto’s exercise of the Research Extension Option as set forth in 5.3.4;

(h) To receive from Evogene information on possible Independent Discovery Rounds, in accordance with Section 4.2.1, and to discuss information provided by Evogene on Internal Non-Field Hits which underwent the Core Validation and met the Validated Hit criteria as set forth in Section 4.2.2;

(i) To review issues relating to Publications resulting from the activities conducted under the Collaboration, in accordance with Section 2.10;

(j) To keep a record of the Collaboration Hit Sets, Special Collaboration Hits, PlaNet Genes, PlaNet Gene Stacks, RePack Recommendations and GeneDex Recommendations licensed to Monsanto hereunder, and any termination of any such license in accordance with the terms of this Agreement (For the avoidance of doubt, all GeneSpec Genes, including those that are Homologs of Collaboration Hits, shall be recorded as such);

(k) To meet no less than annually to discuss field trial results;

(l) To approve amendments to Evogene Project Hits, as contemplated by Section 1.57;

(m) To approve the use of Collaboration Hit Homologs and PlaNet Gene Homologs for Model Plant Validation, as contemplated by Sections 1.87, 5.2.3, 5.2.4(b), 5.2.6(b), 5.5A3(a)(ii), 5.5A3(a)(iv), 5.5B3(a)(ii), 5.5B3(a)(iv) and 5.7;

(n) To amend the forms of Exhibits I, J and Q, pursuant to Sections 2.8.1, 2.8.2 and 5.8.4;

(o) To approve assays for model plant validation of certain Special Collaboration Hits pursuant to Section 4.2.1(a)(v);

 

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(p) To make any other decisions expressly assigned to the Research Committee by this Agreement; and

(q) To exercise such additional responsibilities as may be delegated to the Research Committee by the Steering Committee.

2.3.4 Information Regarding Computational Tools. For the avoidance of doubt, Evogene may, but in any event will not be obligated to, provide the Research Committee information on computational tools used by Evogene in the Funded Project, discovery approaches, and Evogene-Funded Evogene Data.

2.3.5 Meetings. The Research Committee shall meet at such locations as the Research Committee agrees, and at least quarterly, whether in-person or by telephone or video conference as the Research Committee agrees, provided that at least two in-person meetings shall be held in each Collaboration Year. Members of the Research Committee may participate in and vote at meetings, in person, by telephone or by video conference and may vote at meetings by proxy. Additional employees of either party may be permitted to attend Research Committee or its sub-committees’ meetings, subject to prior notice to and the approval of the other party, not to be unreasonably withheld. At each such Research Committee meeting (or sub-committee meeting), whether an in-person meeting or otherwise, the Research Committee shall appoint a member (or a delegate who is not a member) to prepare written minutes which shall document all Research Committee discussions and decisions. Draft minutes shall be distributed to the Research Committee members within one (1) week following the particular Research Committee meeting, revised as necessary, and promptly approved in writing by all Research Committee members. Thereafter, the approved minutes of each Research Committee meeting shall be distributed to each member.

2.3.6 Decision-Making. All decisions of the Research Committee shall be made by unanimous consent. In the event the Research Committee is unable to reach agreement on a matter, then such disputed matter shall be escalated to the Steering Committee.

2.3.7 Limits on Decision-Making Authority. Notwithstanding anything herein to the contrary, the Research Committee shall have no authority to make any decision (including any amendment or modification of, or supplement to, the Research Plan) that: (i) amends, contradicts or violates any provision of this Agreement; (ii) changes or affects the parties’ respective Diligence Obligations; or (iii) causes Evogene to exceed the agreed budget for the Funded Project that is covered by the Research Payments or changes

 

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Evogene’s budget allocations for the performance of the Funded Project. The Research Committee will be entitled to provide recommendations to the Steering Committee on the matters set forth in subsections (ii) and (iii) above, for review and approval by the Steering Committee.

2.4 Patent Committee.

2.4.1 Establishment. The parties establish a joint “Patent Committee” that will be responsible for coordinating Intellectual Property issues hereunder, as set forth in Section 2.4.3.

2.4.2 Membership. The Patent Committee shall be comprised of an equal number of representatives of each party, initially four (4). Two (2) members shall be appointed by Monsanto and two (2) members shall be appointed by Evogene. Each of Monsanto and Evogene may replace its Patent Committee representatives at any time, upon written notice to the other party. From time to time, the Patent Committee may establish subcommittees to oversee particular activities. The subcommittees shall also be comprised of an equal number of representatives from each party.

2.4.3 Responsibilities. The Patent Committee shall:

(a) Discuss, at a general level, Intellectual Property issues relating to Collaboration Hit Homologs, Special Collaboration Hits, PlaNet Gene Homologs, PlaNet Gene Stacks and RePack Recommendations and whether to file patent applications with respect to any Joint IP, including data;

(b) Address patent prosecution issues arising under Section 9;

(c) Determine the form and substance of the patent reports that the parties will deliver to each other pursuant to Section 2.8.3;

(d) Review Intellectual Property issues relating to Publications resulting from the activities conducted under the Funded Project, in accordance with Section 2.10;

(e) Discuss the possibility of adding countries to, or removing countries from, the country list provided in Exhibit N

 

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(f) Exercise such additional responsibilities as may be delegated to the Patent Committee by the Steering Committee.

2.4.4 Meetings. The Patent Committee shall meet at such locations as the Patent Committee agrees, on an as-needed basis, and in-person or by telephone or video conference as the Patent Committee agrees. Members of the Patent Committee may participate in and vote at meetings, in person, by telephone or by video conference and may vote at meetings by proxy. Additional employees of either party may be permitted to attend Patent Committee or its sub-committees’ meetings, subject to prior notice to and the approval of the other party, not to be unreasonably withheld. At each such Patent Committee meeting (or sub-committee meeting), whether an in-person meeting or otherwise, the Patent Committee may appoint a member (or a delegate who is not a member) to prepare written minutes which shall document Patent Committee discussions and decisions. Draft minutes, if prepared, shall be distributed to the Patent Committee members within one (1) week following the particular Patent Committee meeting, revised as necessary, and promptly approved in writing by all Patent Committee members. Thereafter, the approved minutes of each Patent Committee meeting shall be distributed to each member.

2.4.5 Decision-Making. All decisions of the Patent Committee shall be made by unanimous consent. Absent such unanimous agreement, the terms and conditions of this Agreement shall govern.

2.5 Manpower and Costs.

2.5.1 Evogene FTEs. Subject to Monsanto’s right to extend the Funded Project under Section 5.3, Evogene will provide the number of FTEs per Collaboration Year set forth in Section 2.6 to perform work in furtherance of the development and implementation of the Funded Project, and as otherwise required under the Research Plan. At Monsanto’s request, Evogene will provide reports to Monsanto on a quarterly basis that identify the employees, and in summary form, the time each contributed to carrying out the Funded Project.

2.5.2 Independent Responsibility. Except as set forth in this Agreement or in the Research Plan to the contrary, each party is responsible for all costs and expenses that it incurs under or in connection with the Funded Project, including its participation on the Steering Committee, Research Committee, Patent Committee or any of their respective subcommittees, and any meetings thereof.

 

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2.6 Allocated FTE Activity. Evogene shall allocate the following FTEs to performance of the Funded Project:

(a) During Collaboration Years 1 – 3, Evogene shall allocate [* * *] ([* * *]) FTEs to performance of the Funded Project.

(b) During Collaboration Years 4 – 7 Evogene shall allocate the following numbers of FTEs to performance of the Funded Project:

(i) During Collaboration Year 4, Evogene shall allocate [* * *] ([* * *]) FTEs to performance of the Funded Project.

(ii) During Collaboration Year 5, Evogene shall allocate [* * *] ([* * *]) FTEs to performance of the Funded Project.

(iii) During Collaboration Year 6, Evogene shall allocate [* * *] ([* * *]) FTEs to performance of the Funded Project.

(iv) During Collaboration Year 7, Evogene shall allocate [* * *] ([* * *]) FTEs to performance of the Funded Project.

2.7 Records; Information Security. Evogene shall maintain sufficient records of its operations and activities under the Funded Project as is reasonably required for registration and prosecution of Intellectual Property generated under the Funded Project, and to demonstrate Evogene’s compliance with Section 2.6, in accordance with Evogene’s document retention policy (it being understood that such activities are limited to the Research Period) and will make available, to Monsanto or Monsanto’s authorized representative, during normal business hours and upon reasonable notice, its research records relating to patent applications that it has filed on Evogene Project Hits, G2P Genes, PlaNet Gene Stacks and RePack Recommendations and, subject to Evogene’s confidentiality obligations to

 

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Third Parties, Evogene Non-Project Hits, together with its records relating to its performance of Section 2.6. Evogene shall, within thirty (30) days of the Effective Date, provide Monsanto a copy of its then-current document retention policy for Monsanto’s review and comment. To the extent Monsanto has any reasonable recommendations related to improving Evogene’s document retention policy, the parties shall discuss the inclusion of such recommendations in good faith. Evogene shall use commercially reasonable efforts to remedy the information technology issues identified in Exhibit O attached hereto. Monsanto shall have the right to audit Evogene’s information technology systems and records, to determine whether Evogene has addressed the issues set forth on Exhibit O, no earlier than eight (8) months after the Effective Date and again at any time after twelve (12) months following the Effective Date. Monsanto shall provide a summary of the results of each such audit to Evogene promptly after each such audit is completed. If any of the issues set forth on Exhibit O have not been resolved, as reasonably determined by Monsanto, by the end of the second audit described above, then notwithstanding any provision hereof to the contrary, Monsanto may withhold all payments for Data Generation otherwise owing under Section 6.3 until such issues are so resolved. Evogene shall notify Monsanto promptly if any data security breach occurs that involves Monsanto Data, or if any material data security breach occurs at a location where Monsanto Data is stored.

2.8 Reports.

2.8.1 Evogene Reports. Within fifteen (15) days after the end of each quarter of each Collaboration Year during the Research Period, Evogene shall prepare and provide to the Research Committee a summary of Evogene’s activities during such quarter (and for the 4th quarter of each Collaboration Year, for the Collaboration Year then ended), as more particularly described on Exhibit I attached hereto, as such Exhibit may be amended or supplemented by the Research Committee from time to time.

2.8.2 Monsanto Reports. Within thirty (30) days after the end of each quarter of each Collaboration Year during the term of this Agreement, Monsanto shall prepare and provide to the Research Committee a summary of Monsanto’s activities during such quarter (and for the 4th quarter of each Collaboration Year, for the Collaboration Year then ended), to the extent necessary to demonstrate Monsanto’s compliance with its Diligence Obligations hereunder. Each such report shall, subject to the preceding sentence, be based upon the form attached hereto as Exhibit J, as such Exhibit may be amended or supplemented by the Research Committee from time to time, and shall identify, with respect to each Collaboration Hit Homolog on which Monsanto is conducting diligence activities, the Collaboration Hit that is part of the same Collaboration Hit Set as such Collaboration Hit Homolog, and

 

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the most advanced development phase in the Monsanto Pipeline that any Collaboration Hit Homolog in such Collaboration Hit Set has reached, and for each Preferred Mode of Use for which Monsanto is conducting diligence activities, the Preferred Mode of Use and the Collaboration Hit that is part of the same Collaboration Hit Set as the Collaboration Hit Homolog for which Monsanto is applying such Preferred Mode of Use, and the most advanced development phase in the Monsanto Pipeline that any Collaboration Hit Homolog in such Collaboration Hit Set has reached, applying such Preferred Mode of Use. Monsanto shall in no event be obligated to disclose in any such report the identity or sequence of any specific Collaboration Hit Homolog.

2.8.3 Patent Reports. At the end of each Collaboration Year during the term of this Agreement, each party shall provide the Patent Committee with a report, in form and substance to be determined by the Patent Committee, identifying (i) patent applications comprising any Evogene Patent Rights, Evogene Discovery Round Patent Rights or Evogene G2P Round Patent Rights that were filed during the preceding year and the prosecution status of all previously-filed patent applications comprising Evogene Patent Rights, Evogene Discovery Round Patent Rights or Evogene G2P Round Patent Rights, and (ii) (A) for the first such report after the date that any Excluded Collaboration Hit or Excluded PlaNet Gene Stack arises, patent applications comprising any Monsanto Improvement Patent Rights covering such Excluded Collaboration Hit or Excluded PlaNet Gene Stack and the prosecution status thereof, and (B) for each subsequent year after an Excluded Collaboration Hit or Excluded PlaNet Gene Stack arises, all patent applications comprising any Monsanto Improvement Patent Rights covering such Excluded Collaboration Hit or Excluded PlaNet Gene Stack that were filed during the preceding year and the prosecution status of all previously-filed patent applications comprising any Monsanto Improvement Patent Rights covering such Excluded Collaboration Hit or Excluded PlaNet Gene Stack.

2.9 Materials Transfer. Any deliveries of Biological Materials by the parties shall be subject to a Materials Transfer Agreement.

2.10 Publication.

2.10.1 Review. During the Research Period, prior to either party Publishing (a) any Collaboration Hit Homolog, PlaNet Gene Homolog, Special Collaboration Hit or any Homolog thereof, or any PlaNet Gene Stack, RePack Recommendation, GeneDex Recommendation or other Preferred Mode of Use, other than (i) any Special Collaboration Hit arising from any Independent Discovery Round for an academic or research institution, (ii) any Special

 

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Collaboration Hit arising from a Third-Party Independent Discovery Round after the Non-Disclosure Period with respect thereto has expired, or (iii) Encumbered Special Collaboration Hits and any Homologs thereof to the extent licensed to a Third Party, (b) any Intellectual Property related to any Collaboration Hit Homolog, PlaNet Gene Homolog, Special Collaboration Hit or Homolog thereof, PlaNet Gene Stack, RePack Recommendation or GeneDex Recommendation, described in the preceding clause (a), or (c) other scientific data resulting from activities conducted under the Funded Project, which information has not been previously Published pursuant to the procedures set forth in this Section 2.10.1, the disclosing party shall provide to the other party, in writing, the Publication to be made or submitted, and shall allow the other party at least sixty (60) days to determine whether such Publication contains Confidential Information of the non-disclosing party, subject matter for which patent protection should be sought prior to Publication or for which patent protection has been sought but has not yet been published, or subject matter that the other party believes is sensitive strategic information that should be modified or deleted (each of the foregoing, “Sensitive Material”). For avoidance of doubt, this Section 2.10.1 shall not apply to any Evogene Hit resulting from an Independent Discovery Round, or any Intellectual Property relating thereto, until such time as such Evogene Hit becomes a Collaboration Hit, a Special Collaboration Hit, or a Homolog of either.

2.10.2 Delay of Publication. Prior to the expiration of the sixty (60) day period specified in this Section 2.10, the non-disclosing party may notify the disclosing party of its determination that such Publication contains Sensitive Material. In such event, the disclosing party shall withhold its proposed disclosure and confer with the non-disclosing party, through the Research Committee, to determine the best course of action to take in order to modify the disclosure to (a) delete the Confidential Information of the non-disclosing party, or other Sensitive Material sought to be disclosed, or (b) obtain patent protection. If the non-disclosing party determines that the disclosure describes a patentable invention, the party Controlling the prosecution of such patent shall timely file a U.S. patent application, and the disclosing party shall not submit the Publication relating to such invention until after a patent application has been filed and such application has been made public. If either party reasonably anticipates that such application will need to be supplemented (i.e., a continuation-in-part application filed) prior to publication of the application, no disclosure of such information will be made until the subject application is supplemented and filed in the appropriate patent office, and the subject application has been made public. Notwithstanding any provision of this Section 2.10 to the contrary, either party has the right to withhold consent from Publication of its Confidential Information or other sensitive strategic information.

 

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2.10.3 Publication Rights. After the expiration of sixty (60) days from the date of submission by the disclosing party to the other party through the Research Committee, unless the disclosing party has received the notice specified in Section 2.10.2 above, the disclosing party shall be free to make the applicable Publication. Any such Publication shall include an acknowledgment of the contributions of each party, subject to customary scientific norms.

 

  3. LICENSES.

3.1 To Monsanto.

3.1.1 Exclusive Research License. Subject to the terms and conditions of this Agreement, Evogene, on behalf of itself and its Affiliates, grants and agrees to grant to Monsanto and its Affiliates (in each case, so long as such Person remains an Affiliate of Monsanto), and Monsanto hereby accepts for itself and its Affiliates, an exclusive (except as to Evogene and its Affiliates other than Monsanto Competitors), irrevocable and perpetual (in each case except pursuant to termination or forfeiture as elsewhere set forth herein), non-transferable (except pursuant to Section 17.5) and non-sublicensable (except for (i) sublicenses to [* * *] for Research Purposes solely for the benefit of Monsanto or the collaboration under the [* * *], and (ii) after a PCT or other patent application is published with respect to any Evogene Patent Rights, sublicenses of such Evogene Patent Rights to Third Parties for Research Purposes for the benefit of Monsanto, in each case without the right to grant further sublicenses) (a) license under the Evogene Patent Rights to use (i) Collaboration Hits and their respective Collaboration Hit Homologs and Special Collaboration Hits, and (ii) PlaNet Gene Stacks and Repack Recommendations; and (b) license to use the Evogene Know-How solely with respect to Collaboration Hits and their respective Collaboration Hit Homologs and Special Collaboration Hits, in the case of both (a) and (b) solely for Research Purposes and solely for transgenic applications in the Monsanto Crops, and in the case of (a)(ii) solely in connection with any Collaboration Hit Homolog belonging to the specific Collaboration Hit Set containing the specific Collaboration Hit Homolog and/or Special Collaboration Hits in respect of which Evogene delivered the Preferred Mode of Use which contained such PlaNet Gene Stack or Repack Recommendation, as the case may be (the “Exclusive Research License”).

3.1.2 Non-Exclusive Research License. Subject to the terms and conditions of this Agreement, Evogene, on behalf of itself and its Affiliates, grants and agrees to grant to Monsanto and its Affiliates (in each case, so long as such Person remains an Affiliate of Monsanto), and Monsanto hereby accepts for itself and its Affiliates, a non-exclusive, irrevocable and perpetual (in each case except pursuant to termination or forfeiture as elsewhere set forth

 

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herein), non-transferable (except pursuant to Section 17.5) and non-sublicensable (except for (i) sublicenses to [* * *] for Research Purposes solely for the benefit of Monsanto or the collaboration under the [* * *], and (ii) after a PCT or other patent application is published with respect to any Evogene Patent Rights, sublicenses of such Evogene Patent Rights to Third Parties for Research Purposes for the benefit of Monsanto, in each case without the right to grant further sublicenses) (a) license under the Evogene Patent Rights to use Collaboration Hits and their respective Collaboration Hit Homologs, Special Collaboration Hits, PlaNet Gene Stacks and Repack Recommendations; (b) license to use the Evogene Know-How solely with respect to Collaboration Hits and their respective Collaboration Hit Homologs, Special Collaboration Hits, PlaNet Gene Stacks and RePack Recommendations, (c) license under the Evogene Patent Rights to use PlaNet Genes and their respective PlaNet Gene Homologs, and (d) license to use the Evogene Know-How solely with respect to PlaNet Genes and their respective PlaNet Gene Homologs in the case of each of (a) through (d), solely for Research Purposes for transgenic applications in the Research Species (the “Non-Exclusive Research License,” together with the Exclusive Research License, the “Research License”).

3.1.3 Commercial Licenses.

(a) Subject to the terms and conditions of this Agreement, Evogene, on behalf of itself and its Affiliates, grants and agrees to grant to Monsanto and its Affiliates (in each case, so long as such Person remains an Affiliate of Monsanto), and Monsanto hereby accepts for itself and its Affiliates, an exclusive, irrevocable (except pursuant to termination or forfeiture as elsewhere set forth herein), non-transferable (except to pursuant to Section 17.5), perpetual (subject to fulfillment of the Monsanto Diligence Obligations set forth in Sections 5.6.1, 5.6.2, 5.6.3, and 5.6.4 and unless otherwise terminated in accordance with the terms hereof), royalty-bearing, worldwide license (with the right to sublicense and permit further sublicenses subject to Section 3.3), under the Evogene Patent Rights and Evogene Know-How, to (i) Commercially Exploit Collaboration Hits, their respective Collaboration Hit Homologs and Special Collaboration Hits, in all fields of use, and (ii) Commercially Exploit PlaNet Gene Stacks and RePack Recommendations, but in the case of both (i) and (ii) solely for transgenic applications in the Monsanto Crops, and in the case of (ii), solely in connection with any Collaboration Hit Homolog belonging to the specific

 

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Collaboration Hit Set containing the specific Collaboration Hit Homolog for which Evogene delivered the Preferred Mode of Use which contained such PlaNet Gene Stack or RePack Recommendation, as the case may be (the “Commercial License”).

(a1) Subject to the terms and conditions of this Agreement, Evogene, on behalf of itself and its Affiliates, grants and agrees to grant to Monsanto and its Affiliates (in each case, so long as such Person remains an Affiliate of Monsanto), and Monsanto hereby accepts for itself and its Affiliates, a non-exclusive, irrevocable (except pursuant to termination or forfeiture as elsewhere set forth herein), non-transferable (except to pursuant to Section 17.5), perpetual (subject to fulfillment of the Monsanto Diligence Obligations set forth in Section 5.6.1, and unless otherwise terminated in accordance with the terms hereof), royalty-bearing , worldwide license (with the right to sublicense and permit further sublicenses subject to Section 3.3), under the Evogene Patent Rights and Evogene Know-How, to Commercially Exploit PlaNet Genes, their respective PlaNet Gene Homologs, in all fields of use, but in each case solely for transgenic applications in the Monsanto Crops and solely as part of the specific PlaNet Gene Stack that was recommended by Evogene in the Preferred Mode of Use that included such PlaNet Gene, and which PlaNet Gene Stack also contains (i) any Collaboration Hit Homolog belonging to the specific Collaboration Hit Set containing the specific Collaboration Hit Homolog, or (ii) the specific Special Collaboration Hit, in respect of which Evogene delivered such Preferred Mode of Use (the “PlaNet Genes License”).(b) Subject to the terms and conditions of this Agreement, Evogene, on behalf of itself and its Affiliates, grants and agrees to grant to Monsanto and its Affiliates (in each case, so long as such Person remains an Affiliate of Monsanto), and Monsanto hereby accepts for itself and its Affiliates, a non-exclusive, irrevocable (except pursuant to termination or forfeiture as elsewhere set forth herein), non-transferable (except to pursuant to Section 17.5), perpetual (subject to fulfillment of the Monsanto Diligence Obligations set forth in Sections 5.6.1, 5.6.2, 5.6.3 and 5.6.4 and unless otherwise

 

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terminated in accordance with the terms hereof), non-royalty-bearing, worldwide license (with the right to sublicense and permit further sublicenses subject to Section 3.3, but specifically excluding the right to grant any Bare Sublicense thereof), under the Evogene Discovery Round Patent Rights, to Commercially Exploit Hits in all fields of use, but in each case solely for transgenic applications in the Monsanto Crops (the “Hit Non-Assert License”). It is understood that the Hit Non-Assert License in no way impairs Evogene’s right to receive Milestone Fees and Product Royalties on any Collaboration Hit Homologs.

(c) Subject to the terms and conditions of this Agreement, Evogene, on behalf of itself and its Affiliates, grants and agrees to grant to Monsanto and its Affiliates (in each case, so long as such Person remains an Affiliate of Monsanto), and Monsanto hereby accepts for itself and its Affiliates, a non-exclusive, irrevocable (except pursuant to termination or forfeiture as elsewhere set forth herein), non-transferable (except to pursuant to Section 17.5), perpetual (subject to fulfillment of the Monsanto Diligence Obligations set forth in Sections 5.6.1, 5.6.2, 5.6.3 and 5.6.4 and unless otherwise terminated in accordance with the terms hereof), non-royalty-bearing, worldwide license (with the right to sublicense and permit further sublicenses subject to Section 3.3, but specifically excluding the right to grant any Bare Sublicense thereof), under the Evogene G2P Round Patent Rights, to Commercially Exploit G2P Recommendations in all fields of use, but in each case solely for transgenic applications of Collaboration Hit Homologs or Special Collaboration Hits in the Monsanto Crops (the “G2P Non-Assert License”) (the Hit Non-Assert License and the G2P Non-Assert License shall hereinafter be collectively referred to as the “Non-Assert License”). It is understood that the G2P Non-Assert License in no way impairs Evogene’s right to receive Milestone Fees and Product Royalties on any Collaboration Hit Homologs, Special Collaboration Hits or Project G2P Recommendations.

3.1.3A Special G2P Recommendations. In respect of Special G2P Recommendations, Monsanto shall receive the same Research

 

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Licenses, Commercial Licenses and PlaNet Genes Licenses as are granted to Monsanto for Project G2P Recommendations, as applicable with respect to each item of Project G2P Recommendation. Said licenses to Special G2P Recommendations shall become non-exclusive or terminate, in any event that the Collaboration Hit Homologs and/or Special Collaboration Hits in respect of which Evogene identified such Special G2P Recommendations, shall become non-exclusive or terminate, respectively.

In addition, subject to Section 4.2A.1(b)(i), in respect of Special G2P Recommendations, Evogene shall be entitled to the same Milestone Fees and Product Royalties as are payable to Evogene in respect of Project G2P Recommendations, as applicable with respect to each item of Project G2P Recommendation.

3.1.3B Rights of First Offer. For any GeneDex Recommendation that may result from any GeneDex Anaylsis, Evogene hereby grants to Monsanto an exclusive “ROFO” (as defined below) to license any GeneDex Patent Rights, solely for transgenic applications in the Monsanto Crops and solely in respect of (i) any Collaboration Hit Homolog belonging to the specific Collaboration Hit Set containing the specific Collaboration Hit Homolog or (ii) Special Collaboration Hit, in respect of which Evogene delivered the Preferred Mode of Use which contained such GeneDex Recommendation. Evogene expressly acknowledges that any such GeneDex Recommendation identified in the preceding sentence is included under the Monsanto license grant of Evogene Know-How provided in Sections 3.1.1 through 3.1.3 for all transgenic applications in the Monsanto Crops. The process applicable to such right of first offer (“ROFO”) is as set forth below. Within 45 days of Evogene filing a patent application that may constitute a GeneDex Patent Right, Evogene will in writing inform Monsanto and offer Monsanto a license as set forth above in this Section 3.1.3B to such filing. Monsanto shall inform Evogene in writing, within 120 days of receiving each such offer, whether or not Monsanto wishes to negotiate the receipt of such a license. In the event that Monsanto notifies Evogene that Monsanto wishes to enter into such negotiations, the parties shall negotiate exclusively and in good faith the commercial economic terms of any such applicable license at the time Monsanto desires to exercise its rights hereunder. If the parties are unable to agree to the terms of any such license after a reasonable and good faith negotiation, which negotiation shall be for not less than ninety (90) days, Evogene is entitled to enter into a license with a third party, provided such license is on economic and license rights terms no less favorable to Evogene than the last offer by Evogene to Monsanto and

 

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provided such third party license is executed within six months of the date the negotiations between Monsanto and Evogene are terminated; thereafter, Monsanto’s ROFO applies again, provided that after a period of 3 years from the first right of first offer under this Subsection 3.1.3B with respect to a particular GeneDex Recommendation, such right of first offer shall no longer apply with respect to such GeneDex Recommendation.

3.1.3C G2P Recommendation Non-Project G2P Option. For any Non-Project G2P Claim which claim falls within the scope of inventions covered in a G2P Recommendation (“G2P Recommendation Non-Project G2P Claim”), Evogene hereby grants to Monsanto an exclusive option to license such claim pursuant to the licenses for Project G2P Recommendations set forth in this Agreement, but solely to Commercially Exploit Collaboration Hit Homologs, Special Collaboration Hits or PlaNet Gene Homologs (and only for as long as Monsanto has licenses hereunder with respect to such Collaboration Hit Homologs, Special Collaboration Hits or PlaNet Gene Homologs), in all fields of use, and solely for transgenic applications in the Monsanto Crops. It is clarified that if Monsanto’s licenses hereunder to all Collaboration Hit Homologs, Special Collaboration Hits and/or PlaNet Gene Homologs that are applicable to such G2P Recommendation Non-Project G2P Claim terminate prior to a U.S. patent being issued in respect of such claim, then the foregoing option shall not apply with respect to such G2P Recommendation Non-Project G2P Claim. The process applicable to exercising such exclusive option is as set forth below. Evogene shall notify Monsanto in writing of any U.S. patent containing a G2P Recommendation Non-Project G2P Claim. Within one hundred and twenty (120) days of such notification Monsanto shall notify Evogene in writing of its decision to exercise its option with respect to any or all of the G2P Recommendation Non-Project G2P Claims contained in such patent. In the event that Monsanto exercises such option with respect to any G2P Recommendation Non-Project G2P Claim, then the invention claimed in such G2P Recommendation Non-Project G2P Claim shall be treated as a Project G2P Recommendation with respect to the license grant and royalty obligations set forth in this Agreement, including the terms hereof regarding to the termination of such licenses. If Monsanto does not exercise such option, then such G2P Recommendation Non-Project G2P Claim may be licensed to Third Parties, subject to the Non-Assert License.

 

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3.1.3D Rights of First Offer – Non-G2P Recommendation Non-Project G2P Claim. For any Non-Project G2P Claim in a U.S. patent, which claim does not fall within the scope of inventions covered in a G2P Recommendation (“Non-G2 Recommendation Non-Project G2P Claim”), Evogene hereby grants to Monsanto a right of first offer to negotiate with Evogene an exclusive, irrevocable, non-transferable, perpetual, royalty-bearing, worldwide license to such claim, with the right to sublicense and permit further sublicenses (but specifically excluding the right to grant any Bare Sublicense thereof), solely to Commercially Exploit Collaboration Hit Homologs, Special Collaboration Hits or PlaNet Gene Homologs (and only for as long as Monsanto has licenses hereunder with respect to such Collaboration Hit Homologs, Special Collaboration Hits or PlaNet Gene Homologs), in all fields of use, and solely for transgenic applications in the Monsanto Crops. It is clarified that if Monsanto’s licenses hereunder to all Collaboration Hit Homologs, Special Collaboration Hits and/or PlaNet Gene Homologs that are applicable to any such Non-G2P Recommendation Non-Project G2P Claim terminate prior to a U.S. patent being issued in respect of such claim, then the foregoing right of first offer shall not apply with respect to such Non-G2 Recommendation Non-Project G2P Claim. The process applicable to exercising such right of first offer is as set forth below. Evogene shall notify Monsanto in writing of any U.S. patent containing a Non-G2P Recommendation Non-Project G2P Claim. Within one hundred and twenty (120) days of such notification Monsanto shall notify Evogene in writing whether or not Monsanto wishes to negotiate the receipt of such a license. In the event that Monsanto notifies Evogene that Monsanto wishes to enter into such negotiations, the parties shall negotiate exclusively and in good faith the commercial economic terms of any such applicable license at the time Monsanto desires to exercise its rights hereunder. If the parties are unable to agree to the terms of any such license after a reasonable and good faith negotiation, which negotiation shall be for not less than ninety (90) days, Evogene is entitled to enter into a license with a third party with respect to such Non-G2 Recommendation Non-Project G2P Claim, subject to the Non-Assert License, provided such third party license is executed within six months of the date the negotiations between Monsanto and Evogene are terminated; thereafter, the right of first offer under this Subsection 3.1.3D applies again, provided that after a period of 3 years from the first right of first offer under this Subsection 3.1.3D with respect to a particular Non-G2 Recommendation Non-Project G2P Claim, such right of first offer shall no longer apply with respect to such claim.

3.1.4 [* * *] and Covered Vegetables. Subject to the Non-Exclusive Negotiation Requirement set forth in Section 4.1, [* * *] shall be excluded from the Monsanto Crops for purposes of the Exclusive Research

 

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License and the Commercial License, with respect to: (i) any and all Collaboration Hits, that Evogene provides to Monsanto during Collaboration Year 6 and during any Collaboration Year thereafter, and their respective Collaboration Hit Homologs, and (ii) any and all Special Collaboration Hits, that Evogene delivers to Monsanto during Collaboration Year 6 and in any Collaboration Year thereafter, and their Homologs. Furthermore, [* * *] shall also be excluded from the Monsanto Crops for purposes of the Non-Assert License, with respect to any and all Evogene Discovery Round Patent Rights and Evogene G2P Round Patent Rights that are filed by Evogene from and after Collaboration Year 6. In addition, the Covered Vegetables, which were part of the “Monsanto Crops” until the Signing Date, shall be excluded from the Monsanto Crops for purposes of the Exclusive Research License, the Commercial License and the Non-Assert License, as of the Effective Date. If at any time from the Effective Date to the Signing Date, Monsanto conducted any research on, or took any other action with respect to, the use of Collaboration Hit Homologs or Special Collaboration Hits for transgenic applications in Covered Vegetables, then the parties agree that such research and other action, if any, shall be deemed not to infringe the Evogene Patent Rights or Evogene Know-How, and that Monsanto shall have no liability to Evogene as a result thereof.

3.1.5 Reservation of Rights. Except to the extent expressly provided in this Agreement, nothing in this Agreement shall be construed to confer any ownership interest, license or other rights upon Monsanto by implication, estoppel or otherwise, as to any technology, Intellectual Property rights, products or biological materials of Evogene or any other entity, regardless of whether such technology, Intellectual Property rights, products or biological materials are dominant, subordinate or otherwise related to any Evogene Patent Rights, Evogene Discovery Round Patent Rights, Evogene G2P Round Patent Rights or Jointly-Owned Patent Rights. Nothing in this Section 3 shall prevent Monsanto from conducting any activity for which no license from Evogene is required.

3.2 To Evogene.

3.2.1 Grantback Nonexclusive License. Subject to the terms and conditions of this Agreement, Monsanto (on behalf of itself and its Affiliates) grants and agrees to grant to Evogene and its Affiliates (in each case, so long as such Person remains an Affiliate of Evogene), and Evogene hereby accepts for itself and such Affiliates, with respect to each Excluded Collaboration Hit, but only in each Monsanto Crop as to which Monsanto failed to meet its Diligence Obligation to advance such Excluded Collaboration Hit as described in Section 5.6.2, and with respect to each Excluded PlaNet Gene Stack, but only in each Monsanto Crop as to which Monsanto failed to meet its Diligence

 

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Obligation to advance such Excluded PlaNet Gene Stack as described in Section 5.6.2a non-exclusive, royalty-free, worldwide, perpetual, non-transferable (except pursuant to Section 17.5) and irrevocable license, under the Monsanto Improvement Patent Rights that cover such Excluded Collaboration Hit or Excluded PlaNet Gene Stack, as the case may be, to use Improvements relating to such Excluded Collaboration Hit or Excluded PlaNet Gene Stack for Research Purposes and for commercial exploitation in each such Monsanto Crop, solely for transgenic applications and solely for the purpose of practicing inventions claimed in Valid Claims in the Evogene Patent Rights to the extent that (i) such Valid Claims were issued at the time the applicable Collaboration Hit became an Excluded Collaboration Hit or the applicable PlaNet Gene Stack became an Excluded PlaNet Gene Stack, or were applied for at such time and were issued at any time thereafter and (ii) such Valid Claims relate to the applicable Excluded Collaboration Hit or Excluded PlaNet Gene Stack. The license granted hereunder is limited to patent rights, and does not include a transfer or conveyance to Evogene of Biological Material (including Events, Germplasm, vectors or like material) or any technology used by Monsanto to create the Improvement that is the subject of the Monsanto Improvement Patent Rights. Monsanto shall provide Evogene with all data reasonably available to Monsanto or its Affiliates that is necessary to continue development work with such Excluded Collaboration Hit or Excluded PlaNet Gene Stack (including the results of any field trials). Evogene is entitled, in connection with the grant of a license to Evogene Patent Rights covering such Excluded Collaboration Hit or Excluded PlaNet Gene Stack, to grant sublicenses under the license set forth in this Section 3.2.1 to any Third Party.

3.2.2 Limitations. If a Valid Claim in an Evogene Patent Right issues on an applicable Collaboration Hit or PlaNet Gene Stack after the time the applicable Collaboration Hit or PlaNet Gene(s)becomes an Excluded Collaboration Hit or an Excluded PlaNet Gene Stack, as applicable, then Monsanto’s obligation to grant any additional licenses in Section 3.2.1 that arise due to such Valid Claim is subject to Monsanto’s Control of the Monsanto Improvement Patent Rights at the time of issuance of the Valid Claim. Moreover, Monsanto’s obligation to grant, or agree to grant, future licenses under Section 3.2.1 in respect of Monsanto Improvement Patent Rights that would otherwise be subject to the license under Section 3.2.1 shall terminate on the earliest of: (i) the termination or expiration of the Evogene Patent Rights covering such Monsanto Improvement; or (ii) a Change of Control to a Monsanto Competitor; or any other assignment or transfer of this Agreement to a Monsanto Competitor. Any licenses granted or obligations to grant licenses arising prior to any such termination shall be unaffected by such termination.

 

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3.2.3 Certain Jointly-Owned Patent Rights. Monsanto hereby grants and agrees to grant to Evogene, on behalf of itself and its Affiliates, an exclusive, perpetual and irrevocable, transferable, fully-paid license, with the right to grant sublicenses, under Monsanto’s (and, as applicable, Monsanto’s Affiliates’) interest in Discovery Round Jointly-Owned Patent Rights for all research, development and commercialization activities in all fields of use throughout the world. The foregoing license is subject to the licenses that Evogene grants to Monsanto under 3.1, to the extent such licenses have not terminated.

3.2.4 Reservation of Rights. Except to the extent expressly provided in this Agreement, nothing in this Agreement shall be construed to confer any ownership interest, license or other rights upon Evogene by implication, estoppel or otherwise, as to any technology, Intellectual Property rights, products or biological materials of Monsanto or any other entity, regardless of whether such technology, Intellectual Property rights, products or biological materials are dominant, subordinate or otherwise related to any Monsanto Improvement Patent Rights or Jointly-Owned Patent Rights. Nothing in this Section 3 shall prevent Evogene from conducting any activity for which no license from Monsanto is required.

3.3 Sublicenses. Each of Monsanto and Evogene shall require that its respective Sublicensees enter into written agreements agreeing to be bound by terms and conditions (including in respect of license restrictions and confidentiality) consistent with those set forth in this Agreement which are applicable to such sublicense. Without limiting the foregoing, each such sublicense shall include reporting, records maintenance and audit provisions sufficient to enable the applicable sublicensor to collect and verify all information necessary to determine Product Royalty and other payments hereunder. Each party shall take reasonable steps to assure each Sublicensee’s compliance with the terms of such sublicenses. Nothing herein shall limit the right of either party hereto, as sublicensor, to amend or waive the terms of any of its sublicenses, provided that no such amendment or waiver shall permit a Sublicensee to exercise rights or take actions inconsistent with the requirements of this Agreement. In addition, at the end of each Collaboration Year each party will provide to the Steering Committee a list of all of its Sublicensees during the past year (and all Sublicensees whose sublicenses expired or terminated during such period), including the Collaboration Hit Homologs, Special Collaboration Hits, Excluded Collaboration Hits and/or Excluded PlaNet Gene Stack, as applicable, licensed to such Sublicensees, the territory of such sublicense and the Monsanto Crop(s) covered by such sublicense.

 

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  4. EXCLUSIVITY

4.1 Exclusivity. Except as otherwise set forth herein, for the duration of the Exclusivity Period, Evogene agrees (and shall cause each of its Subsidiaries to similarly agree) that: (i) it will not license or otherwise transfer to any Third Party the right to use in the Monsanto Crops, for any transgenic application, any Evogene Hit identified through a Discovery Round or any other activity directed to the identification of Hits that confer Traits in the Monsanto Field, or Homolog of any such Evogene Hit or any Permitted Homolog; (ii) it will not license or otherwise transfer to any Third Party the right to use in the Monsanto Crops, for any transgenic application, any G2P Recommendation arising from any G2P Activity or other activity that in either case intentionally targets the discovery of G2P Recommendation that confers Traits in the Monsanto Field for use in the Monsanto Crops for any transgenic application, it being understood that G2P Recommendation identified through any G2P Activity permitted hereby may be useful in the Monsanto Crops ; (iii) it shall not, in collaboration with or for the benefit of any Third Party, engage in, undertake, or otherwise pursue any Discovery Round or other activity that intentionally targets the discovery of Genes that confer Traits in the Monsanto Field for use in the Monsanto Crops for any transgenic application, it being understood that Hits identified through any Discovery Round permitted hereby may be useful in the Monsanto Crops, (iv) it shall not, in collaboration with or for the benefit of any Third Party, engage in, undertake, or otherwise pursue any G2P Activity or other activity that in either case intentionally targets the discovery of G2P Recommendation that confers Traits in the Monsanto Field for use in the Monsanto Crops for any transgenic application, it being understood that G2P Recommendation identified through any G2P Activity permitted hereby may be useful in the Monsanto Crops, and (v) during the Non-Negotiation Period, it shall not negotiate any specific business and legal terms of any agreement with a Third Party, or enter into any agreement with any Third Party, that contemplates any of the activities described in the preceding clauses (i) through (iv). Subject to Subsections (i) and (iii) above and solely in respect of Encumbered Special Collaboration Hits and their Homologs, Evogene shall be entitled to conduct, in collaboration with or for the benefit of any Third Party that is party to an Existing Encumbering Agreement or a Future Encumbering Agreement, G2P Activity that (A) intentionally targets the discovery of G2P Recommendation relating to the Encumbered Special Collaboration Hits and their Homologs that are the subject of such Existing Encumbering Agreement or Future Encumbering Agreement, (B) confers Traits in the Monsanto Field for use in the Monsanto Crops as to which Evogene granted a license pursuant to such Existing Encumbering Agreement or Future Encumbering Agreement, or any transgenic application, and to license such G2P Recommendation to the

 

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applicable Third Party solely for use with respect to such Encumbered Special Collaboration Hits and homologs and solely to the extent of the Monsanto Crops licensed under the Existing Encumbering Agreement or Future Encumbering Agreement by Evogene. For the avoidance of doubt, after the expiration of the Exclusivity Period, Evogene shall have no obligation with respect to conducting Discovery Rounds or G2P Activity within or outside of the Monsanto Field. Additionally, throughout the Exclusivity Period and thereafter but subject to Section 3.1.2, Evogene may freely license Evogene Project Hits and Evogene Non-Project Hits (and Homologs thereof) and G2P Recommendation, to any Third Party for use outside of the Monsanto Crops, in any field. Evogene shall not license any Homolog of any Special Collaboration Hit (including any Encumbered Special Collaboration Hit except to the extent subject to any Existing or Future Encumbering Agreement) to any Third Party for use in the Monsanto Crops for the longer of (a) the end of the Exclusivity Period or (b) the Non-Disclosure Period for such Special Collaboration Hit. Notwithstanding anything herein to the contrary, commencing on the first day of Collaboration Year 6, [* * *] shall be excluded from the Monsanto Crops for purposes of this Section 4.1. However, if at any time after the first day of Collaboration Year 6 and prior to the expiration of the Exclusivity Period, Evogene wishes to license to any Third Party the right to use in [* * *], for any transgenic application, any Evogene Hit identified through a Discovery Round or any other activity directed to the identification of Hits that confer Traits in the Monsanto Field, or any Homolog of any such Evogene Hit, then Evogene shall first offer, in writing, to enter into non-exclusive negotiations with Monsanto regarding such proposed licensing transaction, for a period of 60 days, and, if Monsanto accepts in writing Evogene’s offer to negotiate such a transaction, Monsanto to provide such acceptance to Evogene within 30 days of Monsanto’s receipt of Evogene’s applicable offer, Evogene shall negotiate with Monsanto such proposed licensing transaction for a period of 60days commencing on Monsanto’s acceptance of Evogene’s applicable offer (the “Non-Exclusive Negotiation Requirement”). Nothing in the foregoing shall require either party to enter into any such proposed licensing transaction. With respect to any given proposed licensing transaction, if within twelve (12) months of Evogene’s offer to Monsanto to negotiate, Evogene does not enter into an agreement with a Third Party with respect to the licensing of the applicable Evogene Hits and the Homologs thereof for use in [* * *], for any transgenic application, then the Non-Exclusive Negotiation Requirement shall be reinstated with respect to such type of licensing of the applicable Evogene Hits and the respective Homologs thereof. For clarification, the Covered Vegetables, which were part of the “Monsanto Crops” until the Signing Date, shall be excluded from the Monsanto Crops for purposes of this Section 4.1, as of the Effective Date.

 

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4.1.1 Non-Negotiation Period. For purposes of this Section 4.1, “Non-Negotiation Period” shall mean the period commencing on the Effective Date and ending on [* * *]; provided, however, that (i) the Non-Negotiation Period shall end on the [* * *] of [* * *] if Monsanto timely exercises its right to Terminate the Funded Project at the end of [* * *], pursuant to Section 14.2, and (ii) the Non-Negotiation Period shall end on [* * *] if Monsanto exercises the Research Extension Option.

4.2 Independent Discovery Rounds.

4.2.1 Notice of Independent Discovery Rounds. During the Exclusivity Period and subject to Section 4.1, Evogene shall have the right to conduct, itself or in collaboration with or for the benefit of any Third Party, Independent Discovery Rounds. Every six (6) months during the Exclusivity Period, Evogene shall notify the Research Committee of (i) the Independent Discovery Rounds planned for the next 18 months (subject to confidentiality restrictions in the case of Third-Party Independent Discovery Rounds) and (ii) all Special Collaboration Hits that Evogene has identified and delivered during the preceding six-month period. Evogene shall not, solely as a result of such reports, be obligated to conduct any such planned Independent Discovery Rounds, nor shall it be precluded from conducting Independent Discovery Rounds in addition to those disclosed to the Research Committee from time to time pursuant to such reports. In addition, Evogene shall notify the Research Committee at least six (6) months before it begins any Internal Independent Discovery Round, and Evogene shall only conduct Internal Independent Discovery Rounds after giving such notice. Once commenced, an Internal Independent Discovery Round cannot become a Third-Party Independent Discovery Round. All Third-Party Independent Discovery Rounds shall be subject to a bona fide written agreement with a Third Party before such round commences.

(a) Internal Independent Discovery Rounds.

(i) Notice to Monsanto. During the Exclusivity Period, with respect to each Internal Independent Discovery Round, Evogene shall notify Monsanto of each of the following stages:

(1) Prior to the initiation of any such Internal

 

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Independent Discovery Round;

(2) Upon identification of the Evogene Non-Project Hits identified under such Internal Independent Discovery Round and the filing of a patent application with respect to such Evogene Non-Project Hits; and

(3) Semi-annually during each Collaboration Year following stage (2) above occurring during the Exclusivity Period, in which Evogene obtains Core Validation or Model Plant Validation results in accordance with the terms hereof, if any, in respect of the Evogene Non-Project Hits identified through such Internal Independent Discovery Round.

(ii) Adding Internal Independent Discovery Rounds to Funded Project. If Monsanto informs Evogene, within forty-five (45) days of Evogene’s notice of the

 

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initiation of any Internal Independent Discovery Round, that Monsanto wishes to add such Internal Independent Discovery Round to the Funded Project, then, subject to the parties mutual agreement, to be negotiated in good faith, to add such Independent Discovery Round to the Funded Project (whether instead of any Discovery Program originally planned for such Collaboration Year, or in addition to the Discovery Programs planned for such Collaboration Year and subject to the parties’ agreement, to be negotiated in good faith, on additional funding to be provided by Monsanto with respect to any additional Discovery Round), such Internal Independent Discovery Round shall constitute a Project Discovery Round for all purposes hereunder, and the Evogene Hits identified thereunder shall constitute Collaboration Hits for all purposes under this Agreement.

(iii) Right to Conduct. If the Internal Independent Discovery Round is not added to the Funded Project, then Evogene shall have the right to conduct or continue to conduct such Internal Independent Discovery Round on its own, in Evogene’s sole discretion and at Evogene’s expense.

(iv) Delivery of Special Collaboration Hits. In accordance with Section 4.4, Evogene shall deliver to Monsanto each Evogene Non-Project Hit that was identified

 

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through an Internal Independent Discovery Round, such delivery to include a Collaboration Hit Data Backpack with respect to such Evogene Non-Project Hit. As set forth in the definition of “Special Collaboration Hit,” each such Evogene Non-Project Hit shall, unless and until it has undergone Core Validation or Model Plant Validation in accordance with the terms hereof, constitute a Special Collaboration Hit. Throughout the Exclusivity Period, subject to Sections 3.1.2 and 4.5, Evogene shall be permitted to license to Third Parties any Special Collaboration Hits or Homologs of Special Collaboration Hits, only for use outside of the Monsanto Crops, provided that, in accordance with Section 3.1.4, [* * *] shall be excluded from the Monsanto Crops with respect to Special Collaboration Hits (and Homologs thereof) that are delivered by Evogene to Monsanto in Collaboration Year 6 and thereafter. For clarification, the Covered Vegetables, which were part of the “Monsanto Crops” until the Signing Date, shall be excluded from the Monsanto Crops for purposes of this Section 4.2.1.(a)(iv), with respect to all Special Collaboration Hits (and Homologs thereof) delivered by Evogene to Monsanto at any time after the Effective Date.

(v) Validation of Special Collaboration Hits. Evogene may at any time, in its sole discretion, conduct model plant validation, as

 

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provided below, on the Special Collaboration Hits arising from any Independent Discovery Round. The assays used for such model plant validation shall be proposed to and approved by the Research Committee within 30 days of Evogene’s written proposal thereof to the Research Committee, and shall be either the Core Validation or the Model Plant Validation assays set forth in the Research Plan. If the Research Committee does not inform Evogene within such 30-day period which model plant validation the Special Collaboration Hits should undergo, Evogene shall conduct the Core Validation. Each Special Collaboration Hit that undergoes Core Validation or Model Plant Validation shall constitute a Collaboration Hit hereunder, regardless whether such Special Collaboration Hit qualifies as a Validated Hit.

(vi) Delivery of Discovery Validation Data Backpacks; Semi-Annual Pools. Semi-annually during each Collaboration Year, Evogene shall deliver to Monsanto Discovery Validation Data Backpacks for all Collaboration Hits arising from Special Collaboration Hits (if any) for which Core Validation or Model Plant Validation was completed during the previous semi-annual period (the Collaboration Hits as to which Discovery Validation Data Backpacks are provided to Monsanto during each semi-

 

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annual period being referred to as a “Semi-Annual Pool”). Such Collaboration Hits shall be included in the Gene Group for the Collaboration Year in which their respective Discovery Validation Data Backpacks are provided to Monsanto.

(vii) Collaboration Hits Not Qualifying as Validated Hits. With respect to Collaboration Hits in each Semi-Annual Pool that do not qualify as Validated Hits, Monsanto may elect, by written notice to Evogene within 90 days of Evogene’s delivery of the results of Core Validation or Model Plant Validation, as the case may be, for each Semi-Annual Pool, either:

(1) to reimburse Evogene, as set forth in Section 6.11, for Evogene’s costs of Core Validation or Model Plant Validation, as applicable, for all Collaboration Hits in such Semi-Annual Pool, in which event Monsanto shall retain its licenses hereunder to all Collaboration Hits in such Semi-Annual Pool that do not qualify as Validated Hits, or

 

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(2) to elect not to reimburse Evogene for Evogene’s costs of Core Validation or Model Plant Validation, as applicable, for all Collaboration Hits in such Semi-Annual Pool, in which event Monsanto shall (A) have the right to retain its licenses hereunder to up to [* * *] ([* * *]%) of such Collaboration Hits that did not qualify as Validated Hits, as designated by Monsanto, and (B) have the right to retain its licenses hereunder to any Collaboration Hits in such Semi-Annual Pool that did not qualify as Validated Hits, in addition to those selected in clause (A) above, provided that each group of additional Collaboration Hits so designated during a Collaboration Year (a “Special Gene Group” for such Collaboration Year) shall be subject to the Monsanto Diligence

 

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Obligations set forth in Section 5.6.6 below. Monsanto’s licenses hereunder shall terminate automatically as to any Collaboration Hits from such Semi-Annual Pool that Monsanto does not elect to retain under the preceding clauses (A) and (B), but such Collaboration Hits and all Collaboration Hit Homologs thereof remain subject to Section 4.1.

(b) Third-Party Independent Discovery Rounds. The terms of Subsections 4.2.1(a)(iv) and (a)(v) shall apply to Third-Party Independent Discovery Rounds, mutatis mutandis; provided, however, that:

(i) Evogene shall only be obligated to notify Monsanto of any such Third-Party Independent Discovery Round either:

(1) within [* * *] ([* * *]) [* * *] applicable to the Evogene Non-Project Hits identified in such Third-Party Independent Discovery Round, in which case any Product Royalties arising in respect of the Special Collaboration Hits arising from such Evogene Non-Project Hits shall be payable for the full term provided in Section 6.5.5(a); or

 

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(2) within [* * *] ([* * *]) [* * *] applicable to the Evogene Non-Project Hits identified in such Third-Party Independent Discovery Round (and not at any earlier stage), in which case any Product Royalties arising in respect of the Special Collaboration Hits arising from such Evogene Non-Project Hits shall be payable solely for the life of the applicable Evogene Patent Rights in the United States, as provided in Section 6.5.5(c).

(ii) The disclosure to Monsanto of any model plant validation results in respect of the Evogene Non-Project Hits identified in such Third-Party Independent Discovery Round shall be subject to any Third Party limitation limiting the scope of such

 

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disclosure; provided that Evogene shall not enter into any agreement with a Third Party after the Effective Date which would prevent Evogene from disclosing to Monsanto Core Validation or Model Plant Validation results (as opposed to any other type of model plant validation results) in respect of Evogene Non-Project Hits identified in such Third-Party Independent Discovery Round; and

(iii) Evogene will be entitled to impose on Monsanto certain special terms and conditions in respect of such Evogene Non-Project Hits (e.g. relating to intellectual property registration, prosecution, defense and enforcement, or to regulatory matters), as may be required in order for Evogene to comply with its undertakings towards the Third Party, but not more restrictive than similar terms and conditions herein and not imposing any new payment obligations on Monsanto.

4.2.2 Non-Field Discovery Rounds.

(a) During the Exclusivity Period, Evogene shall have the right to conduct both Internal Non-Field Discovery Rounds and Third-Party Non-Field Discovery Rounds. Any Evogene Non-Project Hits identified through such Non-Field Discovery Rounds shall be deemed “Non-Field Hits”. Non-Field Hits identified through Internal Non-Field Discovery Rounds shall be deemed “Internal Non-Field Hits”, and Non-Field Hits identified through Third-Party Non-Field Discovery Rounds shall be deemed “Third-Party Non-Field Hits”.

 

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(b) During the Exclusivity Period, (i) Evogene shall have the right to license any Non-Field Hit to Third Parties for research purposes and for commercial exploitation outside the Monsanto Crops, and (ii) Evogene shall have the right to license any Non-Field Hit to Third Parties for research purposes and for commercial exploitation in the Monsanto Crops, provided that such Non-Field Hit has undergone [* * *] and has not met the [* * *] set forth in the Research Plan. For all purposes of this Section 4.2.2(b), [* * *] shall be excluded from the Monsanto Crops with respect to Non-Field Hits, that are identified by Evogene during Collaboration Year 6 and thereafter. For clarification, the Covered Vegetables, which were part of the “Monsanto Crops” until the Signing Date, shall be excluded from the Monsanto Crops for purposes of this Section 4.2.2(b), with respect to all Non-Field Hits identified by Evogene at any time after the Effective Date.

(i) In the semi-annual reports that Evogene will provide to the Research Committee during the Exclusivity Period under Section 4.2.1, Evogene shall notify the Research Committee of any Internal Non-Field Hits that have met the [* * *] set forth in the Research Plan in the preceding semi-annual period, and will concurrently provide Monsanto with the respective [* * *] for such Internal Non-Field Hits. Thereafter each Internal Non-Field Hit that has met the [* * *] shall constitute a Collaboration Hit for all purposes of this Agreement, except that it shall not be subject to the Monsanto Diligence Obligations and shall not be included in any determination of Evogene’s compliance with the Evogene Diligence Obligations.

 

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(ii) Except as required by written agreements in effect prior to the Effective Date, Evogene shall not license or disclose to any Third Party for any reason, or file a patent application on, any Third-Party Non-Field Hits that have met the [* * *] set forth in the Research Plan. Additionally, Evogene shall have no obligation to license or to disclose such Third-Party Non-Field Hits to Monsanto. Promptly after Evogene identifies any such validated Third-Party Non-Field Hits, Evogene shall (i) take commercially reasonable steps to destroy all records (including archive records) of the existence, identity and characteristics of such validated Third-Party Non-Field Hits, and all test results and reports relating thereto, and (ii) instruct all of its personnel with knowledge of any such Third-Party Non-Field Hits that they are to conduct their work as if such Third-Party Non-Field Hits had never been identified. Annually during the Exclusivity Period, Evogene shall certify to Monsanto in writing its compliance with the requirements of this Section 4.2.2(b)(ii).

4.2A Independent G2P Rounds.

4.2A.1 Notice of Independent G2P Rounds. During the Exclusivity Period and subject to Section 4.1, Evogene shall have the right to conduct, itself or in collaboration with or for the benefit of any Third Party, Independent G2P Rounds; provided, however, that upon the occurrence of a Change of Control to a Monsanto Competitor, Evogene shall have no right to initiate any Independent G2P Round relating to any Monsanto Crops, or to complete any Internal Independent G2P

 

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Round relating to any Monsanto Crops that is then pending, except for Independent G2P Rounds conducted on Encumbered Special Collaboration Hits. Every six (6) months during the Exclusivity Period, Evogene shall notify the Research Committee of (i) the Independent G2P Rounds planned for the next 18 months (subject to confidentiality restrictions in the case of Third-Party Independent G2P Rounds), including a list of all Collaboration Hit Homologs and Special Collaboration Hits to be targeted by each such Independent G2P Round, and (ii) all Special G2P Recommendation that Evogene has identified and delivered during the preceding six-month period, as set forth in Section 4.2A.1(a)(iv) below. Evogene shall not, solely as a result of such reports, be obligated to conduct any such planned Independent G2P Rounds, nor shall it be precluded from conducting Independent G2P Rounds in addition to those disclosed to the Research Committee from time to time pursuant to such reports. In addition, Evogene shall notify the Research Committee at least three (3) months before it begins any Internal Independent G2P Round, and Evogene shall only conduct Internal Independent G2P Rounds after giving such notice, provided that with respect to any Independent G2P Rounds that are pending as of the Signing Date or that are planned to commence within 3 months of the Signing Date, Evogene shall notify the Research Committee within 30 days of the Signing Date. Once commenced, any RePack Analyses, PlaNet Analyses, GeneSpec Analyses and GeneDex Analyses conducted through an Internal Independent G2P Round on Collaboration Hit Homologs cannot become part of a Third-Party Independent G2P Round and any RePack Analyses, PlaNet Analyses, GeneSpec Analyses and GeneDex Analyses conducted through an Internal Independent G2P Round on Special Collaboration Hits can become part of a Third-Party Independent G2P Round. All Third-Party Independent G2P Rounds shall be subject to a bona fide written agreement with a Third Party before such round commences.

(a) Internal Independent G2P Rounds.

(i) Notice to Monsanto. During the Exclusivity Period, with respect to each Internal Independent G2P Round, Evogene shall notify Monsanto of each of the following stages:

(1) Prior to the initiation of any such Internal Independent G2P Round, as set forth in Section 4.2A.1;

 

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(2) Semi-annually, with respect to Special G2P Recommendation identified during the preceding 6 month period and either identified in: (i) an Independent Collaboration Hit G2P Data Backpack to be prepared within 3 months from the identification of such Special G2P Recommendation or (ii) a patent application, if any, filed with respect to such Special G2P Recommendation; and

(3) Semi-annually during each Collaboration Year following stage (2) above occurring during the Exclusivity Period, in which Evogene obtains Independent G2P Validation results in accordance with the terms hereof, if any, in respect of the Special G2P Recommendation identified through such Internal Independent G2P Round.

 

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(ii) Adding Internal Independent G2P Rounds to Funded Project. If Monsanto informs Evogene, within forty-five (45) days of Evogene’s notice of the initiation of any Internal Independent G2P Round, that Monsanto wishes to add such Internal Independent G2P Round to the Funded Project, then, subject to the parties’ mutual agreement, to be negotiated in good faith, to add such Independent G2P Round to the Funded Project (whether instead of or in addition to the G2P Activities planned for such Collaboration Year and subject to the parties’ agreement, to be negotiated in good faith on additional funding to be provided by Monsanto with respect to any additional G2P Round. Notwithstanding the foregoing, if Monsanto, at its sole discretion, elects to substitute an Independent G2P Round for Project G2P Rounds planned for the given Collaboration Year of the same magnitude as the Independent G2P Round, there will be no incremental cost for the replacement Independent G2P Round to the Funded Project.), such Internal Independent G2P Round shall constitute a G2P Enhancement Round or G2P Optimization Round, as applicable, for all purposes hereunder, and the G2P Recommendations identified thereunder shall constitute Project G2P Recommendations for all purposes under this Agreement.

 

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(iii) Right to Conduct. If the Internal Independent G2P Round is not added to the Funded Project, then Evogene shall have the right to conduct or continue to conduct such Internal Independent G2P Round on its own, in Evogene’s sole discretion and at Evogene’s expense.

(iv) Delivery of Special G2P Recommendation; Licenses to Third Parties. Evogene shall deliver to Monsanto an Independent Collaboration Hit G2P Data Backpack on each Special G2P Recommendation that Evogene notifies Monsanto of in accordance with Subsection (i)(2) above, concurrently with the delivery of such semi-annual notification. Throughout the Exclusivity Period, subject to Sections 3.1.2 and 4.5, Evogene shall be permitted to license to Third Parties any Special G2P Recommendation, only for use outside of the Monsanto Crops, provided that, in accordance with Section 3.1.4, [* * *] shall be excluded from the Monsanto Crops with respect to Special G2P Recommendation delivered by Evogene to Monsanto in Collaboration Year 6 and thereafter. For clarification, the Covered Vegetables, which were part of the “Monsanto Crops” until the Signing Date, shall be excluded from the Monsanto

 

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Crops for purposes of this Section 4.2.A1.(a)(iv), with respect to all Special G2P Recommendation delivered by Evogene to Monsanto at any time after the Effective Date.

(v) Delivery of Independent G2P Validation Data Backpacks. Semi-annually during each Collaboration Year during the Exclusivity Period, Evogene shall deliver to Monsanto Independent G2P Validation Data Backpacks for all Special G2P Recommendation (if any) on which Evogene conducted Independent G2P Validation, of which Evogene notified Monsanto in accordance with Subsection (i)(3) above, concurrently with the delivery of such semi-annual notification.

(vi) No Monsanto Diligence Obligations. No Monsanto Diligence Obligations shall apply with respect to any Special G2P Recommendations.

(b) Third-Party Independent G2P Rounds. The terms of Subsections 4.2A.1(a)(iv) and 4.2.1(a)(v) shall apply to Third-Party Independent G2P Rounds, mutatis mutandis; provided, however, that:

(i) Evogene shall only be obligated to notify Monsanto of any such Third-Party Independent G2P Round either:

 

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(1) within [* * *] ([* * *]) [* * *] applicable to the Special G2P Recommendation identified in such Third-Party Independent G2P Round, in which case any Product Royalties arising in respect thereof shall be payable for the full term provided in Section 6.5.5(a); or

(2) within [* * *] ([* * *]) [* * *] applicable to the Special G2P Recommendation identified in such Third-Party Independent G2P Round (and not at any earlier stage), in which case any Product Royalties arising in respect thereof shall be payable solely for the life of the applicable Evogene Patent Rights in the United States, as provided in Section 6.5.5(c).

(ii) The disclosure to Monsanto of any Independent G2P Model Plant Validation results in respect of the Special G2P Recommendation identified in such Third-Party Independent G2P Round shall be subject to any Third Party limitation limiting the scope of such disclosure; provided that

 

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Evogene shall not enter into any agreement with a Third Party after the Signing Date which would prevent Evogene from disclosing to Monsanto Independent G2P Validation results (as opposed to any other type of model plant validation results) in respect of Special G2P Recommendation identified in such Third-Party Independent G2P Round; and

(iii) Evogene will be entitled to impose on Monsanto certain special terms and conditions in respect of such Special G2P Recommendation (e.g. relating to intellectual property registration, prosecution, defense and enforcement, regulatory matters, or non-disclosure periods), as may be required in order for Evogene to comply with its undertakings towards the Third Party, but not more restrictive than similar terms and conditions herein and not imposing any new payment obligations on Monsanto.

4.3 Encumbered Special Collaboration Hits.

4.3.1 Delivery of Existing Evogene Hits. Evogene may deliver any or all of the Existing Evogene Hits to Monsanto as Collaboration Hits during Collaboration Year 1, and such Hits shall constitute Collaboration Hits arising from a Project Discovery Round for all purposes of this Agreement. Evogene shall deliver any remaining Existing Evogene Hits to Monsanto within six months after the Effective Date, and such Existing Evogene Hits shall constitute Special Collaboration Hits for all purposes of this Agreement, except as set forth in this Section 4.3 below.

 

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4.3.2 Encumbered Special Collaboration Hits. Notwithstanding any provision to the contrary in this Agreement, the following terms and conditions shall apply to all Encumbered Special Collaboration Hits.

(a) Monsanto’s licenses hereunder with respect to Encumbered Special Collaboration Hits (and the Homologs thereof to the extent such Special Collaboration Hits become Collaboration Hits in accordance with the terms hereof) shall not include any Monsanto Crops already licensed, or agreed to be licensed, by Evogene to Third Parties, or subject to an obligation of Evogene to negotiate a license to a Third Party, pursuant to the terms of an Existing Encumbering Agreement, and shall otherwise be subject to the provisions of the applicable Existing Encumbering Agreements (such as rights to improvements, obligations to negotiate further licenses, and inapplicability of the Regulatory provisions). Evogene shall not be required to make any amendments to such Encumbering Agreements in order to adapt them to the provisions of this Agreement.

(b) For each Encumbered Special Collaboration Hit, Evogene shall, before delivering the applicable Collaboration Hit Data Backpack to Monsanto, (i) identify the Monsanto Crops that would be included in the licenses granted to such Encumbered Special Collaboration Hit pursuant to this Agreement, (ii) notify whether such Encumbered Special Collaboration Hit may be subject to a Future Encumbering Agreement, and (iii) provide to Monsanto a written summary of the limitations on either party’s rights or obligations hereunder with respect to such Encumbered Special Collaboration Hit that would be required by the applicable Existing Encumbering Agreement, and Evogene shall certify that its disclosure of such Monsanto Crops, and such limitations, is accurate and complete.

(c) Monsanto shall have the right, in its sole discretion, to accept or reject the limitations on any Encumbered Special Collaboration Hit. If Monsanto accepts such conditions, then such Encumbered Special Collaboration Hit shall be treated as a Special

 

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Collaboration Hit hereunder, and shall be licensed to Monsanto solely in the Monsanto Crops disclosed to Monsanto in the applicable notice pursuant to subsection (b) above, and subject to the disclosed limitations of the applicable Encumbering Agreement in such notice. If Monsanto rejects such limitations, then such Encumbered Special Collaboration Hit shall cease to constitute a Special Collaboration Hit hereunder, and neither Monsanto nor Evogene shall have any rights or obligations hereunder with respect to such Encumbered Special Collaboration Hit, except that Evogene’s licensing rights with respect to such Encumbered Special Collaboration Hit shall remain subject to Section 4.1.

(d) If Monsanto accepts the limitations on an Encumbered Special Collaboration Hit and such Encumbered Special Collaboration Hit is subject to the negotiation of a Future Encumbering Agreement, then Evogene shall be entitled to enter into any Future Encumbering Agreement with respect to each Encumbered Special Collaboration Hit; provided that (1) such Future Encumbering Agreement shall contain no additional limitations on Monsanto’s rights hereunder (other than those of the types that were disclosed pursuant to subsection (b)), and (2) the limitations in such Future Encumbering Agreement that are of the same types as the limitations disclosed to Monsanto under subsection (b) shall be no less favorable to Monsanto than as described in such disclosure.

(e) In negotiating each Future Encumbering Agreement, Evogene shall propose that such agreement include a provision obligating Evogene’s counterparty to consult with Monsanto regarding regulatory applications and other regulatory issues under such Future Encumbering Agreement; provided that nothing herein shall prevent Evogene from entering into such Future Encumbering Agreement if such counterparty is unwilling to include such provision.

(f) If Evogene enters into a Future Encumbering Agreement with respect to an Encumbered Special Collaboration Hit in any Monsanto Crop in accordance with the foregoing subsection (d), then Monsanto shall

 

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not be entitled to a license to such Encumbered Special Collaboration Hit in such Monsanto Crop. If Evogene does not enter into such Future Encumbering Agreement and abandons negotiations with respect thereto, then:

(i) If Evogene has not yet generated any field trial data with respect to such Encumbered Special Collaboration Hit in such Monsanto Crop, then such Encumbered Special Collaboration Hit shall constitute a Special Collaboration Hit hereunder, but Monsanto’s licenses thereto shall be limited to such Monsanto Crop; and

(ii) If Evogene has generated field trial data with respect to such Encumbered Special Collaboration Hit in such Monsanto Crop, then Evogene and Monsanto shall negotiate in good faith an appropriate royalty rate for a license to such Encumbered Special Collaboration Hit in the available Monsanto Crop or Crops, and if the parties agree on a royalty rate, then such Encumbered Special Collaboration Hit shall constitute a Special Collaboration Hit hereunder, but Monsanto’s licenses thereto shall be limited to such Monsanto Crop; and

(iii) If Evogene and Monsanto are unable to agree on a royalty rate under the preceding clause (ii), then such Encumbered Special Collaboration Hit shall cease to constitute a Special Collaboration Hit hereunder, and neither Monsanto nor Evogene shall have

 

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any rights or obligations hereunder with respect to such Encumbered Special Collaboration Hit, except that Evogene’s licensing rights with respect to such Encumbered Special Collaboration Hit shall remain subject to Section 4.1.

(g) Subject to the preceding subsections of this Section 4.3.2, Evogene will deliver to Monsanto a certain group of [* * *] Encumbered Special Collaboration Hits known as the ‘[* * *]’, together with any available model plant validation results, and Monsanto will be obligated to conduct Phase I Testing in [* * *] or [* * *] with respect to at least [* * *] of such Encumbered Special Collaboration Hits. Failure to conduct such testing shall constitute a Diligence Failure resulting in the loss of the exclusive licenses under Section 3.1 to such [* * *] genes, such licenses becoming terminable and non-exclusive as provided in Section 5.6.7. If any of the Encumbered Special Collaboration Hits in such group become Collaboration Hits in accordance with the terms hereof, then Monsanto will have no additional Phase I Testing obligations with respect thereto. Such Encumbered Special Collaboration Hits shall be subject to Monsanto’s Diligence Obligation relating to Phase Advancement under Section 5.6.2 but, except as expressly provided in this subsection, shall not be subject to Monsanto’s other Diligence Obligations). The testing or Phase Advancement of any Homolog of any such Encumbered Special Collaboration Hit shall constitute testing or Phase Advancement of such Encumbered Special Collaboration Hit for purposes of this subsection (g), and any such testing or Phase Advancement shall earn Activity Points for purposes of Monsanto’s Minimum R&D Activity.

4.3.3 Reservation of Rights. Notwithstanding anything to the contrary in this Section 4, nothing in this Agreement shall limit, during the Exclusivity Period or thereafter, Evogene’s ability to license to Third Parties any (i) Encumbered Special Collaboration Hits or (ii) homologs (as such term is defined in the respective Encumbering agreements) of Encumbered Special Collaboration Hits (whether such homologs are identified before or during the Exclusivity Period), for use in one or more Monsanto Crops, and for any applications, pursuant to the Existing Encumbering Agreements, and pursuant to Future Encumbering Agreements permitted hereunder.

 

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4.4 Patent Applications Arising from Independent Discovery Rounds and Internal Non-Field Discovery Rounds. Subject to Section 4.2.1(b)(i), within thirty (30) days after Evogene files a patent application on Hits identified during any Independent Discovery Round conducted after the Effective Date, Evogene shall notify Monsanto of any Evogene Non-Project Hits included in such patent application (which, for avoidance of doubt, shall constitute Special Collaboration Hits). Within thirty (30) days after the later of (i) the date that Evogene files a patent application on Hits identified during any Internal Non-Field Discovery Round conducted after the Effective Date, and (ii) the date that Evogene determines that any Internal Non-Field Hits identified during such Internal Non-Field Discovery Round have met the [* * *] set forth in the Research Plan, Evogene shall disclose such Internal Non-Field Hits to Monsanto in accordance with Section 4.2.2. Except to the extent required by written agreements with Third Parties in effect on the Effective Date, Evogene shall not disclose any such Evogene Non-Project Hit identified during any Independent Discovery Round, or any Internal Non-Field Hit that has met the Validated Hit criteria set forth in the Research Plan, to a Third Party until it has filed a patent application with respect thereto.

4.4A Patent Applications Arising from Independent G2P Rounds. Subject to Section 4.2A.1(b)(i), within thirty (30) days after Evogene files a patent application on Special G2P Recommendation identified during any Independent G2P Round, Evogene shall deliver such patent application to Monsanto.

4.5 Non-Disclosure Period. Until the end of the Non-Disclosure Period for each Collaboration Hit, Special Collaboration Hit ,Project G2P Recommendation or item of Special G2P Recommendation, Evogene shall not disclose such Collaboration Hit or any of its Collaboration Hit Homologs, or such Special Collaboration Hit or any of its Homologs, or such Project G2P Recommendation or such Special G2P Recommendation, or any Collaboration Hit Data Backpack or Discovery Validation Data Backpack or Collaboration Hit G2P Data Backpack, Project G2P Validation Data Backpack or Independent G2P Validation Data Backpack associated with such Collaboration Hit or Special Collaboration Hit or Project G2P Recommendation or Special G2P Recommendation, to Third Parties for any purpose; provided, however, that (i) Evogene may, subject to confidentiality terms no less restrictive than those set forth in Section 10, disclose any Special Collaboration Hit, or any Homolog thereof, or any Special G2P Recommendation other than Special G2P Recommendation identified in

 

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respect of Evogene Project Hits through an Internal Independent G2P Round, and any data relating thereto, to any Third Party with whom Evogene has a bona fide license or collaboration agreement pursuant to which it licenses such Special Collaboration Hit or Homolog or Special G2P Recommendation to such Third Party, and (ii) after the end of the Non-Disclosure Period for each Collaboration Hit or Special Collaboration Hit and their respective Homologs or Project G2P Recommendation or item of Special G2P Recommendation , but subject to Sections 2.10 and 10, Evogene may make any such disclosure. In the event Evogene discloses a PlaNet Gene or any of its Homologs prior to said PlaNet Gene becoming a Collaboration Hit pursuant to Section 1.119 C, and being subject to the Non-Disclosure Period for a Project G2P Recommendation such disclosure shall not be deemed a breach by Evogene of the provisions of this Section 4.5 in respect of the Non-Disclosure Period for Collaboration Hits.

Concurrent Disclosure of Special G2P Recommendation—Special G2P Recommendation arising from Third-Party Independent G2P Rounds may be disclosed to the Third Party for which the Third-Party Independent G2P Round was performed provided that any Special G2P Recommendation identified in respect of Evogene Project Hits is disclosed to Monsanto no later than within 10 (ten) business days of its disclosure to the applicable Third Party.

4.6 Non-Compete; Non-Solicitation.

4.6.1 Employee Non-Competition. Monsanto shall have the option, upon written notice to Evogene at least sixty (60) days prior to the expiration of the Exclusivity Period, to restrict Evogene from having its employees who have served as Program Managers or members of the Research Committee and who have conducted work on behalf of the Funded Project from conducting work on behalf of any Third Party in the Monsanto Field for a period of [* * *] ([* * *]) year from the date of the expiration of the Exclusivity Period. In order to exercise this option, Monsanto must pay to Evogene the yearly gross salary (before taxes), bonus and employer-funded taxes and benefits, for the year preceding the date of expiration of the Exclusivity Period, of any such employees Monsanto chooses to restrict in this manner.

4.6.2 Non-Solicitation. During the Exclusivity Period and for [* * *] ([* * *]) years thereafter, neither party shall solicit, or request any party engaged by it to solicit, any employee of the other party who conducted work on the Collaboration to join the workforce of such party as an employee or independent contractor; provided that either party may make general postings or advertisements of open positions, and hire any employee of the other party responding thereto.

 

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  5. RESEARCH & DILIGENCE OBLIGATIONS

5.1 Diligence Obligations; General. The parties shall complete their respective diligence obligations under this Agreement, as such obligations are set forth in this Section 5 (the Monsanto diligence obligations are hereinafter referred to as “Monsanto Diligence Obligations,” the Evogene diligence obligations are hereinafter referred to as “Evogene Diligence Obligations,” and collectively or individually as the context may require, the “Diligence Obligations”). For purposes of this Section 5, (i) fractional values greater than or equal to .5 shall be rounded up and fractional values below .5 shall be rounded down, and (ii) except as set forth in Section 5.2.8, Special Collaboration Hits, so long as they remain Special Collaboration Hits, shall be excluded from the determination of each party’s compliance with its Diligence Obligations and the parties’ respective Diligence Obligations shall not apply to them.

5.2 Evogene Diligence Obligations – ATHLETE.

5.2.1 Discovery Activity.

(a) During each of Collaboration Years 1 through 6 of the Research Period, Evogene shall complete not less than the minimum number of Project Discovery Rounds for such Collaboration Year, as set forth below (all or part of which may have commenced in the previous Collaboration Year) under the Funded Project and shall dedicate the number of Project Discovery Rounds to each Discovery Program as is set forth in the Research Plan.

(b) Evogene shall dedicate at least [* * *] ($[* * *]) to Data Generation in respect of each such Project Discovery Round. Such Data Generation may be generated prior to the Collaboration Year during which such Project Discovery Round is performed, provided it was generated following the Effective Date.

 

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5.2.2 Annual Collaboration Hit Delivery. During the Research Period, Evogene shall deliver to Monsanto the number of Collaboration Hits per Collaboration Year set forth in subsections (a) and (b) below.

(a) During Collaboration Year 1, a minimum of [* * *] ([* * *]) [* * *], and in addition, during each of Collaboration Years [* * *]-[* * *], a minimum of [* * *] ([* * *]) [* * *], from a minimum of [* * *] ([* * *]) Project Discovery Rounds that will be completed during such year and which are expected to generate at least [* * *] ([* * *]) [* * *].

(b) During Collaboration Years 4 - 6:

(i) During Collaboration Year 4, a minimum of [* * *] ([* * *]) Collaboration Hits, from a minimum of [* * *] ([* * *]) Project Discovery Rounds that will be completed during such year and which are expected to generate at least [* * *] ([* * *]) Collaboration Hits each.

(ii) During Collaboration Year 5, a minimum of [* * *] ([* * *]) Collaboration Hits, from a minimum of [* * *] ([* * *]) Project Discovery Rounds that will be completed during such year and which are expected to generate at least [* * *] ([* * *]) Collaboration Hits each.

(iii) During Collaboration Year 6, a minimum of three hundred (300) Collaboration Hits, from a minimum of [* * *] ([* * *]) Project Discovery Rounds that will be completed during such year and which are expected to generate at least [* * *] ([* * *]) Collaboration Hits each.

 

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(c) Any Hit that is a Collaboration Hit Homolog of a previously-delivered Collaboration Hit shall not constitute a Collaboration Hit for purposes of fulfillment of the Evogene Diligence Obligations set forth in this Section 5.2.2.

(d) [* * *].

(e) [* * *].

(f) [* * *].

(g) [* * *].

5.2.3 Disclosure of Abandoned Hits.

(a) [* * *].

(b) [Intentionally omitted.]

(c) [Intentionally omitted.]

(d) [* * *].

(e) [* * *].

(f) [* * *].

5.2.4 Model Plant Validation.

(a) Evogene shall conduct Model Plant Validation on each Collaboration Hit delivered by Evogene to Monsanto under Section 5.2.2 [* * *], and shall prepare a Discovery Validation Data Backpack for each such Collaboration Hit [* * *].

(b) [* * *].

(c) [* * *].

(d) [* * *].

(e) [* * *].

5.2.5 Validated Hit Generation. [* * *].

 

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 5.2.6 Monsanto Nominated Hits.

(a) [* * *].

(b) [* * *].

 5.2.7 Data Generation in Collaboration Years 1 through 3. During Collaboration Years 1 through 3 of the Research Period, subject to Monsanto’s timely payment of the Data Generation payments pursuant to Section 6.3 (which payments may cease in accordance with Section 5.7.1(c)), Evogene shall conduct the Data Generation for each Collaboration Year that is supplemental to the Data Generation contemplated by Section 5.2.1(b)(i), as provided in the Research Plan. [* * *].

 5.2.8 Special Collaboration Hits and Internal Non-Field Hits That Become Collaboration Hits. [* * *].

5.3 Research Extension Option. Monsanto shall have the option, by not later than February 1, 2014 (the “Extension Option Last Exercise Date”), to extend the Funded Project by two additional Collaboration Years (i.e. to add Collaboration Years 7 and 8, with Discovery Validation Data Backpacks and/or Project G2P Validation Data Backpacks to be finalized and delivered by Evogene to Monsanto in Collaboration Year 9)( the “Extended Funded Project”), in consideration for the payment by Monsanto to Evogene of Annual Research Payments in Collaboration Years 6 through 9 in the total amount of Twenty-Six Million Dollars ($26,000,000) (the “Extended Period Annual Research Payments”), subject to and upon the terms and conditions set forth in this Section 5.3 below (the “Research Extension Option”).

 5.3.1 Exhibit T attached hereto sets forth a ‘price list’ for various research and development activities from which Monsanto may select for Evogene to conduct during Collaboration Years 7 through 9 and guidelines and constraints as to how those activities can be combined to structure the extended workplan, should Monsanto elect to exercise the Research Extension Option in accordance with the terms of this Section 5.3.

 5.3.2 The exercise of the Research Extension Option is subject to each of the following conditions: (i) Monsanto shall inform Evogene of Monsanto’s election to exercise the Research Extension Option by no later than the Extension Option Last Exercise Date, by providing to Evogene written notice of Monsanto’s election (the “Monsanto Exercise Notice”); (ii) together with the Monsanto Exercise Notice, Monsanto shall deliver to Evogene a ‘Deliverables Proposal’, in the format set forth in Exhibit T, in which

 

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Monsanto will select the research and development activities to be conducted by Evogene in Collaboration Years 7 through 9 (and possibly with Data Generation activities commencing as early as Collaboration Year 6) and amounting to Annual Research Payments of Twenty-Six Million Dollars ($26,000,000), according to the ‘price list’ set forth in Exhibit T, provided that Evogene shall not be required to complete any Project Discovery Rounds or Project G2P Rounds later than Collaboration Year 8 (the “Extended Period Evogene Deliverables”).

5.3.3 Effective upon Monsanto’s exercise of the Research Extension Option in accordance with the provisions of Section 5.3.2:

 

  (i) the ‘Research Period’ shall automatically be extended so that it shall continue until the end of the last-to-end Non-Disclosure Period for any Collaboration Hit Homolog of any Collaboration Hit, or Special Collaboration Hit, that Evogene provides to Monsanto during Collaboration Years 7 and/or 8, but in any event not later than the end of Collaboration Year 10;

 

  (ii) during Collaboration Years 7 through 9 (and possibly also during Collaboration Year 6, as aforementioned) and subject to Monsanto’s timely payment of the Extended Period Annual Research Payments, Evogene shall conduct the Extended Period Evogene Deliverables;

 

  (iii) [* * *];

 

  (iv) the Exclusivity Period shall automatically be extended through the last day of Collaboration Year 8 (the “Extended Exclusivity Period”);

 

  (v) [* * *].

5.3.4 Within three (3) months of Monsanto’s exercise of the Research Extension Option in accordance with the provisions of Section 5.3.2, the parties will negotiate and agree in good faith upon an amendment to this Agreement and the Research Plan, incorporating all provisions detailed in Section 5.3.3, including the Phase I Testing of Preferred Modes of Use Resulting from G2P Optimization Rounds.

 

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5.4 [Intentionally omitted.]

5.4.1 [Intentionally omitted.]

5.4.2 [Intentionally omitted.]

5.5 Minimum Collaboration Hits Per Project Discovery Round. [* * *].

5.5A Evogene Diligence Obligations – G2P Enhancement Rounds

5.5A.1 Research Activity. During each of Collaboration Years 4 and 5 of the Research Period and subject to Monsanto’s timely provision to Evogene of the report set forth in Section 5.5E, Evogene shall commence conducting not less than the minimum number of G2P Enhancement Rounds for such Collaboration Year, under the Funded Project, each in respect of a minimum number of Collaboration Hit Homologs that shall enter such G2P Enhancement Round, as set forth in Subsections (a) and (b) below:

(a) During Collaboration Year 4, a minimum of [* * *] ([* * *]) G2P Enhancement Rounds, in respect of a total of [* * *] ([* * *]) Collaboration Hit Homologs, from Collaboration Hits previously discovered by Evogene, which shall enter such G2P Enhancement Round.

(b) During Collaboration Year 5, a minimum of [* * *] ([* * *]) G2P Enhancement Rounds in respect of a total of [* * *] ([* * *]) Collaboration Hit Homologs from Gene Group 6 which shall enter such G2P Enhancement Round.

5.5A.2 Annual Collaboration Hit G2P Data Backpack Delivery. In connection with the G2P Enhancement Rounds under Section 5.5A.1, Evogene shall deliver to Monsanto the number of Collaboration Hit G2P Data Backpacks per Collaboration Year set forth in subsections (a) and (b) below:

(a) During Collaboration Year 5, a minimum of [* * *] ([* * *]) Collaboration Hit G2P Data Backpacks, pursuant to the G2P Enhancement Round that commenced during Collaboration Year 4 and completed during Collaboration Year 5.

 

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(b) During Collaboration Year 6, a minimum of [* * *] ([* * *]) Collaboration Hit G2P Data Backpacks, pursuant to the [* * *] ([* * *]) G2P Enhancement Rounds that commenced during Collaboration Year 5 and completed during Collaboration Year 6.

(c) During Collaboration Year 6 an additional minimum of [* * *] ([* * *]) Collaboration Hit G2P Data Backpacks for Collaboration Hits that underwent the GeneDex Analysis.

(d) [* * *].

(e) [* * *].

(f) [* * *].

(g) [* * *].

(h) [* * *].

5.5A.3 Project G2P Validation and Model Plant Validation.

(a) During each of Collaboration Years 6 and 7 of the Research Period, Evogene shall conduct Project G2P Validation and/or Model Plant Validation, and shall deliver not less than the minimum number of Project G2P Validation Data Backpacks and Discovery Validation Data Backpacks for such Collaboration Year, as set forth in Subsections (i) through (iv) below.

(i) During Collaboration Year 5, Evogene shall select a minimum of [* * *] ([* * *]) Preferred Modes of Use delivered by Evogene during Collaboration Year 5 in Collaboration Hit G2P Data Backpacks under Section 5.5A.2(a), on which Evogene shall conduct Project G2P Validation, and shall provide a Project G2P Validation Data Backpack for each such Preferred Mode of Use within 14 months from delivery of the Collaboration Hit G2P Data Backpack.

 

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(ii) In addition, during Collaboration Year 5 Evogene shall select a minimum of thirty (30) G2P Genes delivered by Evogene under Section 5.5A.2(a), or the actual number of G2P Genes delivered by Evogene under Section 5.5A.2(a) if less than [* * *] ([* * *]) G2P Genes, on which Evogene shall conduct Model Plant Validation (or on Collaboration Hit Homologs or PlaNet Gene Homologs thereof, as the case may be, if approved by the Research Committee), and shall provide a Discovery Validation Data Backpack for each such G2P Gene (or Collaboration Hit Homolog or PlaNet Gene Homolog) within [* * *] ([* * *]) [* * *] from delivery of the Collaboration Hit G2P Data Backpack for such Collaboration Hit. [* * *].

(iii) During Collaboration Year 6, Evogene shall select a minimum of [* * *] ([* * *]) Preferred Modes of Use delivered by Evogene during Collaboration Year 6 in Collaboration Hit G2P Data Backpacks under Section 5.5A.2(b), on which Evogene shall conduct Project G2P Validation, and shall prepare a Project G2P Validation Data Backpack for each such Preferred Mode of Use within [* * *] ([* * *]) [* * *] from delivery of the Collaboration Hit G2P Data Backpack including such Preferred Mode of Use.

 

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(iv) In addition, during Collaboration Year 6 Evogene shall select a minimum of [* * *] ([* * *]) G2P Genes delivered by Evogene under Section 5.5A.2(b), or the actual number of G2P Genes delivered by Evogene under Section 5.5A.2(b) if less than ninety (90) G2P Genes, on which Evogene shall conduct Model Plant Validation (or on Collaboration Hit Homologs or PlaNet Gene Homologs thereof, as the case may be, if approved by the Research Committee), and shall provide a Discovery Validation Data Backpack for each such G2P Gene (or Collaboration Hit Homolog or PlaNet Gene Homolog) within [* * *] ([* * *]) [* * *] from delivery of the G2P Collaboration Hit Data Backpack for such G2P Gene. [* * *].

 

  (b) Notwithstanding the foregoing or anything else to the contrary herein, [* * *], Evogene’s delay of up to [* * *] ([* * *]) months in completing Model Plant Validation (and delivering the Discovery Validation Data Backpacks) on up to [* * *] percent ([* * *]%) of the G2P Genes on which Evogene is required to perform Model Plant Validation according to Section 5.5A.3 ([* * *]), and/or Evogene’s delay of up to [* * *] ([* * *]) [* * *] in completing Project G2P Validation (and delivering the Project G2P Validation Data Backpacks) on up to [* * *] percent ([* * *]%) of the Preferred Modes of Use on which Evogene is required to perform Project G2P Validation according to Section 5.5A.3, shall not constitute a failure of this Evogene Diligence Obligation.

 

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5.5B Evogene Diligence Obligations – G2P Optimization Rounds

5.5B.1 Research Activity. During each of Collaboration Years 5 and 6 of the Research Period, and subject to Monsanto’s timely [* * *], Evogene shall commence conducting no less than the minimum number of G2P Optimization Rounds for such Collaboration Year, under the Funded Project, each in respect of not less than the minimum number of Collaboration Hit Homolog and/or Special Collaboration Hits that shall enter such G2P Optimization Round, as set forth in subsections (a) and (b) below:

(a) During Collaboration Year 5, a minimum of one (1) G2P Optimization Round for a minimum of [* * *] ([* * *]) Collaboration Hit Homologs and/or Special Collaboration Hits which shall enter such G2P Optimization Round.

(b) During Collaboration Year 6, a minimum of one (1) G2P Optimization Round for a minimum of [* * *] ([* * *]) Collaboration Hit Homologs and/or Special Collaboration Hits which shall enter such G2P Optimization Round.

5.5B.2 Annual Collaboration Hit G2P Data Backpack Delivery. In connection with the G2P Optimization Rounds conducted by Evogene under Section 5.5B.1, Evogene shall deliver to Monsanto the number of Collaboration Hit G2P Data Backpacks per Collaboration Year set forth in subsections (a) and (b) below.

(a) During Collaboration Year 5, a minimum of [* * *] ([* * *]) Collaboration Hit G2P Data Backpacks, pursuant to the G2P Optimization Round that commenced during such year.

(b) During Collaboration Year 6, a minimum of [* * *] ([* * *]) Collaboration Hit G2P Data Backpacks, pursuant to the G2P Optimization Round that commenced during such year.

(c) [* * *].

(d) [* * *].

(e) [* * *].

(f) [* * *].

 

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5.5B.3 Model Plant Validation.

(a) During each of Collaboration Years 6 and 7 of the Research Period, Evogene shall conduct Project G2P Validation and/or Model Plant Validation, and shall deliver no less than the minimum number of Project G2P Validation Data Backpacks and Discovery Validation Data Backpacks for such Collaboration Year, as set forth in Subsections (i) through (iv) below.

(i) During Collaboration Year 6, Evogene shall select a minimum of [* * *] ([* * *]) Preferred Modes of Use delivered by Evogene during Collaboration Year 5 in Collaboration Hit G2P Data Backpacks under Section 5.5B.2(a), on which Evogene shall conduct Project G2P Validation, and shall provide a Project G2P Validation Data Backpack for each such Preferred Mode of Use within [* * *] from delivery of the Collaboration Hit G2P Data Back.

(ii) In addition, during Collaboration Year 6, Evogene shall select a minimum of [* * *] ([* * *]) G2P Genes delivered by Evogene during Collaboration Year 5 under Section 5.5B.2(a), or the actual number of G2P Genes delivered by Evogene under Section 5.5B.2(a) if less than [* * *] ([* * *]) G2P Genes, on which Evogene shall conduct Model Plant Validation (or on Collaboration Hit Homologs or PlaNet Gene Homologs thereof, as the case may be, if approved by the Research Committee), and shall provide a Discovery Validation Data Backpack for each such G2P Gene (or Collaboration Hit Homolog or PlaNet Gene Homolog) within [* * *] ([* * *]) months from delivery of the Collaboration Hit Data Backpack for such G2P Gene. [* * *].

 

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(iii) During Collaboration Year 7, Evogene shall select a minimum of [* * *] ([* * *]) Preferred Modes of Use delivered by Evogene during Collaboration Year 6 in Collaboration Hit G2P Data Backpacks delivered by Evogene under Section 5.5B.2(b), on which Evogene shall conduct Project G2P Validation, and shall provide a Project G2P Validation Data Backpack for each such Preferred Mode of Use within [* * *] from delivery of the Collaboration Hit G2P Data Back.

(iv) In addition, during Collaboration Year 7, Evogene shall select a minimum of [* * *] ([* * *]) G2P Genes delivered by Evogene during Collaboration Year 6 under Section 5.5B.2(b), or the actual number of G2P Genes delivered by Evogene under Section 5.5B.2(b) if less than [* * *] ([* * *]) G2P Genes, on which Evogene shall conduct Model Plant Validation (or on Collaboration Hit Homologs or PlaNet Gene Homologs thereof, as the case may be, if approved by the Research Committee), and shall provide a Discovery Validation Data Backpack for each such G2P Gene (or Collaboration Hit Homolog or PlaNet Gene Homolog) within [* * *] ([* * *]) [* * *] from delivery of the Collaboration Hit Data Backpack for such G2P Gene. [* * *].

 

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(b) Notwithstanding the foregoing or anything else to the contrary herein, [* * *], Evogene’s delay of up to [* * *] ([* * *]) [* * *] in completing Model Plant Validation (and delivering the Discovery Validation Data Backpacks) on up to [* * *] percent ([* * *]%) of the G2P Genes on which Evogene is required to perform Model Plant Validation according to Section 5.5B.3 [* * *], and/or Evogene’s delay of up to [* * *] ([* * *]) [* * *] in completing Project G2P Validation (and delivering the Project G2P Validation Data Backpacks) on up to [* * *] percent ([* * *]%) of the Preferred Modes of Use on which Evogene is required to perform Project G2P Validation according to Section 5.5B.3, shall not constitute a failure of this Evogene Diligence Obligation.

5.5C Monsanto Provision of Monsanto Testing Data.

(a) [* * *].

(b) [* * *].

(c) [* * *].

5.5D Evogene Data Generation in Collaboration Years 4 and 5. During Collaboration Years 4 and 5 of the Research Period, subject to Monsanto’s timely payment of the Annual Research Payments pursuant to Section 6.2, Evogene shall conduct the Data Generation for each Collaboration Year, and shall deliver such data to Monsanto, as provided in the Research Plan.

5.5E Monsanto Report Prior to a Project G2P Round

(a) [* * *].

      [* * *].

5.5F Monsanto Nominated Hits, Monsanto Nominated PlaNet Gene Stacks and Monsanto Nominated RePack Recommendations

(a) [* * *].

 

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(a) [* * *]:

(b) [* * *].

(c) [* * *].

5.6 Monsanto Diligence Obligations.

5.6.1 Phase I Testing.

(a) Phase I Testing Minimum. Monsanto shall, by the end of the Phase I Testing Period for each Gene Group:

(i) conduct Phase I Testing, [* * *], on Collaboration Hit Homologs of at least [* * *] percent ([* * *]%) of the Collaboration Hits within such Gene Group (“Monsanto’s Phase I Testing Minimum in the Main Monsanto Crops”) [* * *],

(ii) conduct Phase I Testing [* * *] of at least [* * *] percent ([* * *]%) of the Collaboration Hits within such Gene Group (“[* * *]”), subject to a limit of [* * *] ([* * *]) Collaboration Hit Homologs in such Gene Group; and

for the first [* * *] Collaboration Hit Homologs for which Evogene performs a Project G2P Round and delivers Preferred Modes of Use, shall conduct Phase I Testing (deemed to be within Gene Group 5) as set forth in Exhibit L, [* * *], of Preferred Modes of Use that are delivered by Evogene (within Collaboration Hits G2P Data Backpacks) for at least [* * *] [* * *]) Collaboration Hit Homologs and/or Special Collaboration Hits.

(iii) commencing with the first Gene Group for which Evogene performs a Project G2P Round and delivers Preferred Modes of Use, conduct Phase I Testing as

 

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set forth in Exhibit L, [* * *], of Preferred Modes of Use that are delivered by Evogene (within Collaboration Hits G2P Data Backpacks) in respect of Collaboration Hit Homologs of at least [* * *]percent ([* * *]%) of the Collaboration Hits within such Gene Group, provided however, that with respect to up to [* * *] percent ([* * *]%) of the Collaboration Hits within such Gene Group as to which Monsanto conducts this Phase I Testing of the Preferred Modes of Use, [* * *];

[* * *].

[* * *].

(b) Credit Gene Generation. [* * *].

(c) Failure to Conduct Phase I Testing in the Main Monsanto Crops. If as of the end of the Phase I Testing Period for any Gene Group, Monsanto conducts Phase I Testing on less than the Phase I Testing Minimum in the Main Monsanto Crops for such Gene Group, [* * *]:

(i) If Monsanto has conducted Phase I Testing in the Main Monsanto Crops on Collaboration Hit Homologs of Collaboration Hits constituting less than [* * *] percent ([* * *]%) of the Collaboration Hits within such Gene Group, and has not reached the testing limit in the Main Monsanto Crops for such Gene Group set forth above, then [* * *].

(ii) If Monsanto has conducted Phase I Testing in the Main Monsanto Crops on Collaboration Hit Homologs of Collaboration Hits constituting [* * *] percent ([* * *]%) or more, but less than

 

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[* * *] percent ([* * *]%), of the Collaboration Hits within such Gene Group, and has not reached the testing limit in the Main Monsanto Crops for such Gene Group set forth above, then [* * *].

(iii) At the end of the original Phase I Testing Period for a Gene Group, for purposes of determining on which Collaboration Hits of such Gene Group Monsanto has conducted Phase I Testing in the Main Monsanto Crops and has earned at least [* * *].

(iv) [* * *].

(v) [* * *].

(d) Failure to Conduct Phase I Testing in Corn. If as of the end of the Phase I Testing Period for any Gene Group Monsanto conducts Phase I Testing on less than the Phase I Testing Minimum in Corn for such Gene Group, [* * *]:

(i) If Monsanto has conducted Phase I Testing in Corn on Collaboration Hit Homologs of Collaboration Hits constituting less than [* * *] percent ([* * *]%) of the Collaboration Hits within such Gene Group, and has not reached the testing limit in Corn for such Gene Group set forth above, then [* * *].

(ii) If Monsanto has conducted Phase I Testing in Corn on Collaboration Hit Homologs of Collaboration Hits constituting [* * *] percent ([* * *]%) or more,

 

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but less than [* * *] percent ([* * *]%), of the Collaboration Hits within such Gene Group, and has not reached the testing limit in Corn for such Gene Group set forth above, then [* * *].

(iii) [* * *].

(iv) [* * *].

(e) Application of Credit Genes. [* * *].

(f) Counting of Collaboration Hits for Phase I Testing. [* * *].

5.6.2 Phase Advancement in the Main Monsanto Crops.

(a) Phase Advancement Criteria; Phase Advancement. Monsanto shall advance a Collaboration Hit Homolog of each Collaboration Hit in the Monsanto Pipeline, in the Main Monsanto Crops, in accordance with the phase advancement criteria set forth in Exhibit K, and shall also advance each PlaNet Gene Stack, in the Monsanto Pipeline, in the Main Monsanto Crops in accordance with the phase advancement criteria set forth in Exhibit K. (“Phase Advancement Criteria”), [* * *]. For purposes of this Agreement, a Collaboration Hit shall be deemed advanced to the next Phase in any particular Main Monsanto Crop if [* * *].

(b) Phase Advancement Failure. If the Phase Advancement Criteria have been met for a Collaboration Hit (or any Collaboration Hit Homolog thereof) in a Main Monsanto Crop, [* * *].

(c) Phase Advancement Failure Fee. In the event a Phase Advancement Failure occurs with respect to a particular Collaboration Hit or PlaNet Gene Stack in a particular Main Monsanto Crop, then, [* * *].

(d) Phase Advancement Failure Fee Dispute Resolution. [* * *].

(e) No Limit in Other Monsanto Crops. [* * *].

 

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5.6.3 Minimum Activity. From and after the Effective Date, Monsanto shall conduct [* * *].

(a) Activity Through Year 10. Minimum R&D Activity through the end of Collaboration Year 10 [* * *].

(b) Activity Through Year 12. Minimum R&D Activity through the end of Collaboration Year 12 [* * *].

(c) Evogene Diligence Failures. For each Collaboration Year during which Evogene suffers a Diligence Failure, [* * *].

(d) Right to Purchase Activity Points. [* * *]:

 

[* * *]

     [* * *]   

[* * *]

   $     [* * *]   

[* * *]

   $ [* * *]   

[* * *]

   $ [* * *]   

(e) [* * *].

5.6.4 Phase II Testing. Except as set forth in Section 5.7.1, by the end of Collaboration Year 11, Monsanto shall in good faith initiate Phase II Testing, [* * *].

(a) [* * *].

(b) [* * *].

(c) [* * *].

(d) [* * *].

(e) [* * *].

 

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(f1) [* * *].

(f2) [* * *].

(g) Phase II Advancement. For the avoidance of doubt, (i) if at any time Monsanto advances a Collaboration Hit Homolog to Phase II Testing in a Main Monsanto Crop, then [* * *].

5.6.5 Monsanto Nominated Hits.

(a) Notification.

(i) [* * *].

(ii) [* * *].

(iii) [* * *].

(b) Scope of Disclosure. [* * *].

(c) Consequences. [* * *].

(d) [* * *].

5.6.6 Special Gene Groups. As to any Special Gene Group, Monsanto shall conduct Phase I Testing, Phase II Testing, Minimum R&D Activity and Phase advancement as if such Special Gene Group were a separate Gene Group for all purposes hereunder. Any Monsanto Diligence Failure with respect to a Special Gene Group shall be subject to the consequences for that type of Monsanto Diligence Failure for a Gene Group, as set forth in this Section 5.6 above, and as provided in Section 5.7.2.

5.6.7 Conversion of Licenses; Continuation of Royalties.

(a) If as a result of any Monsanto Diligence Failure, the Research Licenses, Commercial Licenses and Non-Assert Licenses to any Collaboration Hit (and all Collaboration Hit Homologs thereof) and/or Special Collaboration Hit become subject to the provisions of this Section 5.6.7, then, [* * *].

(b) [* * *].

 

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(c) If as a result of any Monsanto Diligence Failure, the Research Licenses, Commercial Licenses and PlaNet Genes Licenses to any item of Project G2P Recommendation become subject to the provisions of this Section 5.6.7, then, [* * *].

(d) [* * *].

5.7 Diligence Failures. In the event of either party’s failure, for any reason, to complete any of its respective Diligence Obligations (in each case, a “Diligence Failure”), the following provisions shall apply; provided, however, that Evogene shall not be deemed to have suffered a Diligence Failure if (i) for any Gene Group the number of Collaboration Hits constituting such Gene Group is up to [* * *] percent ([* * *]%) lower than the number that Evogene was required to provide under Section 5.2.2 or if for any Gene Group the number of Collaboration Hits (or Collaboration Hit Homologs thereof if approved by the Research Committee as provided in 5.2.4) as to which Evogene has completed Model Plant Validation is up to [* * *] percent ([* * *]%) lower than the number Evogene was required to complete under Section 5.2.3, and (ii) the percentage of Validated Hits from such Gene Group, based on the required minimum number of Base Collaboration Hits under Section 5.2.2, exceeds [* * *] percent ([* * *]%). For example, if a Gene Group was supposed to comprise at least 600 Collaboration Hits but actually comprises [* * *] Collaboration Hits, and the number of Validated Hits from such Gene Group exceeds [* * *], then Evogene will not be deemed to have suffered a Diligence Failure. If either party believes that the other party has suffered a Diligence Failure, such party, after at least [* * *] business ([* * *]) days’ prior written notice to the Steering Committee that it intends to send such a notice, may assert such Diligence Failure by written notice hereunder. If such party fails to deliver such notice within [* * *] ([* * *]) days after the notifying party becomes aware of such Diligence Failure, then such Diligence Failure shall be deemed accepted, and neither party shall have any rights or obligations hereunder as a result of such Diligence Failure.

5.7.1 Evogene Diligence Failures. Subject to Section 5.7 above:

(a) Notice. If Evogene has failed to fulfill any of its Diligence Obligations under Sections 5.2.2, 5.2.3 (other than Section 5.2.4(b)) or 5.2.5 in any Collaboration Year during the Research Period, then [* * *].

 

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(b) [Intentionally omitted.]

(c) Termination of Data Generation Payments. [* * *].

(d) Minimum R&D Activity. Minimum R&D Activity shall be reduced as provided in Section 5.6.3(c).

(e) Termination of Monsanto Diligence Obligations With respect to Gene Discovery. Notwithstanding the foregoing provisions of this Section 5.7.1, all of Monsanto’s Diligence Obligations with respect to Collaboration Hits pursuant to Section 5.6 shall terminate if:

(i) in any Collaboration Year, Evogene delivers less than [* * *] percent ([* * *]%) of the Collaboration Hits required under Section 5.2.2;

(ii) for any Gene Group, Evogene delivers more than [* * *] percent ([* * *]%) of the Discovery Validation Data Backpacks therefor more than [* * *] ([* * *]) months late;

(iii) Evogene fails to conduct any Data Generation for any Collaboration Year.

(f) Termination of Monsanto Diligence Obligations with respect to G2P. Notwithstanding the foregoing provisions of this Section 5.7.1, all of Monsanto’s Diligence Obligations with respect to Preferred Modes of Use pursuant to Section 5.6 shall terminate if:

(i) in any Collaboration Year, Evogene delivers less than [* * *] percent ([* * *]%) of the Collaboration Hit G2P Data Backpacks required under Sections 5.5A.2 and 5.5B.2.

 

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(ii) for any Gene Group, Evogene delivers more than [* * *] percent ([* * *]%) of the Project G2P Validation Data Backpacks therefor more than [* * *] ([* * *]) months late.

Any Evogene Diligence Failure Notice shall provide a reasonably-detailed explanation of the basis therefor.

5.7.2 Monsanto Diligence Failures. The consequences of Monsanto Diligence Failures are set forth in Section 5.6.

5.7.3 Diligence Failure Not a Breach. Notwithstanding any provision hereof to the contrary, no Diligence Failure by either party shall constitute a breach of this Agreement, and each party’s sole and exclusive remedy for any Diligence Failure by the other party shall be as set forth in this Section 5. [* * *].

5.8 Diligence Limitations.

5.8.1 Infringement, Safety, Monsanto Pledge and Regulatory Issues. [* * *]:

(a) [* * *];

(b) [* * *];

(c) [* * *]; or

(d) [* * *].

5.8.2 Credit Toward Diligence. [* * *].

5.8.3 Notices; Failure to Notify. Within ninety (90) days after Evogene delivers a Collaboration Hit Data Backpack or a Collaboration Hit G2P Data Backpack containing a G2P Gene, Monsanto shall notify the Research Committee whether, to Monsanto’s knowledge based on its review of such Backpack and other relevant material, and in accordance with the same standards and criteria that Monsanto applies to Hits identified by Monsanto, the applicable Collaboration Hit or G2P Gene is subject to any of the issues set forth in Section 5.8.1, and if so, such notice shall include a description of the applicable issue or issues [* * *].

5.8.4 Monsanto’s Assistance. [* * *].

 

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5.8.5 Effect on Diligence Obligations. [* * *].

5.8.6 License Rights. Nothing in this Section 5.8 shall affect Monsanto’s licenses to any Collaboration Hits.

 

  6. PAYMENTS.

6.1 Technology Access and License Fees.

6.1.1 In partial consideration of the licenses granted to Monsanto by Evogene under this Agreement, Monsanto shall pay Evogene Five Million Dollars ($5,000,000) (the “License Fee”), [* * *].

6.1.2 If Monsanto exercises the Research Extension Option, then in consideration for the extension of the Exclusivity Period contemplated by Section 5.3.3, Monsanto shall pay Evogene an additional fee in the amount of Six Million Dollars ($6,000,000) (the “Exclusivity Extension Fee”), which Exclusivity Extension Fee accrues and becomes payable [* * *].

6.2 Research Payments to Evogene. Subject to the terms and conditions of this Agreement, during the Research Period, Monsanto agrees to pay Evogene the following non-refundable annual payments for ongoing research (each, an “Annual Research Payment”), which Annual Research Payments shall each be made in four equal, quarterly installments, in arrears, payable, for each quarter of each Collaboration Year, [* * *]:

6.2.1 Collaboration Year 1 through 3. During each of Collaboration Year 1 through Collaboration Year 3, Monsanto shall pay to Evogene an Annual Research Payment equal to [* * *]Dollars ($[* * *]).

6.2.2 Collaboration Year 4. During Collaboration Year 4, Monsanto shall pay to Evogene an Annual Research Payment equal to [* * *] Dollars ($[* * *]).

6.2.3 Collaboration Year 5. During Collaboration Year 5, Monsanto shall pay to Evogene an Annual Research Payment equal to [* * *] Dollars ($[* * *]).

[Intentionally omitted.]

 

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6.2.4 Collaboration Year 6. During Collaboration Year 6, Monsanto shall pay to Evogene an Annual Research Payment equal to [* * *] Dollars ($[* * *]).

6.2.5 Collaboration Year 7. During Collaboration Year 7, Monsanto shall pay to Evogene an Annual Research Payment equal to [* * *] Dollars ($[* * *]).

6.2.6 If Monsanto exercises the Research Extension Option in accordance with Section 5.3, then, in addition to the Research Payments set forth in this Section 6.2 above, Monsanto shall pay to Evogene the Extended Period Annual Research Payments, such Extended Period Annual Research Payments to be distributed between Collaboration Years 7 through 9 according to the research and development activities to be conducted by Evogene in each [* * *].

6.2.7 Exchange Rate Adjustments. [* * *]:

 

    

[* * *]

   _
 

[* * *]

       [* * *]

[* * *]:

 

    

[* * *]

   _
 

[* * *]

       [* * *]

or [* * *]%.

[* * *].

[* * *]:

 

    [* * *]  _    

[* * *]

 

[* * *]

[* * *]:

 

    [* * *]  _    

[* * *]

 

[* * *]

or [* * *]%.

[* * *].

 

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6.3 Data Generation Payments. In addition to any Research Payments payable to Evogene by Monsanto pursuant to Section 6.2 but subject to Section 5.7.1(c), during Collaboration Years 3 and 4, Monsanto shall annually pay Evogene a total of [* * *]Dollars ($[* * *]), quarterly in arrears, for Data Generation. Such Data Generation may be generated prior to the Collaboration Years 3 or 4 provided it was generated following the Effective Date.

6.4 Milestone Fees. As further consideration for the grant to Monsanto of the licenses under the Evogene Patent Rights and Evogene Know-How in Section 3.1, and to provide a convenient means for measuring the value of these licenses, Monsanto shall pay Evogene the following non-refundable milestone fees (“Milestone Fees”) upon the occurrence of the following events (the “Milestones”), each of which shall be subject to recoupment pursuant to Section 6.9 if and to the extent that any Collaboration Hit Homolog in the relevant Collaboration Hit Set, Special Collaboration Hit, PlaNet Gene Homolog, PlaNet Gene Stack or RePack Recommendation in respect of which the Milestone Fee is paid shall generate Evogene Product Royalties:

6.4.1 Completion of Phase II.

(a) [* * *].

(b) [* * *].

6.4.2 Submission for Regulatory Approval.

(a) [* * *].

(b) [* * *].

(c) [* * *].

(d) [* * *].

6.4.3 Regulatory Approval Milestone Fee.

(a) [* * *].

(b) [* * *].

 

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(c) [* * *].

(d) [* * *].

6.4.4 Collaboration Hits That Are Also Monsanto Nominated Hits. [* * *].

6.4.4A Additional Milestone Payments in respect of Products making use of a PlaNet Gene Stack and/or a RePack Recommendation. [* * *].

6.4.5 Notice of Milestones. Without limiting any of Monsanto’s obligations under this Section 6.4 (including the payment of all Milestone Fees), promptly upon the achievement of any Milestone hereunder, Monsanto shall provide Evogene with written notice thereof.

6.5 Royalty Payments. Subject to the terms and conditions of this Agreement, including the provisions of Sections 6.6 and 6.7, and as further consideration for the licenses under the Evogene Patent Rights and Evogene Know-How granted to Monsanto in Section 3.1, and to provide a convenient means for measuring the value of these licenses, Monsanto agrees to pay to Evogene the following Product Royalties, throughout the applicable term determined in accordance with Section 6.5.5:

6.5.1 Royalties on Sales of Products by Monsanto and Affiliates. Subject to Section 6.5.2A, Monsanto agrees to pay to Evogene Product Royalties on all sales and other transfers of Products by Monsanto or its Affiliates, or their respective agents, in an amount equal to [* * *] percent ([* * *]%) of the [* * *] from such Products.

6.5.2 Royalties on Sublicenses After Regulatory Approval. [* * *].

6.5.2A High Impact Royalties for Transformational Products. [* * *].

(a) Transformational Products. [* * *].

(b) Notices. [* * *].

(c) Determination of High Impact Royalty Rates for Transformational Products. [* * *]:

 

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  Ÿ [* * *].

 

  Ÿ [* * *]:

 

  (i) [* * *]; and

 

  (ii) [* * *].

 

  Ÿ [* * *]:

 

  (i) [* * *]; and

 

  (ii) [* * *]; and

 

  (iii) [* * *].

 

  Ÿ [* * *]:

 

  (i) [* * *]; and

 

  (ii) [* * *]; and

 

  (iii) [* * *]; and

 

  (iv) [* * *].

 

  (d) [* * *].

6.5.2B Contingent High Impact Royalties for Contingent Transformational Products. [* * *].

 

  (a) Contingent Transformational Products. [* * *].

 

  (b) Notices. [* * *].

(c)        Determination of Contingent High Impact Royalty Rates for Contingent Transformational Products. [* * *].

 

  Ÿ [* * *]:

 

  (i) [* * *]; and

 

  (ii) [* * *] ; and

 

  (iii) [* * *].

 

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  Ÿ [* * *]:

 

  (i) [* * *]; and

 

  (ii) [* * *]; and

 

  (iii) [* * *]; and

 

  (iv) [* * *].

 

  (d) [* * *].

6.5.3 Royalties on Sublicenses Before Regulatory Approval. [* * *]:

 

  (a) [* * *]; and

 

  (b) [* * *].

6.5.4 Sublicensee Defaults. [* * *].

6.5.5 Royalty Term.

(a) The period for which Product Royalties are payable under Sections 6.5.1, 6.5.2 and 6.5.3 shall be determined separately for each Collaboration Hit Set, Special Collaboration Hit, PlaNet Gene Stack or RePack Recommendation included in any Product, and for any particular Collaboration Hit Set, Special Collaboration Hit, PlaNet Gene Stack or RePack Recommendation, such period shall be determined separately for each Monsanto Crop. For any Product in a particular Monsanto Crop, Product Royalties shall be payable commencing on the first Commercial Sale of such Product, or in the case of a Sublicense, commencing on the date of such Sublicense, and for [* * *]: (A) [* * *] ([* * *]) years from the first Commercial Sale of the first Product in such Monsanto Crop containing or based upon any Collaboration Hit Homolog of the same Collaboration Hit Set to which the Collaboration Hit Homolog in the Product belongs, or such Special Collaboration Hit, or such PlaNet Gene Stack or RePack Recommendation, as the case may be, [* * *], or (B) the life of the Evogene Patent Rights [* * *].

 

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(b)     [* * *].

(c)     [* * *].

6.6 Patent Coverage.

(a) Milestone Fees under Section 6.4 and Product Royalties under Section 6.5.3 6.5 shall only be payable on Products containing a Collaboration Hit Homolog if [* * *].

(b) RePack Recommendations and PlaNet Gene Stacks. [* * *].

(c) PlaNet Gene Homologs. [* * *].

(d) GeneSpec Special Products. [* * *].

(e) [* * *].

6.7 Special Collaboration Hits, Monsanto Nominated Hits, Monsanto Nominated PlaNet Gene Stacks and Monsanto Nominated RePack Recommendations.

6.7.1 Special Collaboration Hits. Notwithstanding Section 6.6, with respect to Products only containing or based on, or Sublicenses relating only to a Special Collaboration Hit, [* * *].

6.7.2 Monsanto Nominated Hits. [* * *].

6.7.3 Monsanto Nominated PlaNet Gene Stacks and Monsanto Nominated RePack Recommendations; PlaNet Gene Stacks and RePack Recommendations as to which the licenses have become Non-exclusive. [* * *].

 

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6.8 Third Party Offsets.

[* * *].

[* * *].

6.9 Recoupment.

[* * *].

6.10 Milestone Fees and Royalties on Certain Collaboration Hit Homologs.

[* * *].

6.11 Model Plant Validation Costs.

[* * *].

6.12 Disclaimer.

Notwithstanding the Milestone Fees and Product Royalty obligations hereunder, but without derogating from Sections 5.7.2 and 11.1.2, Monsanto does not guarantee any anticipated success of sales, achievement of Milestones, success of Product development or of other Commercial Exploitation of Products.

6.13 Regulatory Citation Fees.

[* * *].

 

  7. PAYMENTS; BOOKS AND RECORDS.

7.1 Monsanto Royalty Reports. After the earlier of (i) first Commercial Sale of a Product or (ii) first Regulatory Approval of a Product, and until such time that no Product Royalties are payable to Evogene hereunder, Monsanto shall deliver written reports to Evogene annually, on or before December 31, for the prior Monsanto Fiscal Year(the “Reporting Period”), stating in each such report, with respect to all Product sales during such reporting period, the quantity and description of such Product sold in each Monsanto Crop, broken down by the countries in which such Product was sold, the Net Trait Revenue received by Monsanto and its Affiliates during such period (including the Gross Trait Price and Channel Costs/Marketing Programs included in the calculation of Net

 

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Trait Revenue), and the calculation of Product Royalties due thereon, and, with respect to each Transformational Product, (i) the Evogene Net Trait Revenue received by Monsanto and its Affiliates in respect of such Transformational Product during such period (including each of the Net Trait Revenues that are included in the calculation of such Evogene Net Traits Revenues, and the Gross Trait Price and Channel Costs/Marketing Programs of each such Net Trait Revenue); (ii) the Total Net Seed Revenue of such Transformational Product during the applicable reporting period (including the Net Seed Revenue and the Surrogate Per-Unit Net Seed Revenue and Product Channel Costs/Marketing Programs included in the calculation of such Net Seed Revenue), and (iii) the calculation of High Impact Royalties, if any, due thereon. Additionally, in each annual report, Monsanto shall provide reasonable details of any and all Net Trait Revenue paid to Monsanto or a Monsanto Affiliate pursuant to each Sublicense granted by them hereunder, and the calculation of Product Royalties due thereon as set forth in Sections 6.5.2 and 6.5.3, and, with respect to each Sublicense granted by Monsanto and/or its Affiliates with respect to a Transformational Product, (i) the Evogene Net Trait Revenue received by Monsanto and/or its Affiliates in respect of such Transformational Product during such period (including each of the Net Trait Revenues that are included in the calculation of such Evogene Net Traits Revenues, and the Gross Trait Price and Channel Costs/Marketing Programs of each such Net Trait Revenue); (ii) the Total Net Seed Revenue of such Transformational Product during the applicable reporting period (including the Net Seed Revenue and the Surrogate Per-Unit Net Seed Revenue and Product Channel Costs/Marketing Programs included in the calculation of such Net Seed Revenue), and (iii) the calculation of High Impact Royalties, if any, due thereon. The preceding reports will be signed by an authorized Monsanto officer. If no Product Royalties accrue in any reporting period, the report will state that fact.

7.2 Additional Net Trait Revenue Information. In addition, on or before each June 30, for the first half of each Monsanto Fiscal Year, Monsanto shall provide information reasonably available to Monsanto and in the public domain, if any, as to Products sold in each Monsanto Crop, the countries in which such Products were sold, and the Net Trait Revenue received by Monsanto and its Affiliates during such period (including reasonable details regarding the determination of such Net Trait Revenue).

 

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7.3 Payment; Payment Method. Concurrent with the delivery of the annual reports specified in Section 7.1, Monsanto shall tender payment of the applicable Product Royalty consideration. All payments due under this Agreement shall be made by bank Electronic Funds Transfer (EFT), and in the case of a payment to Evogene, to a bank account designated by Evogene, or in the case of a payment to Monsanto, to a bank account designated by Monsanto, as the case may be. Payments hereunder shall be made in U.S. dollars. If any currency conversion shall be required in connection with the calculation of payments hereunder, such conversion shall be made using the exchange rate quoted for current transactions reported in Reuters on the second-to-last business day of the month prior to the month in which Monsanto records the sale giving rise to the payment obligation set forth herein. If the due date of any payment is a Friday, Saturday, Sunday or national holiday of either party, such payment may be paid on the following business day.

7.4 Interest on Late Payments. Payments required hereunder shall be considered late if not paid on or before thirty (30) days after the date such payment is due and payable under this Agreement. Interest shall accrue on any late payment owed by either party hereunder, at an annual interest rate equal to the lesser of (i) the Prime Rate plus [* * *] percent ([* * *]%) or (ii) 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. Such interest will not prejudice any rights of the recipient party.

7.5 Records; Inspection. Monsanto shall keep, and shall require its Affiliates to keep, complete, true and accurate books of account and records for the purpose of determining the amounts payable under this Agreement. Such books and records shall be kept at Monsanto’s principal place of business, for at least six (6) years following the end of the annual period (or year of payment) to which they pertain. These books and records shall be open for inspection during such six (6) year period by a public accounting firm for whom Monsanto has no reasonable objection, solely for the purpose of verifying payments hereunder. Such inspections may be made no more than once each Collaboration Year, at reasonable times and on reasonable notice. Inspections conducted under this Section 7.5 shall be at Evogene’s expense and may not be conducted on a contingent-fee basis; provided, however, that if a variation or error is determined, any unpaid amounts shall be paid promptly with late payment penalties as set forth in Section 7.4 above, and any overpaid amounts shall be returned promptly, and further provided that if an increase exceeding the lesser

 

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of (i) [* * *] percent ([* * *]%) of the amount stated for any period covered by the inspection or (ii) [* * *] Dollars ($[* * *]) is established in the course of any such inspection, then all reasonable Third Party inspector’s costs relating to the inspection incurred by Evogene shall also be paid promptly by Monsanto.

7.6 Tax Matters. All payments and fees required to be paid pursuant to this Agreement are exclusive of all sales tax, use tax, value-added tax, tariffs, duties or other similar tax (which sales tax, use tax, value-added tax, tariffs, duties or other similar tax or governmental charge shall be borne and paid by the party paying such payments and fees) and shall be paid with deduction therefrom solely for income tax, or withholding tax in lieu of income tax, applicable to a payee that is required pursuant to applicable law to be deducted therefrom. If a payee claims an exemption from, or reduction of, income tax, or withholding tax in lieu of income tax, under the law of the jurisdiction in which the withholding party is located, or under any treaty to which such jurisdiction is a party, with respect to payments owed pursuant to this Agreement, such payee shall deliver to the withholding party any such forms or other certifications as may be required under the laws of such jurisdiction as a condition to exemption from, or reduction of, such withholding tax or income tax. The withholding party agrees to review such forms or certifications and to withhold or deduct at such reduced rate, provided that the requirements for such exemption from, or reduction in the amount of, such withholding tax or income tax, have been satisfied, as determined in the reasonable discretion of the withholding party. The withholding party shall provide the other party with a certificate or other documentation reasonably satisfactory to payee evidencing payment of any such withholding taxes to the applicable governmental or other taxing authority.

 

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  8. REGULATORY.

8.1 Regulatory Requirements. Subject to Sections 4.2.1(b)(iii) and 4.3.2(a), the following requirements shall apply to any and all Collaboration Hit Homologs, Special Collaboration Hits or PlaNet Genes Homologs that Evogene or an Affiliate of Evogene have licensed to a Third Party for Commercial Exploitation outside the Monsanto Crops, but only for as long as Monsanto has a Commercial License or a PlaNet Genes License hereunder covering their use by Monsanto in any Monsanto Crop.

8.2 Regulatory and Product Stewardship.

8.2.1 Monsanto First to Initiate Regulatory Data Preparation. When Evogene or any of its Affiliates or licensees reach the phase of regulatory data preparation with respect to a particular Collaboration Hit Homolog, Special Collaboration Hit or PlaNet Gene Homolog, then, provided Monsanto has already initiated regulatory data preparation at that time with respect to any Collaboration Hit Homolog in the Collaboration Hit Set of which the Evogene Collaboration Hit Homolog is a part, or with respect to any Homolog of such Special Collaboration Hit, or with respect to any PlaNet Gene Homolog of such PlaNet Gene Sections 8.3—8.5 below will apply with respect to such Collaboration Hit Homolog, Special Collaboration Hit or PlaNet Gene Homolog.

8.2.2 Evogene or Licensee First to Initiate Regulatory Data Preparation. When Monsanto begins regulatory data preparation with respect to a particular Collaboration Hit Homolog, Special Collaboration Hit or PlaNet Gene Homolog, Monsanto will notify Evogene thereof. Evogene will then inform Monsanto whether Evogene or any of its licensees have already initiated regulatory data preparation in respect of any Collaboration Hit Homolog in the Collaboration Hit Set of which Monsanto’s Collaboration Hit Homolog is a part, or in respect of any Homolog of such Special Collaboration Hit, or in respect of any PlaNet Gene Homolog of such PlaNet Gene, and thereafter Section 8.3 below will apply with respect to such Collaboration Hit Homolog, Special Collaboration Hit or PlaNet Gene Homolog.

8.3 Consultation. The applicable parties (including Monsanto) shall enter into a confidentiality agreement towards each other, and thereafter such parties shall consult with each other to review relevant regulatory and product stewardship issues and to agree upon the appropriate reasonable strategic plans and actions that will serve to preserve the registrability of and ability to commercial exploit both Monsanto’s and Evogene’s and its Affiliates’ and licensees’ respective Collaboration Hit Homologs, Homologs of a Special Collaboration Hit or PlaNet Gene Homologs.

 

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8.4 Monsanto Regulatory Data and Data Compensation. To ensure that, to the extent appropriate, a single uniform data package exists on any Collaboration Hit Set, or on the Homologs of a Special Collaboration Hit, or on the PlaNet Gene Homologs of a PlaNet Gene, as described above, Evogene agrees, and shall bind its Affiliates and any licensees of any such Collaboration Hit Homolog, or any Homolog of such Special Collaboration Hit, or any PlaNet Gene Homolog of such PlaNet Gene, to agree, that in any of the cases described in Section 8.2.1 above, Monsanto will perform any and all Gene and Protein analyses and characterizations, including safety studies for the Protein expressed by such Collaboration Hit Homolog, Homolog of a Special Collaboration Hit, or PlaNet Gene Homolog. Monsanto agrees to allow Evogene and its Affiliates and licensees to refer to and to cite Monsanto’s Gene and Protein analyses and characterization data, and Protein safety data (collectively, and in the generic, “Regulatory Data”) in sufficient time that Evogene or its Affiliates or licensees can prepare their Regulatory Submission, in exchange for payment to Monsanto of the Regulatory Citation Fee. Upon written request from any Person paying the Regulatory Citation Fee, within ninety (90) days from payment, Monsanto shall make available to such Person the reports and results of Monsanto’s applicable Regulatory Data that are reasonably necessary for such Person to make the required regulatory filing or to submit to or authorize the relevant Regulatory Authority to review the cited Regulatory Data. If Monsanto has not submitted the Regulatory Data, or has not completed its preparation, or the Regulatory Data available by Monsanto is not sufficient or adequate (e.g. the Protein expressed by Evogene’s, its Affiliate’s or licensee’s use of such Collaboration Hit Homolog, Homolog of a Special Collaboration Hit or PlaNet Gene Homolog, is not, in the opinion of the relevant Regulatory Authority, adequately covered by Monsanto’s Regulatory Data), Evogene, its Affiliate or licensee, as applicable, will meet and negotiate in good faith with Monsanto to determine jointly how best to proceed prior to Evogene, its Affiliate or licensee producing its own Regulatory Data.

8.5 Monsanto Protocols. Evogene, or its applicable Affiliate or licensee commercializing such Collaboration Hit Homolog, Homolog of a Special Collaboration Hit or PlaNet Gene Homolog, shall follow Monsanto study protocols or the parties shall consult in good faith to agree on the modification of such protocols to meet specific regulatory requirements or special needs of Evogene or its applicable Affiliate or licensee, and shall utilize relevant Monsanto Protein reference

 

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standards, subject to protocol modifications agreed to among the parties, while performing any Event-specific Protein studies (e.g. expression or equivalence studies) related to such Collaboration Hit Homolog, Homolog of a Special Collaboration Hit or PlaNet Gene Homolog. If Monsanto’s study protocols and Protein reference standards are used, Monsanto shall provide such protocols and Protein reference standards at no cost, and may also provide reagents at Monsanto’s fully-loaded cost, or alternatively shall authorize Evogene, its Affiliate or licensee, to purchase these materials if available from Monsanto-authorized Third Parties.

 

  9. INTELLECTUAL PROPERTY.

9.1 Inventorship and Title.

9.1.1 Determination of Inventorship. Inventorship and rights of ownership and title to Intellectual Property developed under this Agreement or licensed to either party hereunder shall be determined in accordance with United States law.

9.1.2 Solely-Owned IP. Each party or its designee shall own all right, title and interest in any inventions or discoveries, and all Intellectual Property rights relating to such inventions or discoveries, Conceived or Reduced to Practice by that party’s or its Affiliates’ employees, agents or independent contractors (or Conceived or Reduced to Practice jointly with any Third Parties under an obligation to assign such Intellectual Property rights covering such inventions or discoveries to that party or its designee) under or in the course of the Funded Project and/or exercising its license rights hereunder (“Solely-Owned IP”), subject to the licenses granted by that party to the other party hereunder.

9.1.3 ATHLETE Developments. Without derogating from the generality of the foregoing, any inventions, additions, improvements, modifications and the like that may be Conceived or Reduced to Practice by Evogene’s employees, agents or independent contractors in the course of the Funded Project with respect to ATHLETE and the G2P Platform shall be owned solely by Evogene.

9.1.4 Discovery, Enhancement and Optimization Tools and Preferred Modes of Use Improvements. Neither Monsanto nor any of its Affiliates, nor anyone on their behalf, shall provide Evogene with any inventions, discoveries, ideas, know-how, works of authorship or confidential information regarding except for any Monsanto Testing Data or Monsanto reports provided under this Agreement: (i) computational or bioinformatic gene discovery tools, (ii) computational or bioinformatic product development

 

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enhancement or optimization tools , (iii) any combination of one or more Collaboration Hit Homologs and/or Special Collaboration Hits with one or more Genes or (iv) the mode of regulation of any Collaboration Hit Homolog and/or any Special Collaboration Hits (collectively, “Discovery, Enhancement and Optimization Tools Improvements”), without Evogene’s prior written consent, and without the parties first agreeing in writing as to their respective rights in and to the proposed Discovery, Enhancement and Optimization Tools and Preferred Modes of Use Improvements. Evogene shall own all right, title and interest in and to any Discovery, Enhancement and Optimization Tools Improvements, and all Intellectual Property rights relating thereto, disclosed to Evogene by or on behalf of Monsanto or any Monsanto Affiliate not in accordance with the foregoing procedure.

9.1.4A Data Transfer. The parties agree that the transfer to and use by Evogene of the Monsanto Testing Data, and the transfer to and use by Monsanto of the Monsanto Funded Evogene Data, is not considered joint Conception and/or Reduction to Practice of any invention by the parties. Within sixty (60) days after receipt of each Collaboration Hit G2P Data Backpack containing a Preferred Mode of Use, Monsanto shall inform Evogene in writing of any Joint IP, if any, that Monsanto believes, at the relevant time, may reside in such Preferred Mode of Use. If Monsanto believes that any Preferred Mode of Use comprises Joint IP, then the parties shall discuss in good faith ways to limit the nature of the Monsanto Testing Data provided and/or the type of G2P Components being used by Evogene in G2P Optimization Rounds.

9.1.5 Jointly-Owned Patent Rights. The parties shall own jointly (without any duty to account except as expressly provided herein) any patents or patent applications covering inventions or discoveries that are jointly Conceived or Reduced to Practice by Monsanto or any of its Affiliates and by Evogene or any of its Affiliates, under or in the course of the Funded Project and/or exercising each party’s license rights hereunder (“Jointly-Owned Patent Rights”), subject to the following:

(a) Jointly-Owned Patent Rights that arise from Discovery Rounds and that relate to Evogene Hits identified therefrom (“Discovery Round Jointly-Owned Patent Rights”) shall be governed by the provisions of Section 9.2.1 with respect to the preparation, filing, prosecution, maintenance, defense and enforcement of any patents issuing therefrom and the allocation of costs related thereto. With respect to any Jointly-Owned Patent Rights that is not Discovery-Round Jointly-Owned Patent Rights, Monsanto and Evogene shall discuss and determine in good faith which party shall Control the preparation, filing, prosecution, maintenance, defense and enforcement of any patents issuing therefrom, and the allocation of costs related thereto.

 

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(b) Evogene’s interest in patents and patent applications constituting Discovery Round Jointly-Owned Patent Rights will be deemed included within the Evogene Patent Rights for all purposes hereunder.

9.2 Patent Rights.

9.2.1 Evogene Patent Rights.

(a) Prosecution and Maintenance: General. Evogene shall Control and be solely responsible for all costs related to the preparation, filing, prosecution and maintenance of the Evogene Patent Rights. Subject to the cap for each Collaboration Year set forth on Exhibit M, Monsanto shall annually reimburse Evogene for all such costs incurred by Evogene (but not any licensee of Evogene), including (i) the fees and costs of filing patent applications, and any continuations, divisionals, or continuations-in-part, (ii) requests for continued examination and any fees associated therewith; (iii) the costs of responding to an allowance of any application and all fees associated therewith, and (iv) the costs of any maintenance or annuity fees. Evogene shall submit receipts or other reasonable documentation supporting its requests for such reimbursement. Any unused portions of such annual caps may be carried forward by Evogene to the following years. The annual caps set forth on Exhibit M do not include reimbursement for costs and fees associated with Office Actions; provided, however, that the following discretionary costs or fees paid to patent offices shall not be included in such reimbursable out-of-pocket expenses unless such cost or fee has been approved by the patent committee: a) a fee for extension of time; b) costs or fees for obtaining additional examination or appealing a final decision; c) costs or fees for adding new claims, or d) any other similar discretionary costs or fees in jurisdictions outside the United States. Such costs and fees associated with Office Actions incurred by Evogene (but not any

 

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licensee of Evogene) shall be reimbursed separately by Monsanto against receipts. Patents that Evogene determines in its discretion to file in respect of Evogene-owned or Controlled inventions or discoveries required to be licensed hereunder shall be filed in the countries listed on Exhibit N, except that Evogene shall have the right, at its sole discretion, to stop filing any new Patents in [* * *] due to expenses considerations under the cap, and in the event that Monsanto notifies Evogene that Monsanto wishes Evogene to continue filing in such countries, then Monsanto shall reimburse Evogene for the costs of the filing, prosecution and maintenance of any such Patents, outside the annual cap. As of the Signing Date, the list of countries on the previous Exhibit N has been amended so that now such list excludes: [* * *] collectively, the “Excluded Countries”). Evogene Patent Rights existing as of the Effective Date shall be prosecuted in the countries and regions in which such applications currently have been submitted. In addition, Evogene shall have the right to continue prosecuting and maintaining at Monsanto’s cost, any Evogene Patent Rights that have already been filed by Evogene in the Excluded Countries as of the Signing Date (“Existing Evogene Patent Rights in the Excluded Countries”), subject to the cap for each Collaboration Year set forth on Exhibit M. Upon Evogene’s request with respect to any specific Collaboration Hit, and within a reasonable time, Monsanto will provide Evogene with information reasonably requested by Evogene for the prosecution of the Evogene Patent Rights (e.g. field trial results). Upon Evogene’s request with respect to any specific Project G2P Recommendation, and within a reasonable time, Monsanto will provide Evogene with information reasonably required by Evogene to support the filing and/or the prosecution of the Evogene Patent Rights covering such Project G2P Recommendation (e.g. field trial results), to the extent the provision of such information will not preclude Monsanto from filing a patent on a separate invention relating to such information. For clarification, if Monsanto can provide information in a manner which does not disclose the invention for which Monsanto wishes to file a patent application, then Monsanto will provide such information. Evogene (or any licensee of Evogene) shall

 

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prosecute Evogene Patent Rights to completion, provided however that the forgoing shall not apply with respect to any Existing Evogene Patent Rights in the Excluded Countries, and Evogene can cease prosecuting and/or maintaining any such Existing Evogene Patent Rights in the Excluded Countries. Prosecute to completion shall mean prosecution of a patent to either issuance or a final rejection in the applicable patent offices in the Territory. In the event that Evogene (or any licensee of Evogene, as the case may be) should decide to cease prosecution and/or maintenance of any Evogene Patent Rights in a country listed on Exhibit C, Evogene shall notify Monsanto in writing and offer Monsanto the opportunity to continue prosecution and/or maintenance of such patent in such country. Without limiting the generality of the preceding, Evogene shall notify Monsanto no less than sixty (60) days in advance of taking any action with respect to the Evogene Patent Rights, or of any date in respect of which the decision by Evogene not to take action, would prejudice Monsanto’s rights under the Research License, Commercial License, PlaNet Genes License or Non-Assert License, including resulting in the invalidation of any patent or abandonment of any patent application included within the Evogene Patent Rights. If Monsanto should decide to continue prosecution and/or maintenance with respect to such patent in such country, Evogene shall continue to Control the prosecution and maintenance of such patent in such country and Monsanto shall bear all costs associated therewith, and, solely with respect to up to three divisional Patents in any country listed in Exhibit N and in the Excluded Countries, Monsanto shall be entitled to deduct the costs of such continued prosecution and/or maintenance, excluding costs associated with responding to Office Actions, from the applicable annual cap set forth on Exhibit M.

(b) Defense or Enforcement. If either party becomes aware of any infringement in a Monsanto Crop of the Evogene Patent Rights or assertion thereof in respect of a Collaboration Hit Homolog, Special Collaboration Hit, PlaNet Gene Stack or RePack Recommendation as to which the Exclusive Research License, Commercial License, PlaNet Genes License and/or Non-Assert

 

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License shall then be in effect, or of any assertion that a Product infringes or violates the Intellectual Property rights of a Third Party (collectively, an “Evogene Defense or Enforcement Matter”), it shall promptly and in any case before taking any action thereon notify the other party, and the parties shall confer regarding the appropriate action to be taken in respect thereof. Monsanto shall have the sole right to Control, and to be responsible for, all decisions and costs related to any Evogene Defense or Enforcement Matter (only for so long as Monsanto’s Research License, Commercial License, PlaNet Genes License and/or Non-Assert License to the applicable Collaboration Hit Homologs or Special Collaboration Hit remains in force), and shall also own any damages (including in-kind consideration) obtained therefrom, subject to payment of Product Royalties to Evogene pursuant to Section 6.5.1, on an appropriate share of the product sales underlying the damages actually paid. Monsanto’s aforementioned right to Control shall include the right to enter into any settlement involving the Evogene Patent Rights without Evogene’s consent, but only to the extent that the terms and conditions of such settlement have effect solely with regard to the use of such Collaboration Hit Homologs, , Special Collaboration Hits, PlaNet Gene Stack and RePack Recommendation in the Monsanto Crops as to which Monsanto has a Commercial License to Commercially Exploit such Collaboration Hit Homologs and Special Collaboration Hits, and do not materially and adversely affect the scope, validity, enforceability or Evogene’s interest in the Evogene Patent Rights. Evogene shall not unreasonably withhold its consent to any such settlement for which such consent is required. Evogene agrees to assist and cooperate with Monsanto, at Monsanto’s sole cost and expense, as may be reasonably required in order to facilitate Monsanto’s enforcement and defense of the Evogene Defense or Enforcement Matter. Evogene acknowledges that it may be a necessary party to any Evogene Defense or Enforcement Matter action brought by or against Monsanto, and that the assistance and cooperation agreed to under this provision may require its reasonable participation in such proceedings, at Monsanto’s sole cost and expense. Monsanto will keep Evogene

 

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reasonably informed of any actions or suits pursuant to this Section 9.2.1, and will take into account the interests of Evogene and Evogene’s licensees. Monsanto shall consult with Evogene regarding any Evogene Defense or Enforcement Matter and without limiting Monsanto’s right to Control such matter, shall consider Evogene’s interests in determining how to handle such matter.

(c) Evogene Rights. Evogene, at its own cost, shall have the right to participate in all decisions and actions concerning the validity of any Evogene Patent Rights, including the right to join as a party any such action for infringement brought by or against Monsanto where a defense or claim of patent invalidity or unenforceability has been or will be raised. Evogene shall have the right to retain its own counsel for the purpose of defending the validity or enforceability of any Evogene Patent Rights. Further, Evogene retains the right to prosecute and defend any action relating to the Evogene Patent Rights that does not constitute an Evogene Defense or Enforcement Matter; provided that Evogene will keep Monsanto reasonably informed of any such actions, and will consult from time to time with Monsanto regarding any such action.

9.2.2 Monsanto Improvement Patent Rights. Monsanto shall Control and be solely responsible for all costs related to the preparation, filing, prosecution, maintenance, enforcement and defense of the Monsanto Improvement Patent Rights.

 

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  10. CONFIDENTIALITY.

10.1 Confidential Information. Except as expressly provided in this Agreement, the parties agree that, for [* * *] ([* * *]) years after each disclosure of Confidential Information hereunder, the receiving party shall keep completely confidential and shall not disclose, and shall not use such Confidential Information for any purpose except for the purposes contemplated by this Agreement. Without limiting any provision of this Agreement, each of the parties hereto shall be responsible for the observance by its employees and any other recipient(s) from it of Confidential Information of the confidentiality and non-use obligations set forth in this Section 10.

10.2 Permitted Disclosures. Except as otherwise limited by this Agreement, each party hereto may disclose the other party’s Confidential Information only:

10.2.1 to its Affiliates or to its or their respective advisors strictly on a need-to-know basis, if such Affiliates and other permitted recipients agree in writing to be bound by confidentiality and non-use obligations no less restrictive than the terms of this Section 10 or have a fiduciary duty of confidentiality, and provided the receiving party will be responsible for compliance of each such recipient with the confidentiality and non-use obligations set forth in this Section 10 and this Agreement,

10.2.2 to the receiving party’s existing or proposed financial investors and, in the event that Evogene is the receiving party, also to potential acquirers who propose to acquire Control, directly or indirectly, of Evogene and that have entered into a letter of intent, and a confidentiality and non-use agreement no less restrictive than the terms hereof, with Evogene in respect of such proposed acquisition, and the agents and advisors of all the foregoing, provided however, in respect of any such potential investor in or acquirer of Evogene that is a Monsanto Competitor, the permitted disclosure to such potential investor or acquirer is limited to a copy of this Agreement (with Section 5, Section 6, all Exhibits, and any other provisions reasonably requested by Monsanto redacted, it being understood that Evogene shall not be required to disclose the name of such Monsanto Competitor to Monsanto when Evogene asks Monsanto to identify any such other provisions to be redacted), for such potential investor or acquirer to inspect, but not retain, in the course of conducting due diligence (it being understood that such potential investor or acquirer may retain notes and summaries that it prepares in the course of such due diligence), and/or, at the election of such potential investor or acquirer that

 

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is a Monsanto Competitor, an unredacted copy of this Agreement may be disclosed only to an independent Third Party (e.g. outside consultant or other representative) who is neither an Affiliate of the Monsanto Competitor nor a representative of such potential investor or acquirer in the proposed acquisition of Control, together with any additional Confidential Information that may be reasonably required by such Third Party in order to validate the financial estimates proposed by Evogene in respect of this Agreement. The Third Party shall be delegated the authority solely to validate the financial estimates proposed by Evogene in respect of this Agreement. The Third Party shall not be permitted to disclose to the Monsanto Competitor sufficient data to enable the Monsanto Competitor to determine the actual Product Royalty rates, Milestone Fees, or other fees and expenses payable under this Agreement;

10.2.3 to the receiving party’s sublicensees permitted hereunder, subject to confidentiality terms no less restrictive than this Section 10 and will limit any disclosure to the minimum information that the receiving party reasonably determines is required to be disclosed and provided further, if this Agreement is to be disclosed to Sublicensees, then only an agreed-upon redacted version of the Agreement shall be disclosed;

10.2.4 in the case of a disclosure of Section 8 hereof, to other licensees and prospective licensees of Evogene Hits, for purposes of negotiating and administering the regulatory provisions of such licensees’ licenses with Evogene subject to confidentiality terms no less restrictive than this Section 10; and

10.2.5 to the extent such disclosure is reasonably necessary in connection with filing or prosecuting patent applications, filing or publishing a prospectus or any other document or report required in connection with any public offering of such party’s securities on any stock exchange, prosecuting or defending litigation, complying with applicable law, governmental regulations or stock exchange rules, or submitting information to tax authorities or otherwise exercising its rights hereunder, 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 (e.g. which will be sufficient to enable the original disclosing party to apply for patent protection for inventions to be disclosed), to the extent possible, to the latter party of such disclosure and, shall cooperate with the original disclosing party, at the original disclosing party’s cost and expense, 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, and will limit any disclosure to the minimum information that the receiving party reasonably determines is required to be disclosed.

 

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10.3 Data Sharing and Restrictions; Ownership.

10.3.1 Monsanto Data. Monsanto shall own all right, title and interest in and to the Monsanto Data. Other than with respect to Monsanto Testing Data, which will be provided by Monsanto to Evogene in accordance with Section 5.5C, Monsanto shall determine, in its sole discretion, the level and type of Monsanto Data that it provides to Evogene under the Funded Project, provided, however, that Evogene’s written approval shall be required prior to any provision of Monsanto Data to Evogene. Any Monsanto Data provided to Evogene under this Agreement shall be deemed Confidential Information, and Evogene shall keep all Monsanto Data confidential in accordance with this Section 10. Other than with respect to Monsanto Testing Data, during the Exclusivity Period, Evogene may use Monsanto Data to conduct Discovery Rounds outside the Funded Project, including in Discovery Rounds conducted in collaboration with or for the benefit of a Third Party but may not, for the avoidance of doubt, provide any Monsanto Data to Third Parties. Monsanto Testing Data may be used by Evogene solely for the benefit of the Funded Project and may not be used by Evogene outside the Funded Project nor provided to Third Parties. Upon the expiration of the Exclusivity Period or, earlier, in the event that Monsanto Terminates the Funded Project or the G2P Optimization Part of the Funded Project pursuant to a Change of Control to a Monsanto Competitor as set forth in Section 17.5.2 or terminates the Agreement for any other reason provided under this Agreement, Evogene must return to Monsanto any Monsanto Data in written or electronic form; provided, however, Evogene may use any Monsanto Data retained in the unaided memories of any Evogene employees and available for recall without the assistance of any printed or stored materials, without breaching the terms of this Section 10.3.1. Evogene shall not be permitted to use any Monsanto Data in any Evogene Patent Rights, or any other patent applications without Monsanto’s consent, which consent shall not be unreasonably withheld.

10.3.2 Evogene-Funded Evogene Data. Evogene shall own all right, title and interest in and to the Evogene-Funded Evogene Data. Evogene may use Evogene-Funded Evogene Data for the benefit of the Funded Project in accordance with the terms set forth herein but shall be under no obligation to provide Monsanto access to any such Evogene-Funded Evogene Data. Any Evogene-Funded Evogene Data provided to Monsanto under this Agreement shall be deemed Confidential Information of Evogene, and Monsanto shall keep all Evogene-Funded Evogene Data confidential in accordance with this Section 10. Nothing in this Agreement shall be construed to prevent Evogene from using any Evogene-Funded Evogene Data outside of the Funded Project, subject to Evogene’s exclusivity obligations under Section 4. With the exception of any Evogene-Funded Evogene Data necessary to be provided in conjunction with a Collaboration Hit Data Backpack, Discovery Validation

 

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Data Backpack, Collaboration Hit G2P Data Backpack or Project G2P Validation Data Backpack or as otherwise expressly required by the Research Plan or this Agreement, Evogene shall determine, in its sole discretion, the level and type of Evogene-Funded Evogene Data to be provided, if at all, to Monsanto under the Funded Project.

10.3.3 Monsanto-Funded Evogene Data. Evogene shall own all right, title and interest in and to the Monsanto-Funded Evogene Data. Evogene agrees to use Monsanto-Funded Evogene Data for the benefit of the Funded Project in accordance with the terms set forth herein. Nothing in this Agreement shall be construed to prevent Evogene from using any Monsanto-Funded Evogene Data outside of the Funded Project, subject to Evogene’s exclusivity obligations under Section 4. Evogene hereby grants, and Monsanto hereby accepts, a perpetual, irrevocable, non-exclusive, royalty-free, sublicensable (but specifically excluding the right to grant any Bare Sublicense thereof) transferable license to use the Monsanto-Funded Evogene Data for any internal research and development purpose of Monsanto and its Affiliates whatsoever. At Monsanto’s request, Evogene shall provide Monsanto with any Monsanto-Funded Evogene Data [* * *] ([* * *]) [* * *] after the completion of the first Project Discovery Round in which it is used, except as such timing may otherwise be unanimously agreed by the Steering Committee or as may be otherwise specified under any other provision of this Agreement or in any Exhibit hereof; provided, however, that with respect to the Monsanto-Funded Evogene Data that was developed by Evogene before the Effective Date, as described in Exhibit F, Evogene shall provide such Monsanto-Funded Evogene Data to Monsanto within thirty (30) days of Monsanto’s request therefor. During the process of preparation and approval of the Annual Research Plan, Evogene may designate all or part of the planned Monsanto-Funded Evogene Data to be Evogene-Funded Evogene Data. In such an event, funds designated for creation of such Data will be deducted from the Annual Research Payments and/or Data Generation payments made by Monsanto to Evogene in respect of the applicable Collaboration Year. For avoidance of doubt, Evogene will remain obligated to generate such Evogene Data and to use it in the Project Discovery Rounds. Any Monsanto-Funded Evogene Data provided to Monsanto under this Agreement shall be deemed Confidential Information of Evogene, and Monsanto shall keep all Monsanto-Funded Evogene Data confidential in accordance with this Section 10, but only for so long as such Monsanto-Funded Evogene Data remains Confidential Information of Evogene (provided that such Monsanto-Funded Evogene Data does not cease to be Confidential Information of Evogene through the improper disclosure thereof by Monsanto).

 

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10.4 Press Releases.

10.4.1 Promptly after the Signing Date, the parties shall release a joint press release, substantially in the form of Exhibit P, to announce the execution of this Agreement. Thereafter, Evogene and Monsanto may each disclose to Third Parties solely the information contained in such press release and in any other joint press releases released by the parties in accordance with the terms hereof, and in the public filings and disclosure documents agreed between the parties on the Effective Date, without the need for further approval by the other.

10.4.2 On an annual basis the Parties will develop and share a communication plan regarding the Collaboration that includes a framework for the timing and content of press releases, analyst presentations and each Party’s annual report, to the extent they relate to the Collaboration.

10.4.3 During the Collaboration, the parties shall work cooperatively in the drafting of, and shall release, the following press releases:

(a) Upon progression of each Collaboration Hit Homolog or Special Collaboration Hit to a subsequent Phase in the Monsanto Pipeline, either party may make a press release to announce such phase advancement. Monsanto shall have the right to approve the timing and content of any such press release by Evogene which approval will not be unreasonably withheld or delayed.

(b) Periodically, the parties shall discuss in good faith and mutually agree on the timing and content of a joint press release to provide a general update on the progress of the Collaboration.

10.4.4 Neither party shall issue any other press release or other public statement concerning the Collaboration, or use the name of the other party in any other press release or marketing material, without the prior written consent of the other party, such consent not to be unreasonably withheld. Once a press release or other public statement is permitted hereby, nothing in this Section 10.4 shall restrict either party from the subsequent issuance thereof.

 

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  11. REPRESENTATIONS, WARRANTIES AND COVENANTS; DISCLAIMERS.

11.1 Representations and Warranties.

11.1.1 By Evogene. Evogene represents, warrants and covenants to Monsanto that (a) it has the full right and authority to enter into this Agreement and grant the rights and licenses granted herein; provided that nothing in the foregoing shall be construed as any representation or warranty as to non-infringement of Third Party Intellectual Property rights; (b) upon execution by Evogene, and countersignature by Monsanto, this Agreement becomes a valid and binding agreement, and is enforceable against Evogene in accordance with its terms; (c) the execution of this Agreement and the performance by Evogene hereunder (including granting the Research License, Commercial License and Non-Assert License) shall not violate, breach, be inconsistent with, or cause a default under any agreement between Evogene and a Third Party; (d) as of the Effective Date and to the knowledge of Evogene, there are no existing or threatened actions, government investigations, notices, interferences, suits or claims pending against any Evogene Patent Rights, or against Evogene with respect to the licenses granted hereunder and the inventions embodied in such Evogene Patent Rights, or Evogene’s right to enter into and perform its obligations under this Agreement; (e) Evogene has not previously granted, and shall not grant any rights in or to the Evogene Patent Rights or Evogene Know-How which are in conflict with the rights granted to Monsanto hereunder; (f) it is responsible for the actions of its Affiliates in connection herewith and for their adherence to the terms and conditions of this Agreement, and further that each Affiliate making use of the license grants hereunder shall be bound by all the terms and conditions of this Agreement relating to such use; (g) as of the Signing Date, Exhibit C is accurate and complete to Evogene’s knowledge; and (h) it shall use commercially reasonable efforts, through the Funded Project, to identify and prioritize Hits with likelihood and potential for the development of Products displaying improved performance in the Monsanto Field, based on Evogene’s prediction as to the relevance of such Hits to the applicable Discovery Program, freedom-to-operate, conflicting agreements entered into by Evogene prior to the Effective Date, patentability and other considerations, including those considerations set forth in Section 5.8.1. For clarification, nothing in the representation set forth in subsection (h) is intended to be deemed a warranty by Evogene as to the non-existence of such concerns with respect to the Collaboration Hits or Special Collaboration Hits delivered by Evogene hereunder, and Evogene expressly disclaims any such warranty.

 

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11.1.2 By Monsanto. Monsanto represents, warrants and covenants to Evogene that: (a) it has the full right and authority to enter into this Agreement; (b) upon execution by Monsanto, and countersignature by Evogene, this Agreement becomes a valid and binding agreement and is enforceable against Monsanto in accordance with its terms; (c) the execution of this Agreement and the performance by Monsanto hereunder shall not violate, breach, be inconsistent with, or cause a default under any agreement between Monsanto and a Third Party; (d) as of the Effective Date and to the knowledge of Monsanto, there are no existing or threatened actions, government investigations, notices, suits or claims pending against it with respect to its right to enter into and perform its obligations under this Agreement; (e) it is responsible for the actions of its Affiliates in connection herewith and for their adherence to the terms and conditions of this Agreement, and further that each Affiliate making use of the license grants hereunder shall be bound by all the terms and conditions of this Agreement relating to such use; (f) it shall use commercially reasonable efforts to satisfy all of its Diligence Obligations hereunder; and (f) Regulatory Data when delivered pursuant to Section 8 shall be complete and accurate for its original purpose and use by Monsanto.

11.2 Third-Party Beneficiaries. The parties agree that each licensee of Evogene or of Evogene’s Affiliates purchasing Regulatory Data from Monsanto shall be an express third-party beneficiary of this Agreement with respect to Monsanto’s representation and warranty in Section 11.1.2(g), if and to the extent that both (a) such licensee is bound to the provisions of Article 8, or substantially identical provisions, pursuant to its license with Evogene or Evogene’s Affiliate (hereinafter, the regulatory provisions of any such license being referred to as the “Licensee Regulatory Provisions”), and (b) Monsanto is an express third-party beneficiary of such Licensee Regulatory Provisions.

11.3 Disclaimer of Warranties. Except as expressly provided in Section 11.1, Evogene and Monsanto each expressly disclaim any and all warranties, including without limitation any implied warranties of merchantability, patentability, noninfringement, 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 11.1 above.

 

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  12. INDEMNIFICATION.

12.1 Indemnification of Evogene. Monsanto shall indemnify, defend and hold Evogene and its Affiliates and their respective directors, officers, employees, agents, consultants and counsel, and the successors and assigns of the foregoing (the “Evogene 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 an Evogene Indemnitee, arising from or occurring as a result of (a) Monsanto’s breach of its representations, warranties or covenants set forth in Section 11.1.2; (b) any personal injury, death or property damage suffered by such Third Party as a result of any Product sold by or on behalf of Monsanto, its Affiliates or its Sublicensees; and (c) a breach or a claimed breach of any Third Party’s Intellectual Property rights by any Products made, used, sold, imported or otherwise Commercially Exploited by or on behalf of Monsanto or any of its Affiliates and Sublicensees, except (i) in each case under clauses (a), (b) or (c) to the extent caused by the willful misconduct of any of the Evogene Indemnitees.

12.2 Indemnification of Monsanto. Evogene 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 (a) Evogene’s breach of its representations, warranties or covenants set forth in Section 11.1.1; (b) Evogene’s failure, pursuant to Section 4.3.2, to disclose any provision of any Existing Encumbering Agreement that would be breached or violated by, or that would otherwise be inconsistent with, the terms and conditions of this Agreement; (c) any personal injury, death or property damage suffered by such Third Party as a result of any product sold by or on behalf of Evogene or its Affiliates under the license from Monsanto in Section 3.2, or (d) a breach or a claimed breach of any Third Party’s Intellectual Property rights by any products sold by or on behalf of Evogene or its Affiliates under the licenses from Monsanto in Section 3.2 which are made, used, sold, imported or otherwise commercially exploited by or on behalf of Evogene or any of its Affiliates and Sublicensees, except in each case under clauses (a), (b), (c) or (d), to the extent caused by the willful misconduct of any of the Monsanto Indemnitees.

 

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12.3 Procedure. A party that intends to claim indemnification under this Section 12 (the “Indemnitee”) 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 a stipulation to or admission or acknowledgment of any liability or wrongdoing on the part of the Indemnitee or imposes any obligation on the Indemnitee other than a monetary obligation, and only to the extent the Indemnitor assumes in full such obligation. The failure to deliver 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 materially by the delay. At the Indemnitor’s request and cost, the Indemnitee shall cooperate reasonably 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 12, 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.

12.4 Disputes Regarding Indemnification. Any dispute regarding whether the indemnification obligations in this Section 12 apply to a particular Third Party claim, suit or proceeding shall be resolved pursuant to Section 15. The limitations period applicable to the bringing of such claim seeking enforcement of the indemnification obligation shall be tolled until a final, nonappealable judgment or order (or settlement combined with a dismissal with prejudice and release of all claims that are the subject of such indemnification obligation dispute) is entered in respect of the underlying Third Party claim, suit or proceeding. Nothing in the foregoing shall be deemed to postpone a party’s obligation to indemnify pursuant to this Section 12.

 

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  13. EXCLUSION OF DAMAGES; LIMITATION OF LIABILITY.

13.1 Exclusion of Damages. Under no circumstance shall either party be liable under this Agreement to the other party for any incidental, consequential, indirect, special or exemplary damages, including damages from loss of profits or opportunities, even if advised of the possibility of such damages, it being understood that the parties’ confidentiality and indemnification obligations hereunder (Sections 10 and 12) shall not be limited in any way by the aforementioned exclusion of damages.

13.2 Limitation of Liability. Except with respect to indemnification obligations hereunder (Section 12), and except for liability arising from the nonpayment or underpayment of Product Royalties or other fees accruing hereunder, under no circumstance shall either party’s liability to the other party arising out of a breach of this Agreement exceed in the aggregate the greater of (i) the amounts payable by Monsanto to Evogene during the [* * *] ([* * *]) [* * *] period before such liability first accrues, or (ii) $[* * *].

13.3 Allocation of Risk. Each of Evogene and Monsanto acknowledges and agrees that each party has entered into this Agreement in reliance on the warranties, limitations and disclaimers set forth in this Agreement, and that such warranties, limitations and disclaimers reflect an allocation of risk between the parties (including the risk that a contract remedy may fail of its essential purpose and cause consequential damages or other loss) and form an essential basis of the bargain between Evogene and Monsanto.

 

  14. TERM AND TERMINATION.

14.1 Term. The term of this Agreement shall commence on the Effective Date and, subject to the remaining provisions of this Section 14, shall continue until the later of (i) the last to expire of the Evogene Patent Rights or Monsanto Improvement Patent Rights, or (ii) the end of the last-to-expire period during which Monsanto is obligated to pay Product Royalties pursuant to Section 6.5.5. The term of this Agreement shall survive the non-renewal, termination or limitation of any particular license granted hereunder. Certain rights and obligations of the parties may be terminated as provided in this Section 14, but this Agreement may not be terminated in its entirety prior to the end of the term provided above.

 

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14.2 [* * *] Early Termination of Funded Project by Monsanto. At any time prior to the expiration of the [* * *], Monsanto may Terminate the Funded Project, such termination to become effective at the end of [* * *]. Prior to the effective date of such early termination of the Funded Project, Monsanto shall continue to pay for Funded Project costs associated with Evogene’s continuing Diligence Obligations during such period, to the extent payable hereunder in the absence of such termination.

14.3 Termination of Certain Provisions of this Agreement for Cause. Subject to the limitations set forth in Sections 14.6 and 15.2.2, either party may, upon written notice to the other party, terminate certain rights and obligations of the parties hereunder, as provided in Section 14.6 below, if the other party materially breaches the relevant provisions referred to in Section 14.6 and fails to cure such breach within sixty (60) days after receiving written notice thereof from the party seeking to terminate.

14.4 Termination of Funded Project. Termination of the Funded Project upon expiration of the Research Period or upon early termination of the Funded Project pursuant to Section 14.2 shall terminate the Exclusivity Period (to the extent not already expired) but shall not terminate any Research License, Commercial License, PlaNet Genes License, or Non-Assert License to any Collaboration Hits, Special Collaboration Hits, PlaNet Genes, RePack Recommendations or PlaNet Gene Stacks delivered to Monsanto prior to the date of such expiration or termination, or any Collaboration Hit Homologs of such Collaboration Hits or any PlaNet Gene Homologs of such PlaNet Genes, nor the licenses granted to Evogene by Monsanto pursuant to Section 3.2 of this Agreement, which Research Licenses, Commercial Licenses, PlaNet Genes License, Non-Assert Licenses and licenses to Evogene shall continue in perpetuity unless subsequently terminated for cause in accordance with the terms hereof.

14.5 Accrued Obligations. Termination of any provision of this Agreement or any license granted hereunder for any reason shall not release any party from any obligation which, at the time of such termination, has already accrued. Subject to the limitations set forth in Sections 11.3, 13, 14 and 15.2.2, neither party is precluded from pursuing any rights and remedies it may have under this Agreement at law or in equity which accrued, or are based upon any act, error or omission occurring, prior to the effective date of such termination.

 

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14.6 Effect of Breach; Survival. The remedies set forth in Sections 7.4, 14.6.1, 14.6.2 and 14.6.3 shall be the sole and exclusive remedies of each party with respect to any of the breaches specified in such Sections.

14.6.1 Monsanto Breach.

 

  (a) [* * *].

 

  (b) [* * *].

 

  (c) [* * *].

 

  (d) [* * *].

14.6.2 Evogene Breach.

(a) If Evogene breaches (i) Section 2.6 where Evogene has failed to use commercially reasonable efforts to (A) staff the Funded Project with the required number of FTEs, or (B) replace departed FTEs; (ii) Section 3.1; (iii) Section 4.1; (iv) Section 4.5 due to any intentional or grossly negligent disclosure subject to such Section; or (v) Section 10 due to any intentional or grossly negligent disclosure of Monsanto’s Confidential Information to any Third Party, and does not cure any such breach in accordance with Section 14.3, then, at Monsanto’s election, the Funded Project shall Terminate, and Monsanto’s obligations to pay Research Payments and Data Generation payments under Section 6.3 (other than any such payments which, at the time of such termination, had already accrued), shall terminate. All other provisions of this Agreement shall remain in full force and effect; provided, however, that if such termination occurs as a result of the Evogene breach described in clause (i) of this Section 14.6.2(a), then all of Monsanto’s Diligence Obligations shall also terminate. In addition to the foregoing remedies, Monsanto shall be entitled to seek damages or injunctive relief, in accordance with the terms hereof, as a result of any such breach.

(b) If Evogene breaches any provision of this Agreement not specifically set forth in subsection 14.6.2(a) above, then this Agreement shall remain in full force and effect, but Monsanto shall be entitled to seek damages or injunctive relief, in accordance with the terms hereof, as a result of any such breach.

 

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14.6.3 Continuing Royalties for Certain Non-Exclusive Licenses. [* * *].

14.6.4 Survival of Know-How License. Notwithstanding the termination of any license hereunder in accordance with the terms of this Agreement, the license to Evogene Know-How granted under Section 3.1 shall become non-exclusive but shall otherwise survive any such termination, solely to the extent that such Evogene Know-How is retained in the unaided memory of Monsanto personnel.

 

  15. DISPUTE RESOLUTION.

15.1 Informal Negotiation; Mediation. If a dispute arises out of or relates to this Agreement or a breach thereof, or a Deadlock arises among the members of the Steering Committee, the parties shall first try to resolve such dispute or Deadlock through informal and good faith negotiation between the Chief Executive Officer of Evogene and the Vice President of Biotechnology of Monsanto. If said officers cannot resolve the dispute or Deadlock within ten (10) business days after the date on which the matter is referred to the parties’ executive officers listed above, then the parties may, but are under no obligation to, mutually 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 under Section 15.2 or litigation under Section 15.3 (if such litigation is permitted in accordance with the terms hereof). If the parties decide to submit the dispute or the Deadlock to mediation, then each party shall bear its own expenses and an equal share of all costs and fees of the mediation.

15.2 Arbitration.

15.2.1 General. Any dispute, claim or controversy arising out of or relating to this Agreement, including the breach, termination or validity of this Agreement, that is not settled by mutual consent, by the informal negotiations procedure or by the mediation procedure (if such has been initiated) set forth in Section 15.1 above, shall be finally settled by binding arbitration, conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association (except where those rules conflict with the provisions of this Section 15, in which case the provisions of this Section 15 shall control) by one (1) independent, neutral, arbitrator appointed in accordance with said rules and who is a U.S. lawyer with at least fifteen (15) years experience with a law firm or corporate law department or who was a judge of a court of general

 

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jurisdiction in the United States, and who is experienced in matters regarding complex biotechnology collaboration agreements. The arbitration shall be held in New York, New York, and, in accordance with Section 17.1 of this Agreement, the arbitrator must render an award by application of the substantive laws of the State of New York. The arbitrator 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 arbitrator shall permit such discovery as the arbitrator deems 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. Unless the arbitrator determines that equity requires otherwise, the arbitrator shall award to the prevailing party (as determined by the arbitrator) the costs of the arbitration, as well as the reasonable, out-of-pocket fees and expenses of the prevailing party’s attorneys. A disputed performance or suspended performance pending the resolution of the arbitration must be completed within a reasonable time period following the final decision of the arbitrator. Any arbitration subject to this Section shall be completed within six (6) months from the filing of notice of a request for such arbitration, and the decision of the arbitrator shall be in written form, setting forth findings of fact and conclusions of law with the reasons for such findings and conclusions stated. The arbitration proceedings and the decision shall, except as required by applicable law, 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 other than as expressly permitted under Section 7.6. The decision of the arbitrator shall be the sole, exclusive and binding remedy between the parties regarding any and all disputes, controversies, claims and counterclaims presented to the arbitrator. The decision of the arbitrator will be final and not subject to further review, except pursuant to the Federal Arbitration Act. Any award may be entered in a court of competent jurisdiction for a judicial recognition of the decision and an order of enforcement. Each party has the right before or, if the arbitrator cannot hear the matter within an acceptable period, during the arbitration, to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction and replevin, to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the arbitration.

15.2.2 Pre-Termination Arbitration of Certain Disputes. Notwithstanding any provision of this Agreement to the contrary, any dispute, claim or controversy arising out of or relating to this Agreement, including the breach, termination or validity of this Agreement, that could ultimately result in Monsanto losing any of its licenses hereunder (including any dispute over a failure by Monsanto to pay any Milestone Fees or Product Royalties, or any dispute over a Monsanto Diligence Failure), but excluding any such termination under Section 14.6.1(a), shall be finally and exclusively settled by the procedures set forth in this Section 15.2.2.

 

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(a) If Evogene believes that Monsanto has breached this Agreement, or suffered a Diligence Failure, and as a result of such breach or Diligence Failure any of Monsanto’s licenses hereunder could become subject to Sections 5.6.7 or 14.6.1(b), Evogene shall notify Monsanto of such alleged breach or Diligence Failure in writing (a “Special Dispute Notice”). The Special Dispute Notice shall include a description of such breach or Diligence Failure in reasonable detail; the amount, if any, allegedly due and owing by Monsanto hereunder (excluding any damages that may have been suffered by Evogene) in connection with such breach or Diligence Failure; and a statement that Monsanto may lose certain of its license rights hereunder if such breach or Diligence Failure is established or if Monsanto fails to respond to such notice.

(b) If, within sixty (60) days after Monsanto receives a Special Dispute Notice, Monsanto fails to dispute such notice in writing, or fails to cure any breach or Diligence Failure alleged in such notice, then Evogene shall have no further obligations under this Section 15.2.2 and may exercise any or all of the rights granted to it under this Agreement and applicable law as a result of such breach or Diligence Failure.

(c) If Monsanto timely disputes the Special Dispute Notice, then the parties shall immediately begin the dispute resolution process set forth in Sections 15.1 and 15.2.1 above, subject to and as modified by the remaining provisions of this Section 15.2.2.

(d) Monsanto shall, at Evogene’s request and subject to Evogene’s execution of an unsecured promissory note reflecting the terms of this subsection (d) and subsections (g), (i)(iv) and (i)(v) below, advance payments for the reasonable fees and expenses of Evogene’s outside counsel in such dispute (the “Advances”). Advances would be made quarterly, in advance, and would be paid directly to Evogene’s

 

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outside counsel. Each quarter’s Advance would equal the good-faith estimate of Evogene’s outside counsel for the coming quarter, such estimates to be delivered by Evogene to Monsanto at least one (1) month before the beginning of each quarter (other than the first quarter, for which the advance would be $[* * *]), and would be subject to a cap of $[* * *] per quarter. Promptly after the end of each quarter, Evogene shall notify Monsanto of the total amount of such fees and expenses actually incurred during such quarter, and shall cause the repayment to Monsanto of any portion of the applicable Advance in excess of such fees and expenses actually incurred. Subject to the further provisions of Section 15.2.2, Advances shall bear interest at the Prime Rate plus [* * *] percent ([* * *]%) per annum until the arbitration is concluded, and thereafter at the lesser of (i) the Prime Rate plus [* * *] percent ([* * *]%) per annum or (ii) the highest rate permissible by law. Such interest shall accrue on each Advance from the date made until the date it is paid or otherwise satisfied in full in accordance with the further provisions of this Section 15.2.2 below. For clarity, Evogene may, subject to subsection (f) below, prepay any portion or all of each Advance, from time to time, and without penalty, but such prepayment of an Advance shall not discharge any obligation for interest accrued on account of such Advance prior to such prepayment.

(e) Evogene’s right to receive subsequent Advances shall terminate automatically upon the occurrence of any Change of Control to a Monsanto Competitor.

(f) If Monsanto fails to make any Advance when and as required by this Section 15.2.2, then Evogene shall have no further obligations under this Section 15.2.2 and may exercise any or all of the rights granted to it under this Agreement and applicable law as a result of Monsanto’s applicable breach or Diligence Failure.

(g) All payments of and credits against the Advances shall be applied first to accrued and unpaid interest and then to the outstanding principal balance of the Advances.

 

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(h) For clarity, all provisions in this Section 15.2.2 concerning payment of Advances, interest, costs of the arbitration, and fees and expenses of the prevailing party’s attorneys are specifically excluded from the limitation of liability set forth in Section 13.2.

(i) Informal negotiation, mediation (if any) and arbitration shall be conducted as provided in Sections 15.1 and 15.2.1 above, except that:

(i) In any dispute under this Section 15.2.2, the arbitrator shall have no authority to grant a temporary restraining order, injunction or other equitable relief, and neither party shall seek any such relief in connection with any dispute subject to this Section 15.2.2. In the event of any dispute that includes issues under this Section 15.2.2 as well as other issues solely subject to resolution under Section 15.2.1, nothing in this subsection (i) shall limit the right of either party, under Section 15.2.1, to seek injunctive or other equitable relief with respect to the issues that are subject to resolution solely under Section 15.2.1.

(ii) The arbitrator’s decision shall be limited to a determination of whether or not the alleged breach or Diligence Failure occurred and the determination contemplated by 15.2.2(i)(iii); provided, however, that the arbitrator shall also be entitled to award damages against either party to the extent that the arbitrator determines that such party has acted inequitably, or has failed to act in good faith, in the conduct of such arbitration. If the arbitrator determines that

 

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Monsanto failed to pay any Milestone Fee or Product Royalties, then such amount, together with interest pursuant to Section 7.4 (as accrued from the date of such breach or Diligence Failure), applicable costs pursuant to Section 7.5, if any, and any other damages awarded to Evogene as contemplated above, shall be paid immediately to Evogene, and all such payment defaults shall be deemed cured. If the dispute concerns an alleged Monsanto Diligence Failure, then each party shall be entitled to exercise its rights hereunder with respect thereto, based on the arbitrator’s decision as to whether or not such Diligence Failure occurred.

(iii) Unless the arbitrator determines that equity requires otherwise, the arbitrator shall award to the prevailing party (as determined by the arbitrator) the costs of the arbitration, as well as the reasonable, out-of-pocket fees and expenses of the prevailing party’s attorneys.

(iv) If the arbitrator awards attorneys’ fees and expenses to Evogene and any Advances (and accrued interest thereon) are then outstanding, then such award shall automatically be offset against the Advances and interest thereon, as provided in subsection (g) above. Monsanto shall remain liable for any part of such award that exceeds the aggregate outstanding balance of the Advances and all interest thereon, and Evogene shall remain liable for any Advances and interest not offset against such award.

 

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(v) If the arbitrator awards attorneys’ fees and expenses to Monsanto, then (A) all Advances and interest thereon shall immediately be due and payable (and subject to enforcement by Monsanto if not so paid), (B) interest shall continue to accrue, payable monthly in arrears, until all Advances have been repaid in full, and (C) Monsanto shall be entitled to offset any amounts owing under the Agreement against the outstanding Advances and interest thereon (and any remaining balance of Advances not offset shall remain due and payable by Evogene).

15.3 Infringement Claims. Notwithstanding anything in Section 15.2.1 to the contrary but subject to Section 15.2.2, claims for infringement, invalidity or misappropriation of any Evogene Patent Rights or Monsanto Improvement Patent Rights will not be subject to mediation or arbitration, and the party alleging such infringement, invalidity 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, and all claims for legal and equitable relief in respect thereof, to any court of competent jurisdiction, and to pursue without limitation all rights and remedies available under this Agreement and at law and in equity.

15.4 Export Control. Evogene acknowledges and agree that any products, materials, software and/or technology provided by Monsanto under this Agreement are subject to the export control laws and regulations of the United States, potentially including but not limited to the Export Administration Regulations (“EAR”), and sanctions regimes of the U.S. Department of Treasury, Office of Foreign Asset Controls (“OFAC”). Evogene agrees that all exports related to this agreement will be in compliance with these laws and regulations. Evogene shall not, without prior U.S. government

 

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authorization, export, or transfer Monsanto products, materials, software and/or technology, either directly or indirectly, to any country subject to a comprehensive U.S. trade embargo (currently Cuba, Iran, North Korea, Sudan, and Syria) or to any person or entity listed on the “Entity List” or “Denied Persons List” maintained by the U.S. Department of Commerce or the list of “Specifically Designated Nationals and Blocked Persons” maintained by the U.S. Department of Treasury. Moreover, Evogene shall not, without proper U.S. government authorization, export, or transfer Monsanto technology to any resident or national of any country subject to a comprehensive U.S. trade embargo. In addition, Monsanto products, materials, software and/or technology may not be exported, re-exported, or transferred to an end-user engaged in activities related to weapons of mass destruction. Evogene further agrees that this assurance shall remain in effect even after termination of this Agreement.

 

  16. CONDITION PRECEDENT.

This Agreement shall become effective on and as of the Signing Date when it has been executed and delivered by each of the parties hereto, and when the 2nd Amendment to the Share Purchase Agreement has been executed and delivered by each of the parties thereto. For clarification, the parties’ rights and obligation pursuant to, or in connection with, the Funded Project, in respect of the period up and till the Signing Date, shall be governed by the terms and conditions of the Original 2008 Collaboration Agreement.

 

  17. MISCELLANEOUS.

17.1 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 New York applicable to contracts entered into and performed in New York by residents thereof, except in respect of matters arising under patent law, which matters shall be governed by and construed in accordance with Title 35, United States Code, and patent law as interpreted by the U.S. Court of Appeals for the Federal Circuit and the U.S. Supreme Court. Any action or lawsuit brought relating to this Agreement in accordance with the terms hereunder shall be brought in the competent courts of New York, New York, and any objection to venue or personal jurisdiction in such courts is hereby irrevocably waived.

 

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17.2 Language. English is the official language of this Agreement. Any translation prepared by either party is for its own convenience and shall have no binding effect whatsoever.

17.3 Waiver. Neither party may waive or release any of its rights or interests in this Agreement except in a writing executed by such party. 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.

17.4 Amendment. This Agreement may be modified or amended only pursuant to a writing executed by both parties.

17.5 Assignment; Change of Control to a Monsanto Competitor.

17.5.1 Assignment. Except as otherwise provided herein, this Agreement and the licenses granted herein shall not be assignable by either party to any third party, by operation of law or otherwise, without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), provided, however, either party may assign this Agreement or any licenses granted herein, without such consent, to a Subsidiary of such party, or in connection with the reorganization, merger, consolidation, assumption, spin-off, sale or transfer of all or substantially all of the assets related to that portion of its business pertaining to the subject matter of this Agreement, either alone, in conjunction with other businesses or as part of an overall reorganization, provided, with respect to an assignment to Subsidiary of a party, that the assigning party shall remain fully responsible for the compliance of such Subsidiary with the terms of this Agreement. Any assignment of this Agreement by Evogene shall be subject to the limitations set forth in Section 3.2.2. The terms and conditions of this Agreement shall be binding on and inure to the benefit of the permitted successors and assigns of the parties.

17.5.2 Change of Control to Monsanto Competitor. Notwithstanding Section 17.5.1 or any other provision of this Agreement, if Evogene undergoes a Change of Control to a Monsanto Competitor, then:

(a) Monsanto may, at its option, on written notice to Evogene within [* * *] ([* * *]) [* * *] after the later of (i) the date such Change of Control is consummated, or (ii) the date Monsanto receives written notice of such Change of Control, either: (i) Terminate the Funded Project, [* * *];

 

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(b) [* * *];

(c) effective as of the date of such Change of Control, provided that Monsanto does not elect to Terminate the Funded Project pursuant to the preceding clause (a), Evogene’s Diligence Obligation to generate Validated Hits under Section 5.2.5 shall increase from [* * *];

(d) [* * *];

(e) [* * *], and

(f) Any Milestone Fees accruing under Section 6.4.1 after such Change of Control shall, notwithstanding Section 6.4.1, accrue [* * *].

(g) [* * *].

17.5.3 Agreement Otherwise Continues. Except as provided in Section 17.5.2, if Evogene undergoes a Change of Control to a Monsanto Competitor, the terms of this Agreement (including the retroactive payment provisions of Section 6.6) shall remain in full force and effect.

17.5.4 Notice of Monsanto Competitors. At Evogene’s request, Monsanto shall notify Evogene, within fourteen (14) days after Monsanto receives any such request, whether any Person identified by Evogene constitutes a Monsanto Competitor described in clause (iii) of the definition thereof.

17.6 Notices.

17.6.1 Notwithstanding Section 17.6.2, whenever this Agreement requires that a party deliver reports, data backpacks and other communications relating to the day-to-day operation of the Collaboration, such deliveries shall be in writing and shall be made to the Research Committee.

17.6.2 Except as provided in Section 17.6.1, all notices, requests and other communications hereunder shall be in writing and shall be personally delivered or sent by international express delivery service, or registered or

 

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certified mail, return receipt requested, postage prepaid, in each case to the respective address specified below, or such other address as may be specified in writing to the other parties hereto:

 

Monsanto:    Monsanto Company
   Attn: Vice President, Biotechnology
   800 N. Lindbergh Blvd.
   St. Louis, Missouri 63167
with copies to:    General Patent Counsel
   Monsanto Company
   800 N. Lindbergh Boulevard
   St. Louis, Missouri 63167
   Manager Technology Alliances Team
   Monsanto Company
   800 N. Lindbergh Boulevard, B2NL
   St. Louis, Missouri 63167
Evogene:    Evogene Ltd.
   Attn: President and CEO
   13 Gad Feinstein St.
   Rehovot, Israel
with a copy to:    Sharir, Shiv & Co., Law Offices
   Attn: Adv. Debbie Goodman
   3 Azrieli Center, Triangular Tower
   Tel-Aviv-Jaffa, Israel
   (receipt of copy will not constitute delivery of notice)

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 when actually received, or, if earlier: (i) if sent by U.S. mail (or if internationally, by air mail), seven (7) business days after deposit in the U.S. mail or air mail, postage prepaid; (ii) if sent by Federal Express or other overnight delivery service, two (2) business days after delivery to such service; and (iii) if sent by personal courier, upon receipt.

17.7 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

 

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caused by riot, civil commotion, war, terrorist act, governmental law, order or regulation, embargo, action by the government or any agency thereof, act of God, storm, fire, earthquake, 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.

17.8 Independent Contractors. Nothing contained in this Agreement is intended implicitly, or is to be construed, to constitute Monsanto or Evogene 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 the other party or to bind the other party to any contract, agreement or undertaking with any third party.

17.9 Employees and Agents of Each Party. Notwithstanding the obligations and responsibilities of the Steering Committee, the Research Committee, the Patent Committee, or otherwise, and without limiting the generality of Section 17.8, the employees, agents, and independent contractors employed or engaged by or on behalf of each party, to perform work under the Funded Project, are solely engaged by or on behalf of Monsanto or Evogene, as the case may be, for any and all purposes and not by one party jointly for, or as agent for, the other party. Each party agrees not to take any action contrary to the intent of the preceding sentence and shall hold the other party harmless in respect of any alleged or actual breach of the foregoing.

 

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17.10 Other Relationships. Except as expressly provided herein, nothing contained in this Agreement, in the relationship pursuant thereto or otherwise will require either party to negotiate, continue to negotiate or enter into any further research, development or commercial agreements whatsoever with the other party, nor prejudice its sole and absolute discretion to negotiate or enter into, during the term hereof or thereafter, any agreement with any third party, including, without limitation, endeavors in respect of the Evogene Patent Rights, and endeavors competitive to the Monsanto Field, all without having to notify the other party of the existence, substance or status of any of the foregoing.

17.11 Advice of Counsel. Monsanto and Evogene each have had the opportunity to consult with 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 the other and shall be construed accordingly.

17.12 Compliance with Laws. Each party agrees to comply with all state, federal, and local laws, rules, and regulations applicable to the performance of its obligations under this Agreement, including in respect of further research conducted hereunder and the transfer, export, or sale of Biological Materials.

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

17.14 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.

 

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17.15 Remedies Not Exclusive. Except as expressly provided herein, remedies hereunder shall be non-exclusive, and a party’s exercise of any particular remedy shall not preclude its exercise of any other remedy, or of the same remedy on subsequent occasions.

17.16 Further Assurances. At any time or from time to time on and after the Effective Date, 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, in each case of (i)-(iii), as may be reasonably necessary or desirable in order for the requesting party to obtain the full benefits of this Agreement and the transactions contemplated hereby and to the extent consistent with the provisions of this Agreement.

17.17 Entire Agreement. This Agreement together with the Exhibits hereto constitutes the entire agreement with respect to the subject matter hereof, and with respect to the period commencing on the Signing Date, supersedes all prior or contemporaneous understandings or agreements, whether written or oral, between Monsanto and Evogene with respect to such subject matter, including the Original 2008 Collaboration Agreement. For the avoidance of doubt, this Agreement does not amend, modify, or otherwise affect the parties’ obligations under that certain Collaboration and License Agreement dated as of September 24, 2007, by and between the parties.

17.18 Limited Agent for Service of Process. Evogene hereby appoints Evogene, Inc., a Delaware corporation, and Evogene, Inc. hereby accepts such appointment and agrees to act for Evogene and on its behalf solely as agent for service of process in respect of this Agreement and any dispute arising under this Agreement.

17.19 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.

 

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17.20 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.

17.21 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original and which together shall constitute one instrument. Counterpart signature pages may be validly delivered by facsimile or by electronic mail in PDF format, and such signature pages shall have the same effect as originals.

 

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Execution Copy – November 28, 2011

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

 

MONSANTO COMPANY     EVOGENE LTD.
By:  

/s/ Robert Reiter

    By:  

/s/ Ofer Haviv

  Its: VP Biotechnology       Its: President & CEO
Date of Execution: 28 Nov, 2011     Date of Execution: 28 Nov, 2011
    Agreed and Accepted as to Section 17.18: EVOGENE, INC.
    By:  

/s/ Ofer Haviv

      Its: CEO
    Date of Execution: 28 Nov, 2011

 

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Execution Copy – November 28, 2011

EXHIBIT A

Illustration of Collaboration Hit

[* * *]

 

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EXHIBIT B

Research Plan

[* * *]

 

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EXHIBIT C

Evogene Patent Rights

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


EXHIBIT D

Harvestable Yield formulas

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT E

MATERIALS TRANSFER AGREEMENT AND TRANSMITTAL FORM

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


EXHIBIT F

Monsanto-Funded Evogene Data

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT G

Monsanto Improvement Patent Rights

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT H

Determination of Net Trait Revenue

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT I

Evogene Report Criteria

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT J

Monsanto Report Criteria

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT K

Phase Advancement Criteria

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT L

Activity Points

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT M

Monsanto Patent Reimbursement Cap

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


EXHIBIT N

Patent Prosecution Countries

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT O

Information Technology Issues.

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT P

Press Release

 

LOGO

FOR IMMEDIATE RELEASE

Monsanto and Evogene Extend Collaboration on Yield and Stress Research

Collaboration Adds Evogene’s Gene2ProductTM Computational Technologies

ST. LOUIS, MO, USA and REHOVOT, ISRAEL (November XX, 2011) – Monsanto Company (NYSE:MON) and Evogene Ltd. (TASE: EVGN) announced today a one-year extension to their five-year research and development collaboration focused on identifying key plant genes related to yield, environmental stress and fertilizer utilization in corn, soybean, cotton and canola. The companies recently announced the successful completion of the collaboration’s third year.

The collaboration’s gene discovery activities to date have been based on Evogene’s ATHLETETM computational technology. As part of the extension, Evogene will add its Gene2ProductTM computational technologies to its gene discovery program, offering an additional approach for enhancing trait efficacy and the development of candidate genes identified under the collaboration.

Ofer Haviv, Evogene’s President and CEO stated, “We are delighted by this extension of our joint work with Monsanto and in particular with the addition of our Gene2Product computational technologies. We expect that by bringing together Monsanto’s development expertise and these new Evogene technologies, in addition to those already utilized in the collaboration, the companies will be able to further address some of the key challenges that the seed industry is facing in the discovery and development process for biotechnology products in agriculture.”

“Continued agricultural innovation is the key to meeting growing global demand, which is why productive collaborations like this one are critical,” added Bob Reiter, Vice President and Global Lead of Biotechnology for Monsanto Company. “By combining Evogene’s innovative gene discovery technologies with Monsanto’s trait development expertise, we’ll ultimately be able to better deliver products to help farmers increase their productivity.”

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

Additional terms of the collaboration include:

 

   

Evogene will continue to provide Monsanto with candidate genes discovered by Evogene’s computational technologies that are predicted to improve yield, fertilizer utilization and a plant’s reaction to environmental stress. The genes will be validated by Evogene in model plants.

 

   

Monsanto receives exclusive license rights to such candidate genes delivered by Evogene for use in corn, soybean, canola, and cotton.

 

   

As stated above, Evogene will now begin to apply its Gene2ProductTM computational technologies to optimize trait efficacy and the product development process. Evogene will receive additional research payments related to this addition to the collaboration.

 

   

Successful candidate genes that emerge from the collaboration will be commercialized by Monsanto through its branded seed and trait licensing businesses, with Evogene entitled to receive both development milestone payments and royalties.

As part of the original agreement, Monsanto agreed, via a put option exercisable by Evogene, to invest $12 million toward additional equity in Evogene. This arrangement remains in place under a new put option that is exercisable at $12 per share at a later date.

About Monsanto Company

Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. Monsanto remains focused on enabling both small-holder and large-scale farmers to produce more from their land while conserving more of our world’s natural resources such as water and energy. To learn more about our business and our commitments, please visit: www.monsanto.com. Follow our business on Twitter® at www.twitter.com/MonsantoCo, on the company blog, Beyond the Rows® at www.monsantoblog.com, or subscribe to our News Release RSS Feed.

About Evogene

Evogene is a world leading developer of improved plant traits, such as yield and drought tolerance, for a wide diversity of key crops through the use of plant genomics. The company focuses on utilizing its proprietary computational genomic technologies to provide a complete solution for plant trait improvement through combining state of the art biotechnology and advanced breeding methods. These technologies include ATHLETETM for gene discovery; Gene2ProductTM for improving trait efficacy and probability of successful development of biotechnology seed products; and EvoBreedTM for breeding enhancement. Evogene’s plant genomics capabilities combine high throughput plant validation systems, field experiments and proprietary genomic data creation. Evogene is collaborating with world leading seed companies to introduce its improved plant traits into key commercial crops under milestone and royalty bearing agreements. Evogene’s headquarters are in Rehovot, Israel, and its stock is traded on the Tel Aviv Stock Exchange (TASE: EVGN). For additional information, please visit Evogene’s website at www.evogene.com.

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

This press release contains “forward-looking statements.” These statements include words like “may,” “expects,” “believes,” “scheduled,” “potentially” and “intends,” and they describe opinions about future events. These forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of Evogene Ltd. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Contact Information

Evogene:

Liat Cinamon

Director of IR & PR

E-mail: liat.cinamon@evogene.com

Tel: +972-8-931-1933

Monsanto:

Sara Miller

Corporate Communications Manager

Email: sara.e.miller@monsanto.com

Tel: +1-314-694-5824

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT Q

Procedures for Analysis of Diligence Limitations (Section 5.8.1(a)-(d))

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT R

Set-up & Pilot towards Monsanto Provision of Monsanto Testing Data

for use in G2P Optimization Rounds

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT S

Monsanto Testing Data Provision for G2P Pipeline Optimization Activities

(Pursuant to section 5.5C)

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT T

Research Extension Option

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT U

High Impact Royalties Example

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 


Execution Copy – November 28, 2011

EXHIBIT V

Method for Determining Transformational Yield

[* * *]

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

EX-10.2 3 d518283dex102.htm EX-10.2 EX-10.2

Exhibit 10.2

Share Purchase Agreement

This Share Purchase Agreement (the “Agreement”) is made and entered into as of this 27 day of August, 2008, by and among Evogene Ltd., a company organized under the laws of the State of Israel (the “Company”) and Monsanto Company, a company organized under the laws of Delaware (the “Purchaser”).

 

WHEREAS The Company is a publicly-traded company whose securities are listed for trade on the Tel Aviv Stock Exchange Ltd. (hereinafter the “TASE”); and

 

WHEREAS The Purchaser desires to invest in the Company an amount of up to US$30,000,000 (the “Aggregate Investment”) in two (2) tranches in consideration for up to 5,000,000 Ordinary Shares (as defined below) of the Company, as more particularly set out in this Agreement;

Now, therefore, in consideration of the mutual promises and covenants set forth herein, the Parties hereby agree as follows:

 

1. Preamble, Appendices and Interpretation

 

  1.1 The preamble and the Appendices to this Agreement constitute an integral part hereof and are to be read as one with the remaining clauses thereof.

 

  1.2 In this Agreement, unless otherwise expressly stated, the terms set out below shall bear the meaning appearing opposite them:

 

  1.2.1 Closing”—The closing of the purchase and sale of the Purchased Shares (as defined below) which shall take place by teleconference, facsimile and electronic mail communication within four (4) United States business days from the receipt of the approvals set-forth in Section 5 below or at such other time and place as may be agreed between the Parties (the “Closing Date”).

 

  1.2.2 Purchased Sharesmeans 3,272,727 Ordinary Shares having a par value of NIS 0.01 each of the Company listed for trade on the TASE.

 

  1.2.3 The “Prospectus”—the Company’s prospectus dated May 30, 2007.

 

  1.2.4 Price Per Share” – USD 5.50

 

  1.2.5 Collaboration Agreement”—2008 Collaboration and License Agreement between the Parties dated August 27, 2008 relating to developing transgenic yield and stress traits in certain agricultural crops.

 

  1.2.6 Regulations” – the regulations that were promulgated under the Securities Law.

 

  1.2.7 Securities Law” – the Israeli Securities Law -1968.

 


  1.2.8 Taxes”—all taxes imposed by any jurisdiction, including, without limitation, income, employment, value-added taxes, withholding, Social Security (or the equivalent thereof), custom duties, obligatory registration fee, and other taxes, governmental fees or like charges of any kind whatsoever, including any interest, penalties, fines or additions thereto, whether disputed or not.

 

2. The Investment

Subject to the terms and conditions hereof, the Company shall issue, sell and deliver to the Purchaser, and the Purchaser shall purchase from the Company, the Purchased Shares against payment by the Purchaser of an aggregate amount of US$18,000,000 (hereinafter the “Investment Amount”).

 

3. Representations of the Company

The Company hereby declares and represents as follows:

 

  3.1 The Company is a public company (as such term is defined in the Israeli Companies Law, 5759-1999) registered in Israel, the shares of which are listed for trade on the TASE.

 

  3.2 The Company has received no valid notice from the TASE of any intention to delist its securities from trading and/or transfer the Company’s securities to a watch list, and has no reason to believe that the issuance of the Purchased Shares and/or the Additional Shares would cause any of the Company’s securities to be delisted from trading or transferred to a watch list.

 

  3.3 The Company has filed with the Israel Securities Authority (the “ISA”) and the TASE all the required reports and notices in accordance with the Securities Law and the Regulations (hereinafter the “Reports”). Except as set forth in the Reports and except for normal liabilities arising in the ordinary course of business consistent with past practice, the Company does not have any liabilities, either accrued, contingent or otherwise, whether due or to become due, that individually or in the aggregate have had or would reasonably be expected to have a material adverse effect on the Company.

 

  3.4

The Prospectus and the annual report of the Company for the year 2007 and the Reports filed by the Company since the publication thereof (collectively, the “Periodic Report”) are incorporated herein by reference, were true, accurate and complete as of the date filed with the TASE and/or the ISA, as applicable, contain all the information that is necessary for a reasonable investor considering purchasing securities of the Company at the time of their publication and as of the date hereof, and no material information was omitted therefrom, except for information concerning this Agreement, the Collaboration Agreement and a prospective collaboration agreement in Africa in the field of Biodiesel, the publications of which were postponed in accordance with the Securities Law and the Regulations and which were disclosed to the Purchaser, the absence of which

 

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  could mislead a reasonable investor. There has been no material adverse change to the Company’s business, market or financial condition since the date of the Periodic Report. The Company will make copies of all such reports available to Purchaser in the English language after the Closing.

 

  3.5 The registered share capital of the Company is NIS 3 million divided into 300,000,000 ordinary shares of NIS 0.01 par value each (hereinafter “Ordinary Shares”).

 

  3.6 As of the date of this Agreement, the Company’s share capital consists of the following securities:

 

  3.6.1 20,808,568 Ordinary Shares listed for trade on the TASE;

 

  3.6.2 3,900,000 Series 1 Warrants listed to trade on the TASE (hereinafter “Series 1 Warrants”) exercisable into 3,900,000 Ordinary Shares;

 

  3.6.3 4,551,584 Series 2 Warrants listed to trade on the TASE (hereinafter “Series 2 Warrants”) exercisable into 4,551,584 Ordinary Shares listed to trade on the TASE;

 

  3.6.4 4,387,556 non-tradable options exercisable into 4,387,556 Ordinary Shares that were previously granted to investors, employees, consultants and directors of the Company.

Detailed capitalization tables immediately prior to and subsequent to the Closing are attached hereto as Exhibit 3.6.4.

 

  3.7 The Purchased Shares and the Additional Shares (as defined below) will rank equally in all respects with the existing Ordinary Shares.

 

  3.8 The Company has the full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. Except as set forth in Sections 5, 7 & 8 below, no consents, approvals, authorizations or permits are required in connection with the consummation by the Company of the transactions contemplated by this Agreement. The Company has duly and validly executed and delivered this Agreement, and assuming compliance by the Purchaser herewith, this Agreement when executed by the Company will constitute valid, binding and enforceable obligations of the Company in accordance with its terms. Neither the execution of this Agreement, nor the performance of the terms thereof, nor the consummation of the transactions contemplated thereby will conflict with, or result in a violation of, or constitute a default under the foundation documents of the Company, or any agreement or other instrument to which the Company is a party or by which it is bound, or to which any of its properties is subject, nor will the performance by the Company of its obligations hereunder violate any law, consent, permit, rule, regulation or order of any court, or any governmental agency or body having jurisdiction over the Company or any of its properties. Such execution and compliance will not give to others any rights, including, but not limited to, rights of termination, cancellation or acceleration, in or with respect to any agreement or commitment referred to in this section, or to any of the properties of the Company.

 

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  3.9 To the best of the Company’s knowledge, no voting agreements exist among its Shareholders.

 

  3.10 The Company owns, or has the right to use, all patents, patent applications, trademarks, service marks, copyrights, trade secrets, know-how, inventions, designs, processes and computer programs (collectively, the “Intellectual Property”) used in the conduct of its business as currently conducted and as proposed to be conducted. In its conduct of certain research activities, the Company uses certain third-parties’ Intellectual Property without obtaining a license thereto, such use being based upon an exemption in the Israeli Patents Law, 1967 permitting experimental activities regarding an invention the aim of which is to improve an invention or to develop another invention, provided such activities are not of a businesslike scope or nature, and that prior to development and commercialization of a product using such third party Intellectual Property, the Company or its collaborators shall acquire appropriate licenses.

 

  3.11 Except as set forth in Exhibit 3.11 attached hereto, the Company has not received any notice from any person or entity asserting that the Company infringes the Intellectual Property rights of such person or entity and, to the Company’s knowledge, the Company is not infringing and has not infringed upon the Intellectual Property rights of such person or entity.

 

  3.12 All employees of the Company and former employees thereof have assigned and are obligated to assign to the Company all Intellectual Property rights developed by them in the course of their employment with the Company.

 

  3.13 The Company is not committed to pay to any third party any broker’s or finder’s fee or any other similar commission or fee in connection with the investment contemplated hereunder.

 

  3.14 The Company has filed all Tax returns and reports that it is required to file, paid all Taxes that are due and payable, and paid or accrued all Taxes for which a notice of assessment or collection has been received. No Taxing authority has asserted any claim for Taxes, or is threatening any claim for Taxes that would have a material adverse effect on the Company. The Company has withheld and paid over to appropriate governmental authorities or are holding for payment all Taxes required by law to have been withheld or collected. There are no liens for Taxes on the assets of the Company other than liens that individually or in the aggregate would not have a material adverse effect. No jurisdiction in which the Company does not file Tax returns has claimed that the Company is required to file Tax returns or pay Taxes in such jurisdiction.

 

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  3.15 Except as described in the Reports and in this Agreement (including the exhibits hereto), there is no action, suit or proceeding, claim, arbitration or investigation against the Company pending, or to the Company’s knowledge, threatened that individually or in the aggregate has had or reasonably would be expected to have a material adverse effect on the Company.

 

  3.16 The Company has complied with, is not in violation of, and has not received any notices of violation with respect to any statute, law or regulation with respect to the conduct of its business, except for failures that, individually or in the aggregate, have not had or would not reasonably be expected to have a material adverse effect on the Company.

 

  3.17 The Company has all permits, licenses and any similar authority necessary for the conduct of its business or ownership of property, other than as would not have a material adverse effect on the Company.

 

  3.18 The operations and other properties of the Company are, and at all times within the period of the applicable statute of limitations (giving effect to any waiver, mitigation or extension thereof) have been, in compliance in all material respects with, and not subject to pending or threatened liability under, all applicable environmental laws and permits issued thereunder. No substance identified or regulated pursuant to any environmental law, including, without limitation, any hazardous substance, hazardous waste, toxic substance, pollutant, contaminant or petroleum or any fraction thereof, has been released in a reportable quantity or has otherwise come to be located on, at, proximate to or beneath any real property currently or formerly operated, leased, or used by any Acquired Company. No facts or circumstances exist and no event or condition is occurring or has occurred with respect to the Company relating to any environmental law, any release of any hazardous substance, or the Company’s compliance with current requirements of environmental law, that, individually or in the aggregate, have had or could reasonably be expected to have a material adverse effect on the Company.

 

  3.19 Neither the Company nor its directors, officers, employees or agents, or any other person acting on their behalf, directly or indirectly, has to the knowledge of the Company, given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or any other person that (i) could reasonably be expected to subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, except for such damages or penalties as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect, (ii) if not given in the past, might have had a material adverse effect or (iii) if not continued in the future, might have a material adverse effect or that might subject the Company to suit or penalty in any private or governmental litigation or proceeding, except for such suit or penalty as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect.

 

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  3.20 The Company has not breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment in such manner that has had or would reasonably be expected to have a material adverse effect on the Company. Each material contract of the Company that has not expired by its terms is in full force and effect.

 

  3.21 The Company is in compliance in all material respects with all applicable laws, policies, procedures and agreements relating to employment, terms and conditions of employment and to the proper withholding and remission to the proper tax authorities of all sums required to be withheld from employees or persons deemed to be employees under applicable tax laws. Except as provided in the Reports, the Company has paid all of its employees all wages, salaries, commissions, bonuses, benefits and other compensation due and payable to such employees on or prior to the date hereof. All of Company’s employees are parties to employment agreements, non-competition and confidentiality agreements with the Company, and all of the Company’s consultants who have access to the Company’s technical intellectual property (i.e., not including the Company’s executive summary and business plan) are subject to consulting agreements and confidentiality agreements with the Company.

 

  3.22 Except as described in the Reports, there are no transactions or proposed transactions between the Company and any other person or entity that is at the date of such transaction or at the date of this Agreement an Interested Party (as defined in the Israeli Companies Law – 1999), and no Interested Party, employee, shareholder, officer or director of the Company is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them.

 

  3.23 Except as set forth in the Reports, the Company holds all of its real and personal property free and clear of all liens, mortgages or other encumbrances. All improvements on such property are in good condition and all mechanical and utility systems serving such improvements are in good condition, free of material defects.

 

  3.24 Within the meaning of 16 CFR 802.51, the Company did not, in its most recent fiscal year, have aggregate sales in or into the United States in excess of US$63,000,000, and the Company does not hold assets located in the United States (including exclusive patent (or patentable) rights) with an aggregate fair market value in excess of US$63,000,000.

 

4. Representations of the Purchaser

The Purchaser hereby represents and warrants as follows:

 

  4.1 It is a public company formed under the laws of the State of Delaware, whose securities are listed for trade on the NY Stock Exchange (the “NYSE”).

 

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  4.2 It has the full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Purchaser has duly and validly executed and delivered this Agreement, and assuming compliance by the Company herewith, this Agreement when executed by the Purchaser will constitute valid, binding and enforceable obligations of the Purchaser in accordance with its terms.

 

  4.3 It has sufficient immediately available funds in cash to pay the Investment Amount and to satisfy any other obligations hereunder and in connection with the transactions contemplated hereby on the terms and conditions as set forth herein.

 

  4.4 It is aware that the Purchased Shares and the Additional Shares (as defined in Section 7 below) are and will be subject to Section 15 of the Securities Law and the Securities Law Regulations (Details with Regard to Sections 15A to 15C of the Law), 2000, which imposes certain restrictions in respect of the tradability of the Purchased Shares and the Additional Shares.

 

  4.5 On the date of this Agreement, it does not hold any securities of the Company, directly or indirectly.

 

  4.6 No written or oral agreement or voting agreement exists between the Purchaser and any of the holders of the other securities of the Company or any other person or entity concerning their rights and/or holdings in the Company.

 

  4.7 It is a company incorporated under the laws of Delaware. No consents, approvals, authorizations or permits are required in connection with the consummation by the Purchaser of the transactions contemplated by this Agreement.

 

  4.8 The Purchaser will, promptly after execution of this Agreement by both parties, deliver to the Company in English all data listed in Exhibit 4.8 attached hereto for the purpose of publishing immediate reports pursuant to the Securities Law Regulations (Private Offering of Securities in a Listed Company), 2001 (the “Private Offering Regulations”) and the Securities Law Regulations (Periodic and Immediate Statements), 1970. In the event that the Company shall be required by applicable law to provide additional information to that listed in Exhibit 4.8 for the purpose of publishing immediate reports, then the Purchaser shall provide the Company with any such additional information; provided, however, that the Company shall provide reasonable assistance to Purchaser should Purchaser wish to approach a court or applicable regulatory authority to determine whether such additional information is required to be submitted and/or whether it may be submitted on a confidential basis.

 

5. Conditions Precedent; Pre-Closing Conduct

 

  5.1

It is hereby agreed that the consummation of the investment and the issuance of the Purchased Shares under this Agreement are subject to (i) the approval of the Investment Center of the Ministry of Industry, Trade and Employment; (ii) the approval of the TASE to list the Purchased Shares for trading (the “TASE

 

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  Approval”), (iii) the absence or completion of any premerger notification obligations or investigations under the competition laws of the State of Israel and the US, (iv) the execution by both parties of the Collaboration Agreement, and (v) the absence of a material adverse effect on the Company’s business, market or financial condition other than general economic or political conditions (hereinafter, “Material Adverse Effect”), during the period between signing of this Agreement and the Closing Date.

 

  5.2 Until the Closing the Company shall conduct its business solely in the ordinary course of business and, among other things, shall not declare or make any distribution to its shareholders, enter into any related party transaction, or sell or grant an exclusive license to any material asset (other than to the Company’s products sold in the ordinary course of business).

 

  5.3 Until the Closing neither the Company nor any agent of the Company shall solicit, initiate or encourage the submission of an inquiry, contact, proposal or offer relating to a possible merger, sale or other disposition of a material asset of the Company or relating to a possible sale of, investment in, or issuance of, its capital stock or relating to matters that are the subject of the Collaboration Agreement, or participate in any discussions or negotiations regarding, or furnish information with respect to, participate in, or facilitate in any other manner any of the foregoing, without the prior consent of the Purchaser.

 

  5.4 Until the Closing, the Company shall provide to Purchaser, in advance of publication, a translation into English of any immediate report, press release or public statement prepared by the Company with respect to the transactions contemplated hereby and all such statements shall be subject to Purchaser’s approval, subject to the requirements of applicable law and regulations.

 

6. Closing & Post Closing

A. Closing

Subject to the receipt of the approvals described in Section 5 above, the parties will convene on the Closing Date by teleconference, facsimile and electronic mail communication, for the purpose of completing the transaction as described in Section 2 above. On the Closing Date, the following actions will be taken:

 

  6.1 The Purchaser will furnish the Company with details of an account in which the Purchased Shares will be deposited under this Agreement and which enables the trade of the Purchased Shares on the TASE, including the name of the holder of the account, the account number and the name of the stock exchange member with whom the account is maintained (hereinafter the “Account”).

 

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  6.2 The Purchaser will wire transfer the Investment Amount in U.S. dollars to the Company’s bank account as detailed below:

First International Bank

Swift Code: FIRBILITXXX

Ramat Hachayal Branch, Branch no. 121

Payable to: Evogene Ltd.

Account no. 600555

Bank telephone number: +972-3-768-0200

Bank facsimile number: +972-3-649-5988

 

  6.3 The Purchaser will deliver to the Company an executed copy of an Undertaking towards the Israeli Chief Scientist of the Ministry of Industry, Trade and Employment (the “OCS”) substantially in the form attached hereto as Exhibit 6.3 or in any other form required by the OCS.

 

  6.4 The Company shall deliver to the Purchaser a letter from the Company’s Chief Executive Officer confirming that (i) the Board of Directors of the Company has approved the issuance of the Purchased Shares to the Purchaser, (ii) the Company’s representations and warranties herein are true and correct and the Company’s covenants herein have been fulfilled at Closing and (iii) there has been no Material Adverse Effect on the Company during the period between signing of this Agreement and the Closing Date and a letter from the Chairman of the Company’s Board of Directors pursuant to Section 282 of the Israeli Companies Law – 1999 confirming that all approvals required by the Company for the issuance of the Purchased Shares have been obtained (the “Company Letter”).

 

  6.5 The Company shall deliver to the Purchaser a copy of the share certificate registered in the name of Bank Leumi le-Israel Nominees Company Ltd., (hereinafter the “Nominees Company”) representing the Purchased Shares (the “Share Certificate”), a copy of the approval by the Tel Aviv Stock Exchange of registration of the Purchased Shares for trading, and a copy of the Company’s immediate report with respect to the issuance of the shares.

B. Post Closing

 

  6.6 The Company undertakes to deliver to the Nominees Company promptly after receipt of the Investment Amount, the Share Certificate and other documentation necessary to enable the trade of the Purchased Shares.

 

  6.7 As of the appointment of the Purchaser’s Director in accordance with the provisions of Section 8 below, and as long as the Purchaser’s Director is a member of the Company’s board of directors, the Company shall maintain Directors and Officer liability insurance policy in an amount of no less than US$10,000,000.

 

  6.8 The Company undertakes to use reasonable efforts to provide the Purchaser with English translations of its quarterly and annual periodic reports and of other substantial and material filings with the Israel Securities Authority and/or the TASE.

 

-9-


7. Put Option

 

  7.1 Subject to the Company fulfillment of its Diligence Obligations to be completed by the third anniversary of the Closing pursuant to the Collaboration Agreement, and subject to the Company issuing a letter from the Company’s Chief Executive Officer confirming that the Board of Directors of the Company has approved the issuance of the Additional Shares (as defined below) to the Purchaser and a letter from the Chairman of the Company’s Board of Directors pursuant to Section 282 of the Israeli Companies Law – 1999 confirming that all approvals required by the Company for the issuance of the Additional Shares have been obtained, the Purchaser hereby irrevocably grants the Company an option (hereinafter the “Put Option”) pursuant to which the Company may issue to the Purchaser 1,727,273 Ordinary Shares of the Company (hereinafter the “Additional Shares”) at a price of USD 6.9473 per Additional Share, that will be paid in US dollars by the Purchaser (hereinafter the “Exercise Price”), for an aggregate consideration of up to US$12,000,000; provided, however, that the average price per share of the Aggregate Investment shall be $6 per share. Partial exercise of the Put Option shall be subject to the written consent of the Parties.

 

  7.2 Exercise of the Put Option may be made by the Company as of the third anniversary of the Closing and for a period of thirty (30) days thereafter by notice in writing of the Company to the Purchaser (hereinafter the “Exercise Notice”).

 

  7.3 Immediately after delivery of the Exercise Notice, the Company will proceed to publish an immediate report (‘current report’) pursuant to the Private Offering Regulations and obtain the approval of the TASE to list the Additional Shares for trading.

 

  7.4 The parties will, within four (4) US business days of the date of receiving the TASE approval mentioned in clause 7.3 above, convene by teleconference, facsimile and electronic mail communication, and take the following action:

 

  7.4.1 The Purchaser will furnish to the Company details of the account in which the Additional Shares will be deposited if such details are changed compared to those of the account conveyed according to clause 6.1 above.

 

  7.4.2 The Purchaser will wire transfer the Exercise Price to the Company’s bank account as detailed in Section 6.2 above or to such other bank account as shall be detailed in the Exercise Notice.

 

  7.4.3 The Company shall deliver to the Purchaser the copy of a share certificate registered in the name of the Company’s nominees company at such time representing the Additional Shares.

 

  7.4.4 Upon receipt of the Exercise Price, the Company undertakes to deliver to its nominees company the share certificate and other documentation necessary to enable the trade of the Additional Shares.

 

-10-


8. Representation on the Board

 

  8.1 Upon the consummation of the Closing, the Company’s Board of Directors will appoint a person who was recommended by the Purchaser and who is not an employee of the Purchaser or any of its affiliates as a director (hereinafter: the “Purchaser’s Director”), to the Company’s Board of Directors according to Article 19.8 of the Company’s Articles of Association in effect on the date hereof, and resolve to convene a special general meeting on which agenda will appear the appointment of the Purchaser’s Director.

 

  8.2 Upon receipt of the general meeting’s approval of the appointment of the Purchaser’s Director and during the Exclusivity Period (as such term is defined in the Collaboration Agreement) and also thereafter, as long as the Purchaser holds at least 5% of the voting rights in the Company, but only for as long as the Company implements the staggered board mechanism set-forth in Article 19.1 of its Articles of Association in effect as of the date hereof, then upon the Purchaser’s Director retirement from the Board of Directors in accordance with the provisions of Article 19.1, the Company’s Board of Directors shall recommend to the general meeting of the Company to reappoint the Purchaser’s Director to the Company’s Board of Directors.

 

  8.3 In the event the general meeting of the Company resolves not to appoint the Purchaser’s Director to the Company’s Board of Directors, then, as from such general meeting and for the duration of the Exclusivity Period (as such term is defined in the Collaboration Agreement) and also thereafter, as long as the Purchaser holds 5% of the voting rights in the Company, the Purchaser will be entitled to appoint an observer at meetings of the Company’s Board of Directors who shall not be an employee of the Purchaser or any of its affiliates (hereinafter: “the Observer”) subject to the Observer signing an undertaking towards the Company, which undertaking shall include non-disclosure obligations and an obligation to be bound by fiduciary duties similar to those set-forth in Article 254 of the Israeli Companies Law – 1999 in the form to be agreed by the Purchaser and the Company. The Observer will be entitled to receive notices convening meetings of the Board, participate at such meetings and receive a copy of all minutes, written resolutions, information, documents and any other material that will be remitted to the Board by the Company. The Observer will have no voting rights on the Company’s Board of Directors.

 

  8.4 Save with the Company’s written approval, the Purchaser’s rights according to this Section 8 may not be assigned or transferred.

 

9. Miscellaneous

 

  9.1 The parties will effect all the acts and sign all the documents that will be reasonably required in order to accomplish and fully effectuate the provisions of this Agreement and the intention of the parties that are reflected by the contents thereof.

 

-11-


  9.2 This Agreement, including the appendices thereto, contains and expresses all the terms and conditions agreed between the parties with respect to the subject matter hereof. Any assurances, guarantees, written or verbal agreements, undertakings or representations regarding the subject matter of this Agreement, including memoranda of understanding, that have been given or made by the parties between them, but prior to the making of this Agreement, and which have not been expressly stated in this Agreement, will not add to nor derogate from the undertakings and rights prescribed in this Agreement or resulting therefrom, and the parties will not be bound thereby from the date of the signature of this Agreement onwards.

 

  9.3 No waiver, extension, concession or forbearance from exercising any right under this Agreement will be of any effect unless made by express document signed by the waiving party, and if made will only apply with respect to the specific instance mentioned in the document and will not derogate from any other rights of any of the parties under this Agreement. This Agreement may be amended only by a written agreement executed by both parties.

 

  9.4 None of the parties may assign or convey any undertaking or right which it has under this Agreement without the prior consent of the other party.

 

  9.5 Notices under this Agreement will be conveyed in writing to the addresses of the parties appearing at the preamble of this Agreement and to the email addresses detailed hereunder. Any notice sent by either of the parties to the other by registered mail will be deemed to have been received after four business days from the date of posting. Notice sent by fax or emailed will be deemed to have been received on the same business day on which it was sent (subject to despatch confirmation being furnished). Notice given by personal service will be deemed to have been received on the date of service.Purchaser’s fax number and email address: (314)-694-2594, nancy.m.avioli@monsanto.com Company’s fax number and email address: +972-8-946-6724, haviv@evogene.com

 

  9.6 In case any provision of the Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The parties hereto shall be obliged to draw up an arrangement in accordance with the meaning and the object of the invalid provision.

Other than as to matters governed by Israeli corporate or securities laws, which shall apply in such cases, this Agreement, including all Appendices hereto, shall be governed exclusively by, and construed solely in accordance with, the laws of the State of New York, without regard to the conflict of laws provisions thereof. All disputes arising under this Agreement or in connection with the transactions hereunder shall be resolved exclusively in the competent court in the district of Tel-Aviv, Israel.

remainder of page left blank intentionally

 

-12-


In witness whereof the parties have set their hands on the date first above written:

 

/s/ Ofer Haviv

     

/s/ Stephen R. Padgette

Evogene Ltd.       Monsanto Company

 

-13-


Exhibit 3.6.4

Capitalization Tables

Capitalization Table August 27, 2008

 

Shares

     20,808,568   

Options

     4,027,187   

Warrant—Service Providers

     133,545   

Warrant—Investors

     226,824   
  

 

 

 
     25,196,124   

Options—Series 1

     3,900,000   

Options—Series 2

     4,551,584   
  

 

 

 
     8,451,584   
  

 

 

 

Total

     33,647,708   
  

 

 

 

 

-14-


Exhibit 3.11

Claims Asserting Infringement of third parties IP Rights

Two claims letters from Genetic Technologies Limited (“GTG”), dated January 5, 2004 and March 9, 2004, claiming that the Company infringes GTG’s patent rights, and demanding the Company to purchase licenses for the use of such patents, as further detailed in said letters.

 

-15-


Exhibit 4.8—Required Information

 

Purchaser’s Full Name    
Purchaser’s Identity Number or a different Identification Number & type of number provided  
Purchaser’s Country of Incorporation  
Purchaser’s Complete Address  
All information regarding the controlling shareholder, directly or indirectly, of the Purchaser (including name of such controlling shareholder and its holdings in the Purchaser)  
Information relating to agreements, whether written or oral, with regard to the purchase and/or holdings of Evogene’s securities or with regard to the voting rights therein & stating the main points thereof  

If a director is appointed to the Board of Directors of Evogene Ltd., the following additional information will be required with regard to such director:

 

Full Name  
ID number (if not a resident of Israel – passport number & country of issuance)  
Date of Birth  
Address for service of court papers  
Nationality  
If the director is an employee of an affiliate of Evogene or of a Principal Shareholder of Evogene – the position or positions that the director holds  
The director’s education and occupation in the last five years, including information regarding the corporations in which the director serves as director, information regarding the director’s education stating subjects and/or branches, the academic degree or diploma the director holds and the institutes in which they were acquired  
Whether the director is a relative of a Principal Shareholder of Evogene  
Whether the director holds securities of an affiliate of Evogene and details on such securities held  

A “Principal Shareholder” –

 

(a)

(a) A person or entity who/that holds 5% or more of the issued share capital of the Company or the voting power therein, (b) a person or entity who/that is entitled to appoint one or more of the directors of the Company or its general manager, (c) a person or entity who/that holds office as a director of the Company or as its general manager, or (d) a corporation in which a person as aforesaid holds 25% or more of its issued share

 

-16-


  capital or of the voting rights therein or is entitled to appoint 25% or more of its directors. For the purpose of the above: (a) the manager of a joint investment trust fund shall be deemed the holder of the securities included in the fund assets; (b) if a person holds securities through a trustee, the trustee shall also be regarded as holder of the said securities. For this purpose, “trustee” – excluding a registration company and excluding someone who holds securities merely by virtue of his office as trustee for a settlement under section 46(a)(2)(f) the Securities Law or as a trustee for an issue of shares to employees, as defined in section 102 of the Israel Income Tax Ordinance;

 

(b) A subsidiary of the Company.

 

-17-


Exhibit 6.3

 

To: The Research Committee
   The Office of the Chief Scientist
   Jerusalem

Relating to projects that have been financed by or are currently being financed by the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor (the “OCS”) and to projects of the Company (as this term is defined below) that may be financed by the OCS in the future (the “Projects”).

Undertaking

We, the undersigned, of Monsanto Company, a company incorporated, organized and existing under the laws of Delaware and whose headquarters is at 800 N. Lindbergh Blvd., St. Louis, Missouri 63167 (“Monsanto”), having, by an agreement dated August 27, 2008, committed to invest in Evogene Ltd. (the “Company”), in exchange for 3,272,727 Ordinary Shares of the Company;

Recognizing that the Company’s research and development Projects are currently, have been or will be financially supported by the Government of the State of Israel, through the OCS under and subject to the provisions of The Encouragement of Research and Development in Industry Law 5744-1984 (the “R&D Law”) and the regulations, rules and procedures promulgated there under;

Recognizing that the R&D Law places strict constraints on the transfer of know-how and/or production rights, making all such transfers subject to the absolute discretion of the OCS’ research committee (the “Research Committee”), acting in accordance with the aims of the R&D Law and requiring that any such transfer receive the prior written approval of the Research Committee;

 

-18-


Hereby declare and undertake:

 

1. To observe strictly all the requirements of the R&D Law and the regulations, rules and procedures promulgated there under, as applied to the Company and as directed by the Research Committee, in particular those requirements stipulated under Sections 19, 19A and 19B of the R&D Law relating to the prohibitions on the transfer of know-how and/or production rights.

 

2. As a shareholder of the Company, to make all reasonable efforts that the Company shall observe strictly all the requirements of the R&D Law and the regulations, rules and procedures promulgated there under, as applied to the Company and as directed by the Research Committee, in particular those requirements stipulated under Sections 19, 19A and 19B of the R&D Law relating to the prohibitions on the transfer of know-how and/or production rights.

 

08/27/08    

/s/ Stephen R. Padgette

Date     Monsanto Company
    By:  

Stephen R. Padgette

    Title:   VP, Biotechnology

 

-19-

EX-10.6 4 d518283dex106.htm EX-10.6 EX-10.6

Exhibit 10.6

CONFIDENTIAL

Hecate: 4/10/b00917

 

WHEAT COLLABORATION AND LICENSE AGREEMENT

This Wheat Collaboration and License Agreement is made this 10th day of December, 2010, by and between Bayer CropScience AG, a company formed under the laws of Germany, with registered offices at Alfred-Nobel-Str. 50, 40789 Monheim am Rhein, Germany (“Bayer”) and Evogene Ltd., a company formed under the laws of Israel, with registered offices at 13 Gad Feinstein St., P.O. Box 2100, Rehovot 76121, Israel (“Evogene”).

WHEREAS, Bayer is one of the leading ag-biotech and crop protection companies in the world and is in the business, among other things, of developing and commercializing transgenic and non-transgenic plant varieties;

WHEREAS, Evogene is an ag-biotech company that has developed technologies and platforms, including computational discovery platforms and model plant validation capabilities, for discovering genes and other genetic components which may convey desired plant traits and features to the seed industry;

WHEREAS, Bayer and Evogene wish to enter into a collaboration in the area of Wheat with the aim for Bayer to develop improved plant traits and elite varieties in Wheat utilizing both transgenic and breeding methodologies;

WHEREAS, Bayer and Evogene further desire that the valuable know-how and patentable inventions resulting from such collaboration be licensed by Evogene to Bayer in the field of Wheat, so that Bayer can further develop, obtain regulatory approval for and commercialize improved Wheat plant traits and elite transgenic and non-transgenic varieties of Wheat, all subject to and in accordance with the terms herein.

WHEREAS, the parties are signing the “Share Purchase Agreement” defined below simultaneously with the execution of this Agreement, and this Agreement is executed and delivered as a condition precedent to the closing of the Share Purchase Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1. Definitions.

Whenever used in this Agreement with an initial capital letter, the terms defined in this Section 1, whether used in the singular or the plural, will have the meanings specified below.

1.1 “Affiliate” means, with respect to any Person, any other Person which directly or indirectly Controls, is Controlled by, or is under common Control with the former Person in question.

 

Initials Bayer :    page 1 of 89    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


CONFIDENTIAL

Hecate: 4/10/b00917

 

1.2 “Annual Workplan” means a detailed workplan describing the activities to be performed by each of the parties, including schedules for such performance, for a specific Collaboration Year, as shall be agreed upon and amended by the parties from year-to-year in accordance with Section 2.

1.3 “[* * *] Model Plant Validation” means model plant validation activity in [* * *] described in Section A.2. (subsections 4 and 5) of the Multi-Year Workplan.

1.4 “Assumed Net Similar Product Revenue” means with respect to [* * *].

1.5 “ATHLETE” means Evogene’s computational Gene discovery platform for discovering Genes that when transgenically introduced into desired plants potentially would confer a desired Trait, including any modifications improvements and any successor to such platform.

1.6 “ATHLETE Collaboration Discovery Round” means an ATHLETE Discovery Round performed by Evogene under the Workplan targeted at identifying and prioritizing Identified Genes. An ATHLETE Collaboration Discovery Round ends when Evogene has completed delivery to Bayer of all Gene Computational Reports required to be delivered by Evogene with respect to such ATHLETE Collaboration Discovery Round, as set forth in Section 3.1.1.

1.7 “ATHLETE Data Generation Activities” means Data Generation Activities aimed at generating Datasets to be used primarily for ATHLETE Collaboration Discovery Rounds.

1.8 “ATHLETE Discovery Round” means a research and development effort conducted by Evogene utilizing ATHLETE that is targeted at discovering Genes that when transgenically introduced into desired plants potentially would confer a desired Trait.

1.9 “ATHLETE Program” means ATHLETE Collaboration Discovery Rounds and other activities to be performed in connection with ATHLETE Collaboration Discovery Rounds, including Data Generation Activities, preparation of Gene Computational Reports, Model Plant Validation and preparation of Gene Validation Reports, in accordance with Sections 3.1.1 and 3.1.3.

1.10 “Back-Cross Program” means a breeding program using a back-cross approach or other breeding approach to introgress a Collaboration SNP Set from (a) Donor parent(s) into a Recipient parent.

1.11 Bayer Competitor” means any one of the following corporations: [* * *], or any Affiliate thereof, and any other Person that, at the time of the relevant transaction, has at least a [* * *] percent ([* * *]%) share of the total market for commercial Wheat seeds in at least one of the Major Wheat Countries, or any Affiliate of such Person.

 

Initials Bayer :    page 2 of 89    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


CONFIDENTIAL

Hecate: 4/10/b00917

 

1.12 “Bayer Diligence Exhibit” means Exhibit B to this Agreement.

1.13 “Bayer EvoBreed Data Generation Activities” means Data Generation Activities performed by Bayer primarily for the purpose of assisting Evogene in performing EvoBreed Data Generation Activities. Such activities shall include the following:

(a) in each of the [* * *] years of the Collaboration, conducting annual growth field tests on a set of Wheat lines, that will include at least [* * *] lines of ‘[* * *] Wheat’ and may include additional lines of ‘[* * *] Wheat’. In addition, Bayer may conduct, at its discretion, trials on lines of ‘[* * *] Wheat’. Evogene will propose the lines from among the Core Collection to the Research Committee and the lines will be mutually agreed upon by the parties. Each such line shall be grown in at least [* * *] suitable growth [* * *] for such Wheat lines in a major growing country to be determined by Bayer; and

(b) providing Evogene with phenotypic information from the trials described in clause (a) according to the Book of Traits

1.14 “Bayer Line” means any Wheat line Controlled by Bayer (other than due to the provision of such line to Bayer by or on behalf of Evogene) that is designated by Bayer to be used in the Collaboration and is effectively used in the Collaboration. For clarity, “Bayer Line” does not include Public Lines.

1.15 “Bayer Pipeline” means each of (a) Bayer’s phase-based process of developing and testing products incorporating transgenically introduced Genes and (b) Bayer’s phased-based process of developing and testing products incorporating SNPs into a Recipient. The various phases of the Bayer Pipeline for transgenic products and the various phases of the Bayer Pipeline for Feature-based products are described in the GM Phases and Breeding Phases below, respectively.

1.16 “Bayer Wheat Data” means any Dataset generated by or on behalf of (a) Bayer or its Affiliates or (b) Evogene or its Affiliates, from Bayer Lines.

1.17 “Biological Material” means RNA, DNA and protein stocks, tissues, seeds, pollen, flour, plants, and other material provided by one party to the other party in the context of the Collaboration, including all progeny and unmodified derivatives thereof. Without limiting the foregoing, Biological Material includes Bayer Lines and the Evogene Lines.

1.18 “Book of Traits” means a set of consistent phenotypic parameters designed by the parties in the Collaboration in accordance with Section 3.1.2.1.(a) and which may be amended by the Research Committee from time to time. The Book of Traits will be based on the book of traits existing at the Effective Date as designed by Evogene and will meet the minimum requirements set forth in Exhibit H .

 

Initials Bayer :    page 3 of 89    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


CONFIDENTIAL

Hecate: 4/10/b00917

 

1.19 “[* * *] Model Plant Validation” means model plant validation activity in [* * *] as described in Section A.2 (subsection 4 and 6) of the Multi-Year Workplan.

1.20 “Breeding Phase” means any of Breeding Phase 1, Breeding Phase 2 and Breeding Phase 3.

1.21 “Breeding Phase 1” means “Commercial Concept Testing” and comprises [* * *] and field testing of Collaboration Material in at least [* * *] , in at least [* * *] and during at least [* * *] of successful field trials. Timelines for completion of Breeding Phase 1 generally are [* * *] to [* * *] years. The intended endpoint of Breeding Phase 1 is [* * *].

1.22 “Breeding Phase 2” means “Extended Commercial Concept Testing” and comprises further field testing of Collaboration Material in at least [* * *] Recipient germplasms, [* * *] in at least [* * *] and during at least two years of successful field trials. Timelines for completion of Breeding Phase 2 generally are [* * *]-[* * *] years. The intended endpoint of Breeding Phase 2 is [* * *].

1.23 “Breeding Phase 3” means “Advanced Development” and comprises variety development and registration, continuation of all regulatory requirements towards Regulatory Approval and product placement. Timelines for completion of Breeding Phase 3 generally are [* * *] years. The intended endpoint of Breeding Phase 3 is Regulatory Approval followed by First Commercial Sale

1.24 Change of Control” means the acquisition of Control of Evogene by any Person, acting alone or as part of a group acting in concert.

1.25 “Collaboration” means the research and development program to be performed by the parties under this Agreement in accordance with Section 3 and the Workplan.

1.26 “Collaboration Gene” means any Identified Gene and any Homolog of such Identified Gene. In addition, except with respect to Sections [* * *], the definition “Collaboration Gene” also means any Derived Collaboration Gene and any Homolog of such Derived Collaboration Gene. However, the term “Collaboration Gene” shall not include [* * *].

1.27 “Collaboration Invention” means any patentable invention or discovery that is conceived and/or reduced to practice in the performance of the Collaboration but excluding the Collaboration Material.

1.28 “Collaboration Know-How” means all Know-How generated in the performance of the Collaboration.

 

Initials Bayer :    page 4 of 89    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


CONFIDENTIAL

Hecate: 4/10/b00917

 

1.29 “Collaboration Material” means Wheat lines (including elite lines) generated in or resulting from a Back-Cross Program, which are not Evogene Lines.

1.30 “Collaboration Period” means a period of five years beginning on January 1, 2011, unless earlier terminated in accordance with Section 14.3 or extended in accordance with Section 14.2.

1.31 “Collaboration SNP” means any Identified SNP and any Equivalent SNP of such Identified SNP.

1.32 “Collaboration SNP Set” means (a) a set of Identified SNPs (usually [* * *] to [* * *]) identified as part of the same set in a SNP Computational Summary Report and (b) any combination of one or more Identified SNP(s) contained in a set described in (a) or any Equivalent SNPs thereof. In addition, except with respect to Sections [* * *] and [* * *], “Collaboration SNP Set” also includes any Derived Collaboration SNP. However, the term “Collaboration SNP Set” shall not include Nominated Collaboration SNP Set.

1.33 “Collaboration Year” means each period of twelve consecutive months (divided into and composed of four quarters) beginning on January 1st of each year during the Collaboration Period.

1.34 “Commercial Proof of Concept” means Proof of Phenotype of a Trait or Feature in at least [* * *], in [* * *] and in at least [* * *] of successful field testing.

1.35 “Confidential Information” means any and all information, data and trade secrets, including without limitation Know-How, disclosed or provided by or on behalf of one party, including by any of its Affiliates, (“Disclosing Party”) to the other party or any of its Affiliates (“Receiving Party”) in connection with this Agreement (whether in oral, written, graphic or machine-readable form), that is marked as confidential or (if disclosed orally) is reduced to a written summary marked as confidential and delivered to the Receiving Party within 30 days of disclosure. Notwithstanding the above, “Confidential Information” shall not include information to the extent such information: (i) was known to the Receiving Party at the time it was disclosed, other than by previous disclosure by or on behalf of the Disclosing Party, as evidenced by the Receiving Party’s written records at the time of disclosure; (ii) is at the time of disclosure or later becomes publicly known under circumstances involving no breach of this Agreement; (iii) is lawfully and in good faith made available to the Receiving Party by a third party who is not subject to obligations of confidentiality to the other party with respect to such information; or (iv) is independently developed by the Receiving Party without the use of or reference to the Disclosing Party’s Confidential Information, as demonstrated by documentary evidence.

1.36 Contractor” means, with respect to a party, a Person performing work for or on behalf of and for the sole benefit of such party or an Affiliate of such party under this Agreement.

 

Initials Bayer :    page 5 of 89    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


CONFIDENTIAL

Hecate: 4/10/b00917

 

1.37 “Control” means:

(a) as to Confidential Information or Intellectual Property that is owned or in-licensed by a party, the right to disclose (with regard to Confidential Information) or grant the licenses or sublicenses (with regard to Intellectual Property) as provided for herein without violating the terms of any agreement or other arrangement with any Third Party (including the terms of any such in-license or in-license agreement) or any applicable law and without the need for any consent (or further consent) from such Third Party;

(b) as to the preparation and prosecution of patent applications, the maintenance of patent rights, and the enforcement and/or defense of patent rights, Control means the authority to select legal counsel, solicit other expert advice and assistance, and to make decisions pertaining to the preparation of patent applications and to the conduct of patent prosecution, interferences, appeals, patent issuance, maintenance, abandonment, reissue, reexamination, surrender or disclaimer proceedings, oppositions, patent enforcement or defense, as applicable; and

(c) as to a Person, (a) ownership, directly or indirectly, beneficially or of record, of fifty percent (50%) or more of the equity interests representing fifty percent (50%) or more of the aggregate ordinary voting power represented by the issued and outstanding equity interests of such Person, or (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of such Person by individuals who were nominated by another Person or by a group acting in concert; or (c) the possession, directly or indirectly, by another Person or by a group acting in concert, of the power to direct or cause the direction of the management or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.

1.38 “Core Collection” means a collection of Triticum aestivum lines and varieties representing a [* * *] phenotypic and genotypic diversity within the Triticum aestivum species that is being established by Evogene with the input of Bayer. The Core Collection is further described in Exhibit C.

1.39 “Data Generation Activities” means activities for the generation of Datasets, which are intended to be further processed in a database, to be used by Evogene as the basis for the data-mining activity in ATHLETE Collaboration Discovery Rounds and in EvoBreed Collaboration Discovery Rounds.

1.40 “Dataset” means genotypic, phenotypic or other data originating from biological material (plant organs or other organisms) and including the data related to the SNP Array, as referred to in Section 3.1.2.1 (a).

1.41 “Derived Collaboration Gene” means, with respect to an Identified SNP, a Gene specified as a “Derived Collaboration Gene” in the Computational SNP Report for such Identified SNP. If a “Derived Collaboration Gene” is specified in a Computational SNP Report, the Identified SNP is expected to be generally located: (a) within the [* * *] of the Derived Collaboration Gene or its [* * *]; (b) within one of the introns of the Derived Collaboration Gene or its [* * *]; or (c) within the [* * *] of the Derived Collaboration Gene, either the [* * *].

 

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1.42 “Derived Collaboration SNP” means, with respect to a Collaboration Gene, an SNP that is either (a) specified as a “Derived Collaboration SNP” in the Computational Gene Report for such Collaboration Gene or (b) identified by Bayer based on the Collaboration Gene, and is introgressed into a Wheat Recipient. A Derived Collaboration SNP is expected to be generally a SNP that is located: (i) within the [* * *] of the Collaboration Gene or its [* * *] or; (ii) within [* * *] of the Collaboration Gene or its [* * *]; or (iii) within the [* * *].

1.43 “Donor” means a parent Wheat line that incorporates one or more Collaboration SNPs that does not exist in a Recipient.

1.44 “Effective Date” means January 1, 2011.

1.45 “Elite Event” means an Event in Wheat that has been selected by Bayer in GM Phase 3 from a multitude of Events that shows Proof of Phenotype for a given Trait or is otherwise selected and labeled by Bayer as an “Elite Event”.

1.46 “Elite Event Selected” means the identification by Bayer of an Elite Event.

1.47 “Encumbered Collaboration Gene” means any Collaboration Gene that either: (a) is already licensed to a Third Party(ies) pursuant to one or more Pre-existing Obligations in one or more crops other than Wheat, or (b) may be licensed in the future to a Third Party pursuant to a Pre-existing Obligation in one or more crops other than Wheat. Obligations or restrictions under Pre-existing Obligations that are relevant to a particular Encumbered Collaboration Gene will be set forth in the Gene Computational Report with respect to such Encumbered Collaboration Gene in accordance with Section 3.1.1.3.

1.48 “Equivalent SNP” means, with respect to an Identified SNP, an SNP that meets one of the following criteria: (i) it is within the [* * *] of the Derived Collaboration Gene of such Identified SNP; (ii) it is within one of [* * *] of the Derived Collaboration Gene of such Identified SNP; or (iii) it is within the [* * *] of the Derived Collaboration Gene of such Identified SNP, either the [* * *].

1.49 “Euro” means the official currency used in the eurozone, an economic and monetary union of a number of member states of the European Union.

1.50 “Event” means an insertion of a Collaboration Gene in one particular place in the host genome.

1.51 “EvoBreed” means Evogene’s computational genomic platform for discovering SNPs that are predicted to confer a desired Feature when introduced into the target plant through breeding means, including modifications, improvements and any successor to such platform.

 

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1.52 “EvoBreed Collaboration Discovery Round” means an EvoBreed Discovery Round conducted by Evogene under the Workplan targeted at identifying and prioritizing Collaboration SNP Sets. In each EvoBreed Collaboration Discovery Round, several Collaboration SNP Sets may be discovered aimed at addressing several Features; however all Collaboration SNP Sets in an EvoBreed Discovery Round shall address Features of the same Trait Class (e.g. Yield, NUE, ABST).

1.53 “EvoBreed Data Generation Activities” means the Evogene EvoBreed Data Generation Activities and the Bayer EvoBreed Data Generation Activities.

1.54 “EvoBreed Discovery Round” means a research and development effort conducted by Evogene utilizing EvoBreed that is targeted at identifying and prioritizing SNPs or sets of SNPs addressing a certain Feature, or more than one Feature of the same Trait Class.

1.55 “EvoBreed Program” means EvoBreed Collaboration Discovery Rounds and other activities to be performed in connection with EvoBreed Collaboration Discovery Rounds, including EvoBreed Data Generation Activities, preparation of SNP Computational Reports and preparation of Updated SNP Computational Report, in accordance with Sections 3.1.2 and 3.1.3.

1.56 Evogene EvoBreed Data Generation Activities” means Data Generation Activities performed by Evogene that are primarily aimed at being used for EvoBreed Collaboration Discovery Rounds. Such activities shall include the following: (a) conducting an annual growth season (field tests) in Israel in each of the [* * *] Collaboration Years, beginning in [* * *] of each such Collaboration Year, of a subset of the Core Collection comprising between [* * *] ([* * *]) and [* * *] ([* * *]) lines of ‘[* * *] Wheat’; and (b) generating genotypic Datasets as well as phenotypic Datasets, based on the Book of Traits from the trials described in (a) above.

1.57 “Evogene Gene” means any Gene claimed, or the use of which is claimed, in any patent or a patent application Controlled (as in (a) of the definition of Control) by Evogene at any time during the Collaboration Period, and, for clarity, for which Evogene has the rights to provide to Bayer for the purposes of this Agreement.

1.58 “Evogene Line” means any Wheat line that is Controlled by Evogene (other than due to the provision of such line to Evogene by or on behalf of Bayer under this Agreement) that is designated by Evogene to be used in the Collaboration and is effectively used in the Collaboration. For clarity, “Evogene Line” does not include Public Lines.

1.59 “Evogene Patent Rights” means any and all patents and patent applications that are Controlled by Evogene and/or its Affiliates (other than patents and patent applications which were not Controlled by Evogene and/or its Affiliates before the date of a Change of Control, but are (a) Controlled by any Affiliate that becomes an Affiliate of Evogene as the result of such

 

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Change of Control, or (b) Controlled by any Person with which Evogene merges or combines in connection with such Change of Control) on and after the Effective Date, including Evogene’s interest in Joint Patent Rights, that:

(i) claim or contain a claim which covers a Collaboration Gene or subject matter comprising a Collaboration Gene, or the use of a Collaboration Gene or the use of subject matter comprising a Collaboration Gene, in each case solely to the extent the claims cover such Collaboration Gene or the use of such Collaboration Gene; or

(ii) claim or contain a claim which covers a Collaboration SNP Set or subject matter containing a Collaboration SNP Set, or the use of a Collaboration SNP Set, in each case solely to the extent the claims cover such Collaboration SNP Set or the use of such Collaboration SNP Set.

1.60 “Evogene SNP” means any SNP in Wheat with respect to which Evogene Controls, at any time during the Collaboration Period, Know-How identifying such SNP as conferring a particular Feature.

1.61 “Evogene Wheat Data” means Datasets (a) generated by or on behalf of Evogene or its Affiliates from Evogene Lines or (b) generated by or on behalf of Bayer or its Affiliates from Evogene Lines.

1.62 “Exclusive Know-How” means Know-How relating specifically to (a) a Collaboration Gene, or its use or (b) to a Collaboration SNP Set, or its use or (c) a cross-plan for a specific Collaboration SNP Set, that is:

(i) Controlled by Evogene and/or its Affiliates on the Effective Date or during the Collaboration Period, including Evogene’s interest in any jointly-owned Know-How, and

(ii) provided from time to time by or on behalf of Evogene to Bayer or its Affiliates in connection with the Collaboration;

provided, however, that Exclusive Know-How shall not include Know-How that as of the date of a Change of Control, is (x) Controlled by any Affiliate that becomes an Affiliate of Evogene as the result of such Change of Control, or (y) Controlled by any Person with which Evogene merges or combines in connection with such Change of Control, and which, prior to the Change of Control, was not Controlled by Evogene or any Person that was an Affiliate of Evogene before the date of a Change of Control.

1.63 “Extended Commercial Proof of Concept” means Proof of Phenotype of a given Feature in [* * *], in [* * *] and in at least [* * *] of successful field testing

 

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1.64 “Feature” means a quantifiable component of a Trait Class having potential to impact a plant phenotype characteristic of such Trait Class (e.g. seed number per spikelet is a ‘Feature’ of Trait Class Yield) and which is achieved by a non-GM approach.

1.65 “First Commercial Sale” means the date of the first sale by Bayer, its Affiliate or a Sublicensee of a Licensed Product to an unaffiliated Grower after receiving Regulatory Approval in the country or jurisdiction in which the sale is made and commercially selling in such country units of such Licensed Product (excluding samples, returns, rejections and replants) in sufficient quantities to plant at least [* * *] acres of such Licensed Product, determined based upon a reasonable planting rate.

1.66 “First Wheat Breeding Trial” means the first field trial of Collaboration Material containing a Collaboration SNP Set introgressed under a Back-Cross Program performed under Bayer’s best practices for the Bayer Pipeline that meets the following criteria: (a) it is performed in at least [* * *] ([* * *]) [* * *] (common for growth of the Recipient into which the Collaboration SNP Set was introgressed); (b) the trial is performed using the [* * *] used by Bayer and, in any event, using at least [* * *] ([* * *]) [* * *]; and (c) the trial is conducted under treatment conditions used for the Trait Class for which the relevant Collaboration SNP Set was discovered (i.e. the Trait Class targeted by the relevant EvoBreed Collaboration discovery Round).

1.67 “First Wheat GM Trial” means the first field trial of Wheat lines containing Event(s) performed under Bayer’s best practices for the Bayer Pipeline that meets the following criteria: (a) it is conducted in at least [* * *] ([* * *]) [* * *]; (b) it is performed on at least [* * *] ([* * *]) Events of the relevant Collaboration Gene, which have undergone [* * *]; and (c) the trial is conducted under treatment conditions used for the Trait Class for which the Collaboration Gene was discovered (e.g. a trial of an Event containing a Collaboration Gene discovered for ABST will be conducted under abiotic stress conditions).

1.68 “FTE” means an employee working full time on research or research management activities directed to the performance of the Funded Project, or that number of employees working less than full-time on the Funded Project that collectively equal one such full-time employee.

1.69 “Funded Project” means the part of the Collaboration to be performed, conducted, or undertaken by Evogene during the Collaboration Period or the Validation Tail in accordance with, and in fulfillment of, Section 3 and the Workplan.

1.70 “Gene” means (a) a sequence of DNA consisting of nucleotides that encode functional RNA (whether encoding a protein or not), which DNA may also contain non-coding introns, and (b) any protein encoded by such sequence of DNA.

 

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1.71 “Gene Computational Report” means a report setting forth, with respect to a particular Identified Gene, the sequence of such Gene, as well as additional information with respect to the Gene and the basis for its selection, as further provided in Section A.3 (subsection 8.1.1) of the Multi-Year Workplan.

1.72 “Gene Group” means each of the following:

(a) “Gene Group 1” which means all Identified Genes with respect to which (or with respect to the Homolog of which) Gene Validation Reports are provided to Bayer prior to [* * *], and their Homologs;

(b) “Gene Group 2” which means all Identified Genes with respect to which (or with respect to the Homolog of which) Gene Validation Reports are provided to Bayer on or after [* * *], but before [* * *], and their Homologs;

(c) “Gene Group 3” which means all Identified Genes with respect to which (or with respect to the Homolog of which) Gene Validation Reports are provided to Bayer on or after [* * *], but before [* * *], and their Homologs;

(d) “Gene Group 4” which means all Identified Genes with respect to which (or with respect to the Homolog of which) Gene Validation Reports are provided to Bayer on or after [* * *], but before [* * *], and their Homologs;

(e) “Gene Group 5” which means all Identified Genes with respect to which (or with respect to the Homolog of which) Gene Validation Reports are provided to Bayer on or after [* * *], but before [* * *], and their Homologs;

(f) “Gene Group 6” which means all Identified Genes with respect to which (or with respect to the Homolog of which) Gene Validation Reports are provided to Bayer on or after [* * *], but before [* * *], and their Homologs; and

(g) “Gene Group 7” which means, if the Collaboration Period is extended to include a sixth year in accordance with Section 3.1.3, all Identified Genes with respect to which (or with respect to the Homolog of which) Gene Validation Reports are provided to Bayer on or after [* * *], but before [* * *], and their Homologs.

1.73 “Gene Group Period” means, with respect to each Gene Group, the period set forth in the definition of such Gene Group.

1.74 “Gene Validation Report” means a report setting forth, with respect to a particular Identified Gene, data on results from the [* * *] Model Plant Validation or [* * *] Model Plant Validation (if conducted) conducted by Evogene on such Identified Gene (or its Homolog if approved by the Research Committee) as further provided in Section A.3 (subsection 8.1.3) of the Multi- Year Workplan.

 

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1.75 “GM Phase” means any of GM Phase 1, GM Phase 2, GM Phase 3 and GM Phase 4.

1.76 “GM Phase 1” means “Technology Testing” and comprises transformation of a Collaboration Gene into Wheat and field testing of the Wheat lines containing Event(s) in at least [* * *] in at least [* * *] and during at least [* * *] of successful field trials. Timelines for completion of GM Phase 1 generally are [* * *]-[* * *] years. Successful completion of GM Phase 1 is characterized by Technology Proof of Concept.

1.77 “GM Phase 2” meansCommercial Concept Testing” and comprises large scale transformation of the Collaboration Gene into Wheat and field testing of [* * *] Wheat lines containing Event(s) in at least [* * *], in [* * *] and in at least [* * *] of successful field testing. Timelines for completion of GM Phase 2 generally are [* * *]-[* * *] years. Successful completion of GM Phase 2 is characterized by Commercial Proof of Concept.

1.78 “GM Phase 3” means “Final Elite Event Selection” and comprises further field testing of [* * *] in [* * *] and in [* * *] during at least two years of successful field trials. Timelines for completion of GM Phase 3 generally are [* * *]-[* * *] years. Successful completion of GM Phase 3 is characterized by Elite Event Selected.

1.79 “GM Phase 4” meansAdvanced Development” and comprises variety development and Elite Event registration, continuation of [* * *] towards Regulatory Approval and product placement. Successful completion of GM Phase 4 is characterized by Regulatory Approval followed by First Commercial Sale.

1.80 “Grower” means a Person who/that purchases units of Licensed Products for purposes of growing Wheat plants, and not for the purpose of further distribution of such Licensed Products.

1.81 “Homolog” means any Gene, the encoded protein or functional RNA of which meets the following test with respect to an encoded protein or functional RNA of an Identified Gene: the sequences are more than [* * *] percent ([* * *]%) identical using a global alignment of the two sequences with the EMBOSS needle program, version 6.0.1 or later versions unanimously approved by the Research Committee, configured with the following parameters: [* * *].

1.82 “Identified Gene” means a Gene identified and prioritized for a given Trait in the performance of an ATHLETE Collaboration Discovery Round that is included in a Gene Computational Report delivered by Evogene to Bayer under this Agreement. “Identified Gene” may include, subject to Pre-existing Obligations or [* * *]resulting in a delay to deliver to Bayer till [* * *], Genes discovered by Evogene in previous ATHLETE Discovery Rounds, outside the Collaboration (including under collaborations with third parties), which are included in previously filed Evogene Patent Rights.

 

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1.83 “Identified SNP” means a SNP discovered and prioritized in the performance of an EvoBreed Collaboration Discovery Round aimed at addressing a certain Feature and that is included in a SNP Computational Report delivered by Evogene to Bayer under this Agreement.

1.84 “Initiated Transformation” means having exposed Wheat [* * *] for transformation, to a transformation method applicable for Wheat (e.g Agrobacterium mediated transformation, biolistics mediated transformation) with the aim to introduce a Collaboration Gene into Wheat.

1.85 “Intellectual Property” means inventions, discoveries, ideas, Know-How, works of authorship and confidential information, including copyrights, patents and patent applications, trade secrets, trademarks, service marks, design marks, any registrations or applications relating to any of the foregoing, whether now existing or hereafter created, developed, arising or otherwise coming into being.

1.86 “Joint Patent Rights” has the meaning set forth in Section 9.2.3.

1.87 Jurisdiction” means, with respect to Regulatory Approval, a nation or country or other multinational governmental entity that controls the import or export of a Licensed Product into a geographic region and that has the authority to determine the acceptability of a Licensed Product within that geographic region.

1.88 “Know-How” means methods, techniques, processes, specifications, materials, recipes, formulae, designs, plans, drawings, data, trade secrets, publications or any other technical or scientific information that, in each case, derive independent economic value, actual or potential, from not being generally known to, and not being easily ascertainable by proper means, by other Persons who can obtain economic value from their disclosure or use, and are the subject of efforts that are reasonable under the circumstances to maintain their secrecy or confidentiality.

1.89 “Licensed Product” means any Wheat plant, tissue or seed that contains: (a) one or more transgenically introduced Collaboration Gene(s); and/or (b) one or more Collaboration SNP Sets.

1.90 “Major Wheat Countries” [* * *].

1.91 “Major Wheat Countries For Regulatory Purposes” means for the purposes of Sections 7.3.1.4 and 7.3.2.3, the Major Wheat Countries which are considered as Wheat growing countries (“Wheat Growing Country(ies)”) and [* * *] which are considered as Wheat importing countries (“Wheat Importing Country(ies)”).

1.92 “Model Plant Validation” means [* * *], as applicable.

 

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1.93 “Multi-Year Workplan” the workplan attached as Exhibit A hereto setting forth in summary form the activities to be performed by the parties during the Collaboration Period and the Validation Tail, as such plan may be amended in accordance with the provisions of Section 2.

1.94 “Net Bayer Feature Revenue” means either (a) [* * *] or (b) [* * *].

1.95 “Net Feature Revenue” means, [* * *].

[* * *].

[* * *]

[* * *];

[* * *].

[* * *]

1.96 “Net Product Revenue” means [* * *]

(a) [* * *]:

(b) [* * *]:

(i) [* * *].

(ii) [* * *]; and

(iii) [* * *].

1.97 “Net Bayer Trait Revenue” means either (a) [* * *] or (b) [* * *].

1.98 “Net Sublicensee Feature Revenue” means [* * *].

1.99 “Net Sublicensee Trait Revenue” means [* * *].

1.100 “Net Trait Revenue” means, [* * *].

[* * *].

[* * *]

 

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(i) [* * *]

(ii) [* * *].

(iii) [* * *].

1.101 “Nominated Collaboration SNP Set” shall have the meaning ascribed to such term in Section 3.1.2.2(e)(iii).

1.102 “Nominated Gene” shall have the meaning ascribed to such term in Section 3.1.1.4(c).

1.103 “Non-Royalty Sublicense Income” means [* * *].

1.104 “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership or other legal entity.

1.105 “Pre-existing Obligation” means any obligation of Evogene to a Third Party under (a) an agreement entered into by Evogene prior to the Effective Date or (b) an agreement entered into by Evogene after the Effective Date pursuant to a right, or right to negotiate, granted to such Third Party in an agreement entered into by Evogene prior to the Effective Date; provided that Pre-existing Obligation shall not include any obligation under the agreement between Evogene and [* * *]. A description of the Pre-existing Obligations is set forth in Exhibit G.

1.106 “Proof of Phenotype” means (i) the observation by Bayer in the field of a [* * *] effect (to be determined per Trait and per Feature e.g. for the target Trait Class Yield, Proof of Phenotype could be an average increase in Wheat seed yield of at least [* * *] percent ([* * *]%) between a Licensed Product and the near isogenic plant line that is not a Licensed Product) of the Trait or Feature without any adverse effect on grain quality or any other agronomic or phenotypic characteristics obtained under treatment conditions relevant for the Trait or Feature as conducted by Bayer; or (ii) in the absence of such Proof of Phenotype, the decision by Bayer to continue the further development through the Bayer Pipeline of any Licensed Product.

1.107 “Public Lines” means Wheat lines available in the public domain. Nothing in this Agreement restricts a party to access and use such Wheat lines for purposes other than the Collaboration.

1.108 “Recipient” means a Wheat line (usually elite line) that does not display a certain Feature, or displays a Feature but not to the extent desired.

1.109 “Regulatory Approval” means, with respect to a Licensed Product in any Jurisdiction, approval from the competent Regulatory Authority in such Jurisdiction to place on the market a Licensed Product under conditions defined by such Regulatory Authority or by applicable law.

 

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1.110 “Regulatory Authority” means the applicable regulatory agency in a Jurisdiction charged under the applicable legislation with deregulating and/or providing approval for the commercialization of seeds, grains, plants, processed products and agricultural products in such Jurisdiction.

1.111 RePack” means Evogene’s computational platform for prediction of a preferential regulation mode for a given Gene transgenically introduced into a crop to confer a desired Trait.

1.112 “Research Committee” has the meaning set forth in Section 2.2.2.

1.113 Research Payments” has the meaning set forth in Section 7.2.

1.114 “Share Purchase Agreement” means that certain Share Purchase Agreement of even date herewith between Evogene and Bayer CropScience AG .

1.115 “Similar Product” means:

(a) For purposes of determining [* * *]; and

(b) For purposes of determining [* * *].

1.116 “SNP” means any single-nucleotide polymorphism and any other polymorphism (e.g. insertion, deletions, polymorphism of more than one nucleotide, etc.), which occurs in the genome of (a) Wheat line(s).

1.117 “SNP Assays” means a high throughput assay developed for the genotyping of Collaboration SNPs in a plant and compatible with Bayer’s high-throughput platforms.

1.118 “SNP Computational Report” means a report setting forth, with respect to a particular Identified SNP that is identified during an EvoBreed Discovery Round, the sequence of the SNP, as well as additional information with respect to the Identified SNP and the basis for its selection as further described in Section A.3 (subsection 9.1.1) of the Multi-Year Workplan.

1.119 “SNP Computational Summary Report” has the meaning set forth in Section 3.1.2.2(d).

1.120 “Steering Committee” has the meaning set forth in Section 2.2.1.

1.121 “Sublicense” means any right granted, license given or agreement entered into by Bayer or any of its Affiliates to or with any other person or entity, under or with respect to or permitting any use, practice or exploitation of any of the rights granted to Bayer and its Affiliates

 

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under Section 5.1 or otherwise permitting the development, manufacture, marketing, distribution and/or sale of Licensed Products in each case regardless of whether such grant of rights, license given or agreement entered into is referred to or is described as a sublicense. For clarity, (a) rights granted to Contractors pursuant to Section 5.1.4 and (b) any license to grow Wheat plants that is granted as part of the sale of a Licensed Product to a Grower, shall not be deemed a “Sublicense”.

1.122 “Sublicense Income” means [* * *].

1.123 “Sublicensee” means any person or entity granted a Sublicense (including any person or entity granted a further Sublicense by a Sublicensee in accordance with Section 5.1.1.2(c)).

1.124 “Technology Proof of Concept” means Proof of Phenotype of a Trait or Feature in at least [* * *], in at least [* * *] ([* * *]) [* * *] and during at least [* * *] of successful field trials.

1.125 “Third Party” means a person or entity other than Bayer and its Affiliates, and other than Evogene and its Affiliates.

1.126 “Trait” means a quantifiable component of a Trait Class having potential to impact the plant phenotype characteristic for such Trait Class (e.g. seed number per spikelet is a ‘Trait’ of the Trait Class Yield) and which is achieved by a GM approach.

1.127 “Trait Class” means one of the following: Yield, Abiotic Stress Tolerance (“ABST”), Nitrogen Use Efficiency (“NUE”) and any other class of traits in Wheat that may be agreed to by the parties in accordance with Section 3.2 as a class of traits to be addressed in the Collaboration (e.g. [* * *]).

1.128 “Updated EvoBreed Collaboration Discovery Round” means an EvoBreed Collaboration Discovery Round performed in accordance with Section 3.1.2.2(f).

1.129 “Validation Tail” means the Model Plant Validation to be performed by Evogene, during the year following the last Collaboration Year, with respect to the Identified Genes discovered in the last Collaboration Year.

1.130 “Validation Tail Payment” means an Annual Research Payment of [* * *] Euro (€[* * *]) to fund the Validation Tail work.

1.131 “Wheat” means Triticum spp.

1.132 “Valid Claim” means (a) a claim of an issued and unexpired patent which has not been held unenforceable or invalid by a court or other governmental agency of competent jurisdiction in an unappealed or unappealable decision and which has not been abandoned, disclaimed or admitted to be invalid or unenforceable, through reissue or otherwise, or (b) a claim of a pending patent application that (i) has been asserted and continues to be prosecuted in good faith and (ii) has not been abandoned or finally rejected without the possibility of appeal or refiling in a continuation application or divisional application.

 

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1.133 “Workplan” means the Multi-Year Workplan together with each Annual Workplan.

 

2. Collaboration.

2.1 Purpose and Scope of Work. The parties are entering into the Collaboration with the intent of identifying Genes conferring Traits in Wheat and SNPs conferring Features in Wheat for integration by Bayer into the Bayer Pipeline. The activities to be performed by the parties under the Collaboration are set forth below in Section 3, which includes a general overview and timetables for development and implementation of the Collaboration, details regarding the Evogene deliverables and the Bayer deliverables under the Collaboration and timetables for delivery of such deliverables. In addition, the Workplan (including the Annual Workplans to be prepared and approved in accordance with the provisions of Section 2.2), will set forth in greater detail the activities to be performed by the parties in each Collaboration Year. The parties, subject to and in accordance with Section 3.2, may determine to revise or expand the research performed by Evogene and funded by Bayer under this Agreement. The Workplan may be revised or expanded by the Research Committee and/or the Steering Committee from time to time, subject to the provisions of Section 2 and Section 3.2 below. To the extent any terms in the Workplan shall at any time conflict with the terms of this Agreement, the terms of this Agreement shall control.

2.2. Management.

2.2.1 Steering Committee.

2.2.1.1 Establishment. The parties hereby establish a joint “Steering Committee” that will be responsible for overseeing and managing the Collaboration.

2.2.1.2 Membership. The Steering Committee will be comprised of three (3) members appointed by Bayer and three (3) members appointed by Evogene, all of whom shall be full time employees of the appointing party (or an Affiliate of the appointing party, provided that for purposes of this clause, “Control” as it relates to the definition of Affiliate will mean seventy-five (75%) or more ownership and not fifty percent (50%)) and shall have appropriate authority to make the decisions assigned to the Steering Committee hereunder. At least two members of the Steering Committee will be different than the members of the Research Committee. The chairperson of the Steering Committee (having no special or additional voting power) shall be one of the members, in annual rotation between the parties, beginning with Bayer. Each of Bayer and Evogene shall communicate to the other, within two (2) weeks after the Effective Date, about the identity of the members it appoints and each of Bayer and Evogene may replace one or more of its Steering Committee representatives at any time, upon written notice to the other party.

 

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From time to time, the Steering Committee may establish subcommittees, comprised of an equal number of representatives from each party (who may be persons other than Steering Committee members), to oversee particular activities within the responsibilities of the Steering Committee described in Section 2.2.1.3. These subcommittees will have an advisory role towards the Steering Committee and will have no decisive power, unless the Steering Committee has explicitly provided a proxy to the subcommittee to take decisions on specific matters for which it has been established.

2.2.1.3 Responsibilities. Subject to the terms and conditions hereof, the Steering Committee shall have ultimate supervisory authority over the Collaboration. The Steering Committee shall have the following responsibilities:

(a) Approving of the Annual Workplans proposed by the Research Committee pursuant to Section 2.2.2.3 (with or without modifications);

(b) Overseeing, through updates from and discussions with the Research Committee, the establishment of infrastructure and procedures for facilitating efficient communication between the parties, as described in Section 2.2.2.3(b), and making decisions on matters escalated by the Research Committee relating to such matters;

(c) Monitoring and overseeing activities performed under the Collaboration, including reviewing and discussing all reports, notices and other materials relating to the Collaboration delivered by the Research Committee to the Steering Committee hereunder;

(d) Discussing and deciding on revisions or expansions to the Workplan proposed by the Research Committee pursuant to Section 2.2.2.3(e)(ii) or recommended by the Research Committee pursuant to Section 3.2, including suggesting and deciding on changes to such recommended amendments or modifications. Any amendments or modifications the Workplan approved by the Steering Committee shall be incorporated into the Workplan by reference; it being understood however, for the avoidance of doubt, that any decision which would entail a change to the terms and conditions of this Agreement will need to be formalized in an amendment to this Agreement and agreed upon and duly signed by authorized representatives of the parties before it is considered as binding upon the parties;

(e) Discussing and deciding on matters that are escalated to the Steering Committee from the Research Committee under this Agreement, such as decisions under Section 3.3 regarding the justification for and repercussions of failures or delays in the delivery of deliverables to be delivered in accordance with Section 3.1;

(f) Discussing possible expansions of the Collaboration, as per Section 3.2, and other possible strategic collaborations that may be of interest to the parties, it being understood that in the event expansions or other possible strategic collaboration would relate to matters outside the field of Wheat, the matter may be communicated within the respective organizations for further discussions and follow ups outside the Steering Committee with the representatives responsible for the specific subject matter; and

 

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(g) Other matters within the scope of the overall responsibility of the Steering Committee to oversee and manage the Collaboration, for which the Steering Committee jointly decides a discussion/decision is required.

The Steering Committee may delegate any additional responsibilities to the Research Committee.

2.2.1.4 Meetings. The Steering Committee shall meet in person at least twice per year (once in Israel and once in Belgium or Germany), on dates agreed upon in the Steering Committee, and otherwise on an as-needed basis (in person or by telephone or video conference) as shall be required in order to make decisions, carry out its duties hereunder and approve recommendations of the Research Committee. The invitations for the meeting shall be sent by the chairperson of the Steering Committee at least two (2) weeks prior to the date of the Steering Committee meeting, and shall include confirmation of the items on the agenda.

Members of the Steering Committee may participate in and vote at meetings in person, by telephone or by video conference, and may vote at meetings by proxy; provided, however, that Bayer and Evogene shall use reasonable efforts to cause their respective Steering Committee members to attend in person, as observer, advisor or expert, each scheduled in-person meeting. Additional employees of either party (or, in the case of Bayer, of its Affiliates) may be permitted to attend Steering Committee meetings. No Steering Committee meeting can be validly held if not all its members are present or represented, in person or by phone, video conference or similar form of communication.

At each such Steering Committee meeting, whether in-person or otherwise, the Steering Committee chairperson shall prepare, or shall have a delegate who is not a member prepare, written minutes which shall document all Steering Committee discussions and decisions in such meetings. Draft minutes shall be distributed to the Steering Committee members within two (2) weeks following the particular Steering Committee meeting, revised as necessary, and, if agreed upon, promptly approved in writing by all Steering Committee members. Thereafter, the approved minutes of each Steering Committee meeting shall be distributed to each member.

2.2.1.5 Decision-Making. All decisions of the Steering Committee shall be made by unanimous consent and documented in writing in the approved minutes of the Steering Committee. In the event the Steering Committee is unable to reach agreement on a matter relating to the activities under the Collaboration within the responsibilities of the Steering Committee (a “Deadlock”), then either party may notify the other of the Deadlock in writing, such notice to describe the subject of the Deadlock in reasonable detail. Subject to the limitations in the following Section 2.2.1.6., Bayer shall retain ultimate decision-making authority over the Deadlocked matter, such authority to be exercised by Bayer in good faith (taking into

 

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consideration concerns raised by Evogene’s representative and the goals of the Collaboration) and notified to Evogene within thirty (30) days after delivery of the applicable Deadlock notice, or within such reasonable longer period of up to an additional sixty (60) days notified by Bayer to Evogene within thirty days after delivery of the applicable Deadlock notice. If Bayer fails to notify Evogene how Bayer has elected to exercise its authority on the Deadlocked matter, then Evogene may take the decision over the Deadlocked matter, such decision to be taken by Evogene in good faith (taking into consideration concerns raised by Bayer’s representative and the goals of the Collaboration) and Evogene shall notify Bayer within thirty (30) days after expiration of Bayer’s notification period set forth the previous sentence. If Evogene fails to notify Bayer how it has elected to exercise its authority to decide on the Deadlocked matter, the matter will be resolved according to Section 15 (Dispute Resolution).

With respect to matters described in Section 2.2.1.6, for which Bayer is not entitled to exercise ultimate decision-making authority with respect to any Deadlock, such Deadlock shall be resolved pursuant to the provisions of Section 15.

2.2.1.6 Limits on Decision-Making Authority. Bayer shall not have the authority under Section 2.2.1.5 to unilaterally make any decision that: (a) adversely impacts Evogene’s rights or its ability to meet its obligations under this Agreement; (b) amends or alters Evogene’s obligations under Section 3.1 or 3.3 or affects the achievability of such obligations (including changes to the criteria for satisfaction thereof); (c) amends or alters Bayer obligations under Sections 6.2 or 6.3 (or the criteria for satisfaction thereof); (d) would change the amount of any of the research payments under Section 7.2 or would require activities that would necessitate an increase in the resources allocated by Evogene to performing the Funded Project; (e) would materially change the goals or scope of the Workplan (excluding however changes to the allocation of activities between ATHLETE Collaboration Discovery Rounds and EvoBreed Collaboration Discovery Rounds that do not materially change the overall resources to be allocated to the ATHLETE Program and/or EvoBreed Program); (f) relate to use of Evogene’s computational platforms or data generation activities; or (g) materially amends either party’s reporting obligations under this Section 2.

Evogene shall not have the authority under Section 2.2.1.5 to unilaterally make any decision that: (a) materially adversely impacts Bayer’s rights or its ability to meet its obligations under this Agreement; (b) amends or alters Evogene’s obligations under Section 3.1 or 3.3 or affects the achievability of such obligations (or the criteria for satisfaction thereof), (c) amends or alters Bayer obligations under Sections 6.2 or 6.3 (or the criteria for satisfaction thereof), (d) would increase the amount of any of the research payments under Section 7.2, or (e) amends either party’s reporting obligations under Section this Section 2.

For the avoidance of doubt, neither party shall be entitled to unilaterally take a decision that may amend, contradict or otherwise be inconsistent with any term or provision of this Agreement.

 

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2.2.2 Research Committee.

2.2.2.1 Establishment. The parties hereby establish a joint “Research Committee” that will be responsible for administering the research and development activities to be performed under the Collaboration, as further set forth in Section 2.2.2.3.

2.2.2.2 Membership. The Research Committee will be comprised of four (4) members appointed by Bayer and four (4) members appointed by Evogene, all of whom shall be full time employees of the appointing party (or an Affiliate of the appointing party, provided that for purposes of this clause, “Control” as it relates to the definition of Affiliate will mean seventy-five (75%) or more ownership and not fifty percent (50%)) and shall have appropriate authority to make the decisions assigned to the Research Committee hereunder. Each of Bayer and Evogene shall communicate to the other, within two (2) weeks after the Effective Date, about the identity of the members its appoints and each of Bayer and Evogene may replace one or more of its Research Committee representatives at any time, upon written notice to the other party. The chairperson of the Research Committee (having no special or additional voting power but who shall be responsible for the practical organization of the meetings) shall be one of the members, in annual rotation between the parties, beginning with Evogene. From time to time, the Research Committee may establish subcommittees, comprised of an equal number of representatives from each party (who may be persons other than Research Committee members), to oversee particular activities within the responsibilities of the Research Committee described in Section 2.2.2.3 hereafter (such as an IT subcommittee and an IP subcommittee). The subcommittees will have an advisory role towards the Research Committee and will have no decisive powers unless the Research Committee has explicitly provided a proxy to the subcommittee to take decisions on specific matters for which it has been established.

2.2.2.3 Responsibilities. The Research Committee will supervise performance of the parties’ work under the Collaboration. The Research Committee will have the following responsibilities:

(a) Discussing, reviewing, suggesting revisions to and approving (subject to final approval by the Steering Committee), no later than sixty (60) days prior to the commencement of each Collaboration Year, a detailed research plan for the subsequent Collaboration Year (“Annual Workplan”). Evogene shall take the lead in preparing such Annual Workplan(s) and in proposing it to the Research Committee. Each such Annual Workplan, upon approval of the Steering Committee, shall automatically constitute an amendment to and part of the Workplan;

(b) Establishing (or, as the case may be, implementing the decisions taken by the Steering Committee related thereto according to Section 2.2.1.3 (b)) infrastructures and procedures for facilitating efficient communication between the parties, including: (i) putting in place necessary IT infrastructures; (ii) deciding on the structure of the reports to be delivered under the Collaboration; (iii) coordinating data transfer; and (iv) establishing procedures for communications regarding patent related issues.

 

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(c) Reviewing reports delivered under the Collaboration, monitoring the parties’ performance of their respective obligations under Section 3 and the Workplan, conducting scientific discussions regarding the results of the Collaboration, reporting on this towards the Steering Committee to allow the Steering Committee to perform its work under Section 2.2.1.3(c) and providing suggestions to the Steering Committee with respect to future activities;

(d) Discussing and deciding on matters that are specifically referred to the Research Committee under this Agreement, such as addressing the justification for and repercussions of failures or delays in the delivery of deliverables to be delivered in accordance with Section 3.1, in accordance with the procedure set forth in Section 3.3.

(e) Periodically reviewing whether there is need to revise or expand the Workplan as may be reasonably required to meet the goals of the Multi-Year Workplan and Collaboration.

(i) Subject to Section 2.2.2.5, the Research Committee will have the authority to amend the Workplan with respect to matters that do not materially change the Workplan, without the approval of the Steering Committee, such as changes in Traits within a Trait Class to be addressed in an ATHLETE Collaboration Discovery Round or in an EvoBreed Collaboration Discovery Round or shifting among the Trait Classes to be targeted, or changes in the assays used for validation, provided such changes do not impact the amount of resources allocated to such activity. Any amendments or modifications to the Workplan approved by the Research Committee in accordance with this clause (i) shall be incorporated into the Workplan by reference.

(ii) Subject to Section 2.2.2.5, material changes to the Workplan may be proposed by the Research Committee, but must be approved by the Steering Committee. For illustration purposes, material changes to the Workplan include: (1) changes in the quantity of ATHLETE Collaboration Discovery Rounds or EvoBreed Collaboration Discovery Rounds to be conducted in a Collaboration Year; (2) a shift in the number of Collaboration Genes to be provided among Collaboration Years; and (3) an increase in Model Plan Validation activities. The process for making such proposals to the Steering Committee is set forth in Section 3.2.

(f) Exercising such additional responsibilities as may be delegated to the Research Committee by the Steering Committee.

2.2.2.4 Meetings. The Research Committee shall meet at least quarterly, on dates agreed upon in the Research Committee, whether in-person or by telephone or video conference as the Research Committee agrees, provided that at least two in-person meetings (one in Israel and one in Belgium or Germany) shall be held in each Collaboration Year. The invitations for the meeting shall be sent by the chairperson of the Research Committee at least

 

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two (2) weeks prior to the date of the Research Committee meeting, and shall include confirmation of the items on the agenda. Members of the Research Committee may participate in and vote at meetings, in person, by telephone or by video conference and may vote at meetings by proxy. Additional employees of either party (and in the case of Bayer, of its Affiliates) may be permitted to attend Research Committee or its sub-committees’ meetings, as observer, advisor or expert. At each such Research Committee meeting (or sub-committee meeting), whether an in-person meeting or otherwise, the Research Committee shall appoint a member (or a delegate who is not a member) to prepare written minutes which shall document all Research Committee discussions and decisions in such meeting. Draft minutes shall be distributed to the Research Committee members within two (2) weeks following the particular Research Committee meeting, revised as necessary, and, if agreed upon, promptly approved in writing by all Research Committee members. Thereafter, the approved minutes of each Research Committee meeting shall be distributed to each member.

2.2.2.5 Decision-Making. All decisions of the Research Committee shall be made by unanimous consent and documented in writing in the approved minutes of the Research Committee. In the event the Research Committee is unable to reach agreement on a matter, then such matter shall be escalated to the Steering Committee.

2.2.2.6 Limits on Decision-Making Authority. Notwithstanding anything herein to the contrary, the Research Committee shall have no authority to make any decision (including any amendment or modification of, or supplement to, the Workplan) that: (i) may amend, contradict or otherwise be inconsistent with any term or provision of this Agreement; (ii) changes or affects the parties’ respective obligations under Section 3.1 or 3.3; (iii) would result in Evogene incurring significant additional costs; or (iv) would materially change the Workplan.

2.3 Manpower and Independent Responsibility

2.3.1 Evogene FTEs. Evogene will allocate the number of FTEs per Collaboration Year set forth in the Workplan to perform the Funded Project. Evogene expressly confirms that this number of FTE’s is appropriate and sufficient for the performance of the work of the Funded Project as per the terms of this Agreement and insofar this would not be the case, Evogene shall allocate the number of FTE’s appropriate to perform the work under the Collaboration without this causing an increase of the Research Payments set forth in Section 7. Upon Bayer’s written request in each case, Evogene shall provide Bayer once per Collaboration Year, with a list setting forth the identity of the people working on the Funded Project (in order to allow Bayer comply with Section 4.2).

2.3.2 Independent Responsibility. Except as set forth in this Agreement or in the Workplan to the contrary, each party is responsible for all costs and expenses that it incurs under or in connection with the Collaboration, including its participation on the Steering Committee, Research Committee or any of their respective subcommittees, and any meetings thereof.

 

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3. Activities Under the Collaboration.

3.1 Performance of Collaboration.

3.1.1 ATHLETE

3.1.1.1 Data Generation. During Collaboration Years [* * *] through [* * *], Evogene will perform ATHLETE Data Generation Activities. [* * *], Datasets generated through ATHLETE Data Generation Activities may also be used by Evogene in EvoBreed Collaboration Discovery Rounds.

3.1.1.2 ATHLETE Collaboration Discovery Rounds. During each of Collaboration Years [* * *] through [* * *], Evogene shall perform the ATHLETE Collaboration Discovery Rounds for such Collaboration Year (all or part of which may be commenced in the previous Collaboration Year), as set forth in Section A.1 (subsection 2) of the Multi-Year Workplan or amendments thereof. Each ATHLETE Collaboration Discovery Round will focus on a target Trait Class (i.e. ABST, NUE or Yield) as provided in Section A.1 (subsection 2) of the Multi-Year Workplan, or as potentially amended (e.g. with regard to [* * *]). Each Identified Gene shall undergo the pre-screen process described in Exhibit F.

3.1.1.3 Gene Computational Reports and Summary Reports. By the end of each Collaboration Year in which Evogene is required to conduct an ATHLETE Collaboration Discovery Round, Evogene shall deliver to Bayer the minimum number of Gene Computational Reports set forth in Section A.1 (subsection 2.4) of the Multi-Year Workplan for such ATHLETE Collaboration Discovery Round, together with a summary report with respect to such ATHLETE Collaboration Discovery Round which shall provide the information described in Section A.3 (subsection 8.1.2) of the Multi-Year Workplan (the “Gene Computational Summary Report”). However, in addition thereto, in the [* * *] Collaboration Year, the Gene Computational Reports and the Gene Computational Summary Reports for first ATHLETE Collaboration Discovery Round will be delivered by the end of the [* * *] of the [* * *] Collaboration Year. [* * *]. If an Identified Gene (or Homolog thereof) is an Encumbered Collaboration Gene, Evogene shall make note of such fact in the corresponding Gene Computational Report, together with a description of the limitations to the parties’ rights and obligations under this Agreement that are required by the Pre-existing Obligations applicable to such Encumbered Collaboration Gene.

3.1.1.4 Summary and Feedback Meetings

(a) ATHLETE Discovery Round Summary Meeting. The Research Committee will convene within thirty (30) days of the delivery by Evogene of the Gene Computational Reports for each ATHLETE Collaboration Discovery Round, for a presentation by Evogene of the ATHLETE Collaboration Discovery Round, highlights on certain Collaboration Genes discovered therein and recommendations for selection into Bayer’s Pipeline.

 

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(b) ATHLETE Discovery Round Feedback Meeting. If the Research Committee jointly so agrees upon, the Research Committee may convene after the ATHLETE Discovery Round Summary Meeting referred to in Section 3.1.1.4 (a) above, at a date jointly agreed upon, either in a separate meeting, or in combination with another meeting of the Research Committee, to further discuss Bayer’s comments and feedback to the information included in the relevant reports and/or raised at the ATHLETE Discovery Round Summary Meeting described in Section 3.1.1.4(a), and possibly [* * *].

(c) [* * *].

3.1.1.5 Model Plant Validation.

(a) Evogene shall conduct and complete the [* * *] Model Plant Validation activities described in Section A.2 (subsection 5) of the Multi-Year Workplan on the Identified Gene included in a Gene Computational Report delivered by Evogene to Bayer (or on a Homolog thereof if approved by the Research Committee), within [* * *] ([* * *]) months of the delivery of each such Gene Computational Report.

(b) In addition to the [* * *] Model Plant Validation described in clause (a), subject to Section 3.1.1.6 below, Evogene will perform [* * *] Model Plant Validation with respect to at least [* * *] percent ([* * *]%) [* * *] of the Identified Genes discovered in each of the ATHLETE Collaboration Discovery Rounds that are completed in Collaboration Years [* * *] through [* * *] [* * *], within [* * *] ([* * *]) months of the delivery of the Gene Computational Reports with respect to such Identified Genes. [* * *].

3.1.1.6 Gene Validation Reports and Summary Reports. Within [* * *] ([* * *]) months of the delivery of each Gene Computational Report, Evogene shall deliver to Bayer a Gene Validation Report for the Identified Gene included in the corresponding Gene Computational Report ([* * *]), together with a summary report with respect to the Model Plant Validation performed on such Collaboration Genes as set forth in Section 3.1.1.5 above (“Gene Validation Summary Report”), which shall provide the information described in Section A.3 (subsection 8.1.4) of the Multi-Year Workplan. However, in addition thereto, in the [* * *], the Gene Validation Report and the Gene Validation Summary Reports for first ATHLETE Collaboration Discovery Round will be delivered by the end of the [* * *] of the [* * *].

[* * *]:

(a) [* * *].

(b) [* * *].

 

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(c) [* * *].

(d) [* * *].

(e) [* * *].

3.1.2 EvoBreed

3.1.2.1 Infrastructure and Data Generation.

(a) Evogene Infrastructure and EvoBreed Data Generation Activities. During the [* * *]Collaboration Years, Evogene will design the [* * *], as specified in Section A.4 of Exhibit A or other equivalent technology for genotyping. In addition, Evogene, with input from and in joint collaboration with Bayer will perform the following activities in preparation [* * *]. In addition, during each of the [* * *] Collaboration Years, Evogene will perform the Evogene EvoBreed Data Generation Activities (in each case, such activities may be completed in the Collaboration Year following the Collaboration Year in which they were initiated). The Datasets generated through the Evogene EvoBreed Data Generation Activities may be used in ATHLETE Collaboration Discovery Rounds.

(b) Bayer EvoBreed Data Generation Activities. During the [* * *] Collaboration Years, Bayer will perform the Bayer EvoBreed Data Generation Activities [* * *]. The Datasets generated through the Bayer EvoBreed Data Generation Activities will be used in EvoBreed Collaboration Discovery Rounds and may also be used in ATHLETE Collaboration Discovery Rounds. [* * *].

3.1.2.2 EvoBreed Collaboration Discovery Rounds

(a) Target Feature Selection

(i) By the end of the [* * *] of the [* * *] Collaboration Year (i.e. within [* * *]), the Research Committee shall discuss and decide upon a list of [* * *] ([* * *]) Features that are of high priority to Bayer (the “Feature List”), from which Features will be chosen (as described in sub-section (ii) below) for targeting in EvoBreed Collaboration Discovery Rounds. [* * *].

(ii) For each EvoBreed Collaboration Discovery Round, the Research Committee, will determine, taking into account, among other things, the ranking referred to in (i) above, the availability of relevant data and the probability that promising Collaboration SNP Sets will be identified, which Features from the Feature List (the “Chosen Features”) will be targeted in such EvoBreed Discovery Round, based on the target Trait Class for such EvoBreed Collaboration Discovery Round (i.e. ABST, NUE or Yield) as provided in the Multi-Year Workplan. [* * *].

 

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(iii) [* * *].

(b) Recipient Information. Evogene will provide Bayer with advance written notice of at least [* * *] ([* * *]) days of any change in the initiation date of an EvoBreed Collaboration Discovery Round from the date set forth for such initiation in the Workplan. [* * *].

[* * *].

[* * *].

[* * *].

(c) Performance of EvoBreed Collaboration Discovery Rounds. During each of Collaboration Years [* * *] through [* * *], Evogene shall complete the number of EvoBreed Collaboration Discovery Round(s) for such Collaboration Year (part of which may be commenced in the previous Collaboration Year) as described in Section A.1 (subsection 3) of the Multi-Year Workplan. [* * *].

(d) Deliverables Resulting from the EvoBreed Collaboration Discovery Round. Following each EvoBreed Collaboration Discovery Round, Evogene shall deliver to Bayer: (i) SNP Computational Reports in respect of the number of Collaboration SNP Sets with respect to such EvoBreed Collaboration Discovery Rounds, as set forth in Section A.1 (subsection 3.3) of the Multi-Year Workplan; and (ii) a summary report with respect to such EvoBreed Collaboration Discovery Round (the “SNP Computational Summary Report”) which shall provide a [* * *].

(e) Summary and Feedback Meetings.

(i) EvoBreed Discovery Round Summary Meeting. The Research Committee will convene within [* * *] ([* * *]) [* * *] of the delivery by Evogene of the SNP Computational Reports of each EvoBreed Collaboration Discovery Round, for a presentation by Evogene of the EvoBreed Collaboration Discovery Round, highlights on certain Collaboration SNP Sets discovered therein.

(ii) EvoBreed Discovery Round Feedback Meeting. If the Research Committee jointly so agrees upon, the Research Committee may convene after the EvoBreed Discovery Round Summary Meeting referred to in Section 3.1.2.2. (e) (i) above, at a date jointly agreed upon, either in a separate meeting, or in combination with another meeting of the Research Committee, to further discuss Bayer’s comments and feedback to the information included in the relevant reports and/or raised at the EvoBreed Discovery Round Summary Meeting and possibly [* * *].

 

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(iii) [* * *].

(f) EvoBreed Collaboration Discovery Round Updates. In each of Collaboration Years [* * *], [* * *] and [* * *], Evogene will perform a repeated EvoBreed Discovery Round with respect to Collaboration SNP Sets delivered by Evogene in the previous Collaboration Year, as set forth in Section A.1 (subsection 3.3) of the Multi-Year Workplan (the “Updated EvoBreed Collaboration Discovery Round”). [* * *].

3.1.3 Option to Extend or Curtail the Collaboration Period.

3.1.3.1 Option. Bayer shall have the option, exercisable at any time prior to the end of Collaboration Year [* * *] by written notice to Evogene, to choose one of the following courses of action:

(a) to continue with the Collaboration as planned through Collaboration Year [* * *] only;

(b) to terminate the Collaboration, in whole, effective at the end of Collaboration Year [* * *], in which case the provision of Section 14.3.1.1 shall apply;

(c) to terminate the ATHLETE Program at the end of Collaboration Year [* * *], but to continue the EvoBreed Program activities up to and including Collaboration Year [* * *], in which case the provisions of Section 14.3.1.2.1 shall apply;

(d) to terminate the ATHLETE Program at the end of Collaboration Year [* * *], but to continue and extend the Collaboration Period with respect to the EvoBreed Program activities up to and including Collaboration Year [* * *], in which case the provisions of Section 14.3.1.2.2 shall apply;

(e) to terminate the EvoBreed Program at the end of Collaboration Year [* * *], but to continue the ATHLETE Program activities up to and including Collaboration Year [* * *] in which case the provisions of Section 14.3.1.3.1 shall apply;

(f) to terminate the EvoBreed Program at the end of Collaboration Year [* * *], but to continue and extend the Collaboration Period with respect to the ATHLETE Program activities up to and including Collaboration Year [* * *], in which case the provisions of Section 14.3.1.3.2 shall apply; and

(g) to extend the Collaboration Period with respect to both the ATHLETE Program and the EvoBreed Program to include a Collaboration Year [* * *], in which case the provisions of Section 3.1.3.2 shall apply.

For clarity, if Bayer does not provide any such notice prior to the end of Collaboration Year [* * *], the Collaboration shall continue as planned through Collaboration Year [* * *] only as described in Section 3.1.3.1(a) above.

 

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3.1.3.2 Activities in the Sixth Collaboration Year. If, in its written notification pursuant to Section 3.1.3.1, Bayer states that it wishes to extend the Collaboration to include Collaboration Year 6, Evogene will perform the following activities, subject to Bayer’s payment of the applicable amounts set forth in Section 7.2:

(a) [* * *].

(b) [* * *].

(c) [* * *].

(d) [* * *].

(e) [* * *].

3.2 Revisions or Expansions to Workplan

3.2.1 Any revision or expansion to the Workplan that may be requested by Bayer or suggested by Evogene during the Collaboration Period (e.g. [* * *]) shall be discussed by the parties at the Research Committee. Such discussions will include, without limitation, discussions regarding the effect any such requested revision or expansion will have on the deliverables (including timing) to be provided under this Agreement, the allocation of Evogene’s resources for performance of its activities under the Collaboration, and any corresponding impact such change may have on Bayer’s Annual Research Payments to Evogene, on the ownership of Intellectual Property or on any other provisions of this Agreement.

3.2.2 If the Research Committee determines that Bayer’s request refers to matters that do not materially change the Workplan (such as [* * *]), the Research Committee shall have the authority to amend the Workplan per Bayer’s request, and such amendment shall be incorporated into the Workplan by reference.

3.2.3 If the Research Committee determines that Bayer’s request refers to matters that materially change the Workplan, the Research Committee shall prepare and present to the Steering Committee a detailed written proposal for such revision or expansion to the Workplan, setting forth the description of the work to be performed, the change such expansion or revision will have on deliverables to be delivered under this Agreement (including timing) and the change such expansion or revision will have on resource allocation by Evogene under the Collaboration, as well as possible changes to Annual Research Payments to Evogene, and any adaptations (if any) that such expansion or revision will require in other provisions of this Agreement (e.g. [* * *]).

 

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The Steering Committee shall then have the right to approve such proposal, with or without change, or to reject such proposal. Any such proposal that is approved by the Steering Committee will, when agreed upon and signed by the Parties, be incorporated into an amendment to this Agreement and the Workplan.

3.2.4 If the Research Committee cannot reach agreement as to a detailed proposal for any such proposed revision or expansion to be presented before the Steering Committee as per Section 3.2.3., then the matter will be escalated to the Steering Committee. If the Steering Committee cannot reach agreement on a detailed revision or expansion as referred to in Section 3.2.3. or if such proposal made by the Research Committee is not approved by the Steering Committee (with or without change), the parties will revert to the activities currently contemplated in the Agreement.

3.2.5 The parties acknowledge that Bayer has expressed an interest in expanding the Collaboration to include one or more Discovery Round(s) targeted at identifying Genes or SNPs that confer Traits or Features in the trait class of [* * *], either by adding additional Discovery Rounds or by substituting such Discovery Round(s) with respect to [* * *] for Discovery Rounds for one or more other Trait Class(es). During the Collaboration Period, Bayer has the right, to request an expansion(s) of the Collaboration to include [* * *] as referred to here before. The parties agree that, upon such request from Bayer, they will work in good faith to agree on the terms of such an expansion, including amendments, if any, to be made to this Agreement (e.g. relating to ownership of Intellectual Property, patent filing, prosecution and maintenance, and possibly Annual Research Payments), it being understood that, with respect to the scope of the licenses granted to Bayer, the royalty rates and the milestone payments, the terms relating to such expansion shall be substantially the same as those set forth herein.

3.2.6 The parties acknowledge that Bayer has expressed an interest in expanding the Collaboration to include RePack discovery work. During the Collaboration Period, Bayer has the right to request an expansion of the Collaboration to include RePack. The parties agree that, upon such request from Bayer, they will work together in good faith to agree on the terms of such an expansion, including amendments, if any, to be made to this Agreement.

[* * *].

3.3 Delivery Delays or Failure.

3.3.1 Evogene Delivery Delays or Failures. Each failure or delay by Evogene to duly deliver Gene Computational Reports, Gene Validation Reports, SNP Computational Reports and/or Updated SNP Computational Report, in the amounts and within the time periods for such deliverables required pursuant to this Agreement and the Workplan, and having the content as in Exhibit A, Section A.3 (subsection 8.1 and 9.1) , which failure or delay is beyond the failures and delays permitted under Section 3.1 or otherwise excused under Section 17.2, will hereinafter be deemed an “Evogene Deliverable Failure”, and the following provisions shall apply:

 

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3.3.1.1 Evogene shall promptly notify the Research Committee of such Evogene Deliverable Failure, will provide an explanation of the reasons for such Evogene Deliverable Failure and, if applicable (i.e. if curable), shall provide the Research Committee with a proposed timeframe for completing such delivery and details of activities that must be performed in order to meet such proposed timeframe. The Research Committee then shall discuss such Evogene Deliverable Failure, the information provided by Evogene with respect thereto, and the possible rectification thereof, including taking a decision with regard to timelines for completing the delivery. The Research Committee will further discuss the delay such Evogene Deliverable Failure may have, if at all, on Bayer’s corresponding diligence obligations under Section 6, and to the extent required, will decide on a reasonable extension (e.g. [* * *]). Parties expressly agree however, that with regard to the decision to be taken by the Research Committee regarding any extension to the timetable for any of Bayer’s diligence obligations set forth in Section 6 necessitated by Evogene’s delays, the parties will strive to agree by consensus in the Research Committee, but that, in the event no consensus can be reached, Bayer will have the ultimate decision power to decide on this subject matter, irrespective of any other decision taking mechanisms foreseen in this Agreement; provided that such decision must be reasonable taking into consideration Evogene’s delay and the actual impact such delay has on Bayer’s ability to perform its corresponding diligence obligations within the time periods set forth therefore.

3.3.1.2 Within sixty (60) days after such discussion having taken place and distribution of the minutes of the meeting reflecting the discussion and advise of the Research Committee, Bayer shall elect one of the following courses of action and shall provide written notice to Evogene of its elected course of action:

(a) require Evogene to provide, at no additional cost for Bayer, the relevant deliverables within an extended time period as has been advised by the Research Committee (as per Section 3.3.1.1);

(b) credit the Deliverable Failure Amount (defined in this Section 3.3.1.2 below) towards the performance by Evogene of alternative activities, to be determined by the Research Committee;

(c) require Evogene to reimburse Bayer the Deliverable Failure Amount;

(d) terminate the Collaboration pursuant to Section 14.3.2, if the Evogene Deliverable Failure involves: (i) a failure by Evogene to deliver more than [* * *] percent ([* * *]%) of the minimum number of Gene Computational Reports or Gene Validation Reports required to be delivered in connection with any given ATHLETE Collaboration Discovery Round; or (ii) a failure by Evogene to deliver SNP Computational Reports in respect of more than [* * *] percent ([* * *]%) of the minimum number of Collaboration SNP Sets required to be delivered in connection with any given EvoBreed Collaboration Discovery Round; or

 

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(e) terminate the Collaboration pursuant to Section 14.3.2, if Evogene Deliverable Failures relate to (i) a total cumulative amount of more than [* * *] ([* * *]) Collaboration Genes (i.e. Evogene has under-delivered by more than a total of [* * *] Collaboration Genes, excluding permitted failures under Section 3.1.1.6 (a) and (b)) or (ii) a total cumulative amount of more than [* * *] Collaboration SNP Sets (i.e. Evogene has under-delivered by more than a total of [* * *] ([* * *]) [* * *]).

[* * *].

3.3.1.3 The Research Committee will then discuss and determine in good faith any matters not yet addressed in the discussions referred to in Section 3.3.1.1 in connection with Bayer’s elected course of action, except if such course of action is termination according to Section 3.3.1.2 (e).

3.3.1.4 In the event that the Research Committee shall not reach an agreement as to the matters set forth in Section 3.3.1.3 above, such matters shall be escalated from the Research Committee to the Steering Committee.

3.3.1.5 Bayer’s rights under this Section 3.3.1 shall be Bayer’s sole and exclusive remedy in respect of an Evogene Deliverable Failure, and Evogene shall have no further liability in respect of an Evogene Deliverable Failure.

3.3.2 Bayer Data Delivery Delays or Failures. In the event that Bayer fails to duly provide Evogene with the deliverables set forth in Section 3.1.2.1(b) above (i.e., the Datasets generated through Bayer in the framework of Bayer EvoBreed Data Generation Activities) and/or the deliverables set forth in Section 3.1.2.2(b) above (i.e., [* * *]), within the time periods (including permitted delays) described in Section 3.1.2.1(b) or 3.1.2.2(b), as applicable , the following shall apply: [* * *].

Evogene’s rights under this Section 3.3.2 shall be Evogene’s sole and exclusive remedy in respect of Bayer’s delay or lack of delivery of the deliverables set forth in Section 3.1.2.1(b) or 3.1.2.2(b), and Bayer shall have no further liability in respect of such delay or lack of delivery.

3.4 Bi-Annual and Annual Reports. During the Collaboration Period, in addition to the reports to be provided pursuant to Section 3.1, within thirty (30) days after the end of each six-month period of each Collaboration Year during the Collaboration Period, each party shall prepare and provide to the Research Committee a summary of its activities during such six-month period (and for the 2nd half of each Collaboration Year, for the Collaboration Year then ended) under the Collaboration, as more particularly described on Exhibit A.3 (subsection 10) attached hereto.

 

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3.5 Material Transfer and Stewardship.

3.5.1. From time to time, each of Bayer and Evogene may transfer Biological Materials to the other for purposes of the Collaboration. Prior to transferring any such Biological Material, the party proposing to transfer material will ask the other party whether it wishes to receive such Biological Material, and will not make any such transfer without first receiving the consent of the other party to the receipt of such Biological Material. If a party transferring the Biological Materials is aware of a (potential) presence of unintended material in Biological Material, it shall inform the receiving party thereof prior to transferring the Biological Material. Each party agrees not to transfer, and to ensure that its Affiliates do not transfer, the other party’s material to any Third Party; except that a party and its Affiliates may transfer the other party’s Biological Material to Contractors performing work on behalf of and for the benefit of such party under this Agreement who are legally bound to use such Biological Material in accordance with terms comparable to those of this Section 3.5. The Biological Materials are experimental in nature and neither party makes any representation or warranty, express or implied, as to the identity, ownership, purity, utility, safety or activity of the Biological Materials. Neither party shall be liable for any loss, harm, illness or other damage or injury arising from the other party’s receipt, handling, use or disposal of the Biological Materials, except to the extent attributable to its own gross negligence or willful misconduct. Further, neither party makes any representation or warranty that use of the Biological Materials will not infringe any Third Party intellectual property rights. Each party shall use the other party’s Biological Materials only for the purposes of performing its obligations or exercising its rights under this Agreement. Upon expiration or early termination of the Collaboration Period, (i) Evogene will destroy or return (at the request of Bayer), and ensure that Evogene’s Affiliates destroy or return, to Bayer any remaining Biological Materials of Bayer in its or its Affiliates’ possession, and (ii) Bayer will destroy or return (at the request of Evogene), and ensure that Bayer’s Affiliates destroy or return, to Evogene any remaining Biological Materials of Evogene in its or its Affiliates’ possession , except that Bayer and its Affiliates will be entitled to continue using Biological Materials in accordance with the licenses as granted under this Agreement and to the extent needed to exercise such licenses.

3.5.2. Destruction of Biological Material received from the other party shall be certified by the party destructing the Biological Material to the party having provided the Biological Material.

3.5.3. Each party will use, and ensure that its Affiliates use, the other party’s Biological Materials in accordance with all applicable laws, regulations and governmental guidelines.

To the extent that any legal approvals or documents are required to enable activities under this Agreement, the party responsible for performing the activities shall obtain such approvals and documents which may include release permits and notifications, necessary approvals for material movement, importing or exporting Biological Material.

3.5.4. (a) Bayer supports and has affirmed its commitment to the Excellence Through Stewardship industry initiative. Further information relating to this initiative can be found at www.excellencethroughstewardship.org.

 

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The Parties agree to adhere, with respect to Biological Material exchanged between the parties ,to, and will include in agreements with Third Parties with whom they work in connection with this Agreement, the requirement of such Third Party to adhere with respect to such Biological Material to, mutually (between Bayer and Evogene) agreed appropriate and commercially reasonable stewardship provisions (including a plan to meet applicable stewardship and regulatory requirements pursuant to Section 3.5 which shall contain standard operating procedures and best practices which are applicable to such Biological Material), plant product integrity provisions, quality-assurance and quality-control standards with respect to Biological Material it provides the other party under this Agreement, including the requirement in all cases to immediately report any significant non-conformance (including unintended presence or loss of material control) relating to such Biological Material with the potential to impact product integrity, regulatory compliance, stewardship, quality standards or affect external stakeholders and/or markets.

Such incident reporting to Bayer shall be done to:

Bayer CropScience Inc.,

t. attn. James Humphris

Global Stewardship Manager – Oilseeds & Wheat

Calgary, Canada

Phone: +1 403 723 4541

Fax +1 403 723 7496

E-mail : james.humphris@bayer.com

and/or to any other person communicated by Bayer to Evogene

All communications related to incidence reporting and further actions shall be coordinated by the Bayer responsible person and Evogene. Any actions agreed to by the parties will be specific to the situation at hand including appropriate documentation and record keeping.

3.5.4. (b) Parties acknowledge that, as the Agreement evolves, more detailed stewardship provisions including plant product integrity provisions may apply on the activities of this Agreement with respect to Biological Material provided, in which case Bayer may propose such detailed provisions as a new Exhibit to this Agreement. Such detailed provisions may include e.g. rights to audit (as explained hereunder), quality management systems implementation, processes, requests to ship Biological Material through internationally accepted analytical laboratories for testing on presence of intended and absence of unintended biological material in the Biological Material to be shipped, self-certification of Evogene of having appropriate process based quality management systems in place designed to be consistent with leading industry programs, including the Excellence Through Stewardship™ initiative (www.excellencethroughstewardship.org).

 

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With regard to the right to audit, such right of Bayer on Evogene would mean auditing the stewardship and quality processes and plans of Evogene and any contractor of Evogene at reasonable intervals and times, coordinated in advance with Evogene, for compliance with this Agreement or to contract a Third Party on its behalf and at its expense to conduct such audit, subject to such Third Party signing a confidentiality agreement in a form reasonably acceptable to Evogene, in each case solely to determine whether Evogene complying with its obligations under Section 5 with respect to Biological Material to be transferred to Bayer. Evogene must respond to reasonable audit findings and take commercially reasonable appropriate actions to remedy findings of non-compliance with this Agreement. Evogene must permit properly requested inspections by authorized regulatory officials with respect to its activities under this Agreement, and if such audit relates to Biological Material to be provided to Bayer, must provide a copy of the final audit report, to the extent relating to such Biological Material, to the Bayer responsible person. It is understood that the right to audit shall not imply an obligation to audit. In case no audits are performed, this shall not be interpreted as an approval of stewardship and quality processes and plans.

3.5.5 Parties agree to cooperate and work together in good faith to agree on such stewardship and plant product integrity provisions, it being understood that Evogene shall not unreasonably withhold its consent to stewardship requirements requested by Bayer including plant product integrity provisions which are customary in the industry, taking into account the activities under the Agreement and the nature of the business of the parties. Such good faith discussions shall include a discussion on the estimated costs potentially related to adhering to certain stewardship or plant product integrity provisions and a good faith negotiation to reach agreement on which party is to bear such costs. For clarity, nothing in the above shall be deemed to require Evogene to agree to incur additional costs.

3.5.6. The stewardship provisions in this Section 3.5 are minimum requirements. Each party remains responsible for following all applicable laws and regulations. If any regulatory requirement conflicts with any provision of these stewardship provisions the regulatory requirement shall prevail. The party having received the Biological Material shall immediately notify the other party of any such conflict.

 

4. Exclusivity; Non-Solicitation

4.1 Exclusivity. Except as otherwise set forth herein, for the duration of the Collaboration Period, Evogene agrees that: (i) except as required by Pre-existing Obligations, it will not directly or indirectly license to any Third Party the right to use for any transgenic or breeding application in Wheat (regardless of Trait or Feature of interest), any Evogene Gene or Evogene SNP; and (ii) it shall not, in collaboration with or for the benefit of any Third Party, engage in, undertake, or otherwise pursue any ATHLETE Discovery Round that intentionally targets the discovery of Genes that confer Traits for transgenic applications in Wheat, it being understood that Genes identified through any ATHLETE Discovery Round not targeted towards

 

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the discovery of Genes that confer Traits in Wheat may be useful in Wheat (e.g. Evogene Genes discovered in an ATHLETE Discovery Round for yield improvement in corn, may be useful for use in Wheat), and (iii) it shall not, in collaboration with or for the benefit of any Third Party, engage in or perform any EvoBreed Discovery Round geared at discovering SNPs for breeding applications in Wheat targeted at addressing Features, it being understood that SNPs identified through any EvoBreed Discovery Round not targeted towards the discovery of SNPs that confer Features (irrespective of the target Features) in Wheat may be useful in Wheat. For clarity, in the event of a Change of Control of Evogene in which it is merged into another entity, the restrictions above with respect to Evogene Genes and Evogene SNPs shall not apply to Genes or SNPs, the use of which was discovered by such entity prior to such Change of Control or after the Change of Control through activities not making use of ATHLETE or EvoBreed. For clarity, and subject to other agreements that may be made between the parties, Evogene may freely license rights with respect to Collaboration Genes to any Third Party for use in any crop other than Wheat and may freely use Evogene Wheat Data and any other Dataset developed by Evogene under the Collaboration with respect to crops other than Wheat for any and all purposes.

4.2 Non-Solicitation. During the Collaboration Period and for [* * *] ([* * *]) year thereafter, neither party (or any of its Affiliates) shall solicit, or request any party engaged by it to solicit, any employee of the other party or its Affiliates who conducted work on the Collaboration to join the workforce of such party as an employee or independent contractor; provided that either party may make general postings or advertisements of open positions, and hire any employee of the other party responding thereto.

 

5. Licenses.

 

  5.1 To Bayer.

 

  5.1.1 Exclusive Commercial License.

5.1.1.1 License Grant. Subject to the terms and conditions set forth in this Agreement, Evogene hereby grants to Bayer and its Affiliates (with respect to each Affiliate, only so long as such entity remains an Affiliate of Bayer) an exclusive, perpetual, worldwide, royalty-bearing license under the Evogene Patent Rights and Exclusive Know-How to use Collaboration Genes, Collaboration SNP Sets solely in Wheat to make, have made, market, offer for sale, sell, have sold and import Licensed Products; provided that Evogene reserves for itself, its Affiliates and Contractors performing work for or on behalf of and under supervision of Evogene, the right under Evogene Patent Rights and Exclusive Know-How to use Collaboration Genes and Collaboration SNP Sets in Wheat solely for Evogene’s or its Affiliates’ own research purposes. For clarity, no license is granted under this clause with respect to any crops other than Wheat.

5.1.1.2 Sublicenses. Bayer will be entitled to grant Sublicenses to Third Parties under the license granted pursuant to Section 5.1.1.1, subject to the terms of this Section 5.1.1.2. Any such Sublicense shall be on terms and conditions in compliance with and not

 

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inconsistent with the terms of this Agreement and may only be made pursuant to written agreements, which will be subject and subordinate to the terms and conditions of this Agreement. Such Sublicense agreements will contain, among other things, the following:

(a) provisions necessary to ensure Bayer’s ability to perform its obligations under this Agreement, such as reporting and audit provisions that will enable Bayer to comply with its obligations under Section 8.1 and 8.3;

(b) a provision clarifying that, in the event of termination of the license set forth in Section 5.1.1.2 (in whole or in part, e.g. with respect to specific Collaboration Genes or a Gene Group), any existing Sublicense shall terminate to the extent of such terminated license, subject to Evogene’s obligations under Section 14.5.1.7; and

(c) If the Sublicense agreement allows for the grant of a further Sublicense by the Sublicensee, a provision stating that any further Sublicense may only be made in compliance with, and shall be subject to, the terms of this Section 5.1.1.2.

5.1.1.3 Summary Information Regarding Sublicense Agreement. Within sixty days of the end of every Calendar Year, Bayer shall provide Evogene with a list of Sublicense agreements entered into by Bayer in the previous Calendar Year, together with the following information: (a) the identity of the Sublicensee; (b) the subject matter Sublicensed, including the scope of the Sublicense granted (e.g. Collaboration Gene(s) covered, Collaboration SNP Set(s) covered, territories covered); and (c) Non-Royalty Sublicense Income received and to be received in connection with such Sublicense, including upfront fees, milestone payment and any other consideration that is Non-Royalty Sublicense Income. Such information shall be treated by Evogene as Confidential Information of Bayer and shall be used solely for the purpose of monitoring Bayer’s compliance with its obligations under this Agreement.

5.1.1.4 Breach by Sublicensee. Bayer shall be responsible and liable for any breach of a Sublicense agreement by any Sublicensee that results in a material breach of this Agreement. Without limiting the foregoing, Bayer shall either (a) cure such breach in accordance with Section 14.4.1 of this Agreement or (b) enforce its rights by terminating such Sublicense agreement in accordance with the terms thereof. Bayer will inform Evogene in its annual report of any termination of a Sublicense agreement or any assignment of a Sublicense agreement made by any Sublicensee (including the identity of the assignee).

 

  5.1.2 Non-Exclusive Licenses.

5.1.2.1 Evogene Wheat Data. Subject to the terms and conditions set forth in this Agreement, Evogene hereby grants to Bayer and its Affiliates (with respect to each Affiliate, only so long as such entity remains an Affiliate of Bayer) a non-exclusive, worldwide, royalty-free license (without the right to grant Sublicenses but with the right to use Evogene Wheat Data for research purposes alone or in collaboration with Third Parties) to use the Evogene Wheat Data solely in Wheat.

 

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5.1.2.2 Evogene Lines. Subject to the terms and conditions set forth in this Agreement, Evogene hereby grants to Bayer and its Affiliates (with respect to each Affiliate, only so long as such entity remains an Affiliate of Bayer) a non-exclusive, worldwide, royalty-bearing (included in the Net Feature Value) license (without the right to grant Sublicenses) to use the Evogene Lines solely for use in a Back-Cross Program for the development of Licensed Products.

5.1.3 Affiliates. Bayer shall remain responsible in all regards with respect to acts or omissions of its Affiliates under this Agreement and shall ensure their adherence to the terms and conditions of this Agreement. Bayer hereby represents and warrants that each of its Affiliates exercising any of the rights granted hereunder agrees to be bound and will be bound toward Evogene by all obligations relating to such use, by obligation that is directly enforceable by Evogene against Bayer and such Affiliate, it being understood however that Bayer shall in any event be notified prior to any action being taken by Evogene towards an Affiliate of Bayer. Via Bayer’s reporting obligations under Section 6.1.4, Bayer will keep Evogene informed which operations are undertaken by any of its Affiliates under this Agreement.

5.1.4 Contractors. The licenses granted to Bayer under Section 5.1.1.1 and 5.1.2 include the right to have some or all of Bayer’s rights under such sections exercised or performed by one or more Contractors for or on Bayer’s or its Affiliate’s (in case of Affiliates, so long as such entity remains an Affiliate) behalf for Bayer’s or its Affiliate’s sole benefit and under its supervision; provided, however, that: (a) such Contractor is bound by all confidentiality and intellectual property-related provisions of this Agreement applicable to its activities under such license; (b) no such Contractor shall be entitled to grant, directly or indirectly, to any Third Party any Sublicense with respect to any such rights; and (c) Bayer will be responsible for any act or omission taken or made by a Contractor of Bayer or its Affiliate under the licenses granted to Bayer pursuant to Section 5.1.1.1 and 5.1.2 and any such act or omission will be deemed an act or omission by Bayer under this Agreement.

 

  5.2 To Evogene.

5.2.1 License Grant. Subject to the terms and conditions set forth in this Agreement, Bayer hereby grants to Evogene and its Affiliates (in each case, only so long as such entity remains an Affiliate of Evogene) a non-exclusive, worldwide, royalty-free license (without the right to grant Sublicenses) to use the Bayer Wheat Data solely for the performance of the Collaboration.

5.2.2 Affiliates. Evogene shall remain responsible in all regards with respect to acts or omissions of its Affiliates under this Agreement and shall ensure their adherence to the terms and conditions of this Agreement. Evogene hereby represents and warrants that each of its Affiliates that may exercise any of the rights granted hereunder will agree to be bound and will be bound toward Bayer by all obligations relating to such use, by obligation that is directly enforceable by Bayer against Evogene and such Affiliate. Evogene will inform Bayer on an annual basis which operations are undertaken by any of its Affiliates under this Agreement.

 

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5.2.3 Contractors. The license granted to Evogene under Section 5.2.1 includes the right to have some or all of Evogene’s rights under such section exercised or performed by one or more Contractors on Evogene’s or its Affiliate’s (in each case, so long as such entity remains an Affiliate) behalf for Evogene’s or its Affiliate’s sole benefit and under its supervision; provided, however, that: (a) such Contractor is bound by all confidentiality and intellectual property-related provisions of this Agreement applicable to its activities under such license; (b) no such Contractor shall be entitled to grant, directly or indirectly, to any Third Party any sublicense with respect to any such rights; and (c) Evogene will be responsible for any act or omission taken or made by a Contractor of Evogene or its Affiliate under such license and any such act or omission will be deemed an act or omission by Evogene under this Agreement.

5.3. Limitations with Respect to Encumbered Collaboration Genes. Notwithstanding anything to the contrary in this Agreement, Bayer’s license and rights hereunder with respect to an Encumbered Collaboration Gene shall be subject to the applicable provisions(such as patent enforcement and rights to improvements) covering such Encumbered Collaboration Gene that are set forth in the report provided by Evogene under Section 3.1.1.3 which will describe, with respect to such Encumbered Collaboration Gene, the limitations to the parties’ rights and obligations under this Agreement that are required by the Pre-existing Obligations applicable to such Encumbered Collaboration Gene. Evogene shall not be required to make any amendments to such Pre-existing Obligations in order to adapt them to the provisions of this Agreement and in the case of a conflict between the terms of this Agreement and any Pre-existing Obligations as described in the relevant report provided by Evogene under Section 3.1.1.3, such Pre-existing Obligations will prevail. Bayer’s exercise of its license and rights with respect to an Encumbered Collaboration Gene will be deemed Bayer’s agreement to the provisions set forth in the relevant report provided by Evogene under Section 3.1.1.3., provided however, for the avoidance of doubt, that such agreement of Bayer shall only relate to the provisions impacting Bayer’s rights and obligations under this Agreement.

5.4 No Other Grant of Rights. Except for the rights specifically granted under this Agreement, nothing in this Agreement will be construed to confer any ownership interest, license or other rights upon either party by implication, estoppel or otherwise as to any technology, intellectual property rights, products or biological materials of the other party, or any other entity.

 

6. Development and Commercialization Diligence.

 

  6.1 General.

6.1.1 Specific Diligence Milestone. Without prejudice to Section 17.2, Bayer, by itself or through its Affiliates or Sublicensees, shall perform the activities set forth in Sections 6.2 and 6.3 within the time periods specified therein.

 

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6.1.2 General Diligence.

6.1.2.1 In addition to Bayer’s obligations under Section 6.1.1, Bayer, by itself or through its Affiliates or Sublicensees, shall use its commercial reasonable efforts (meaning those reasonable, diligent, good faith efforts as Bayer would normally use to accomplish a similar objective under similar circumstances and using at least those efforts that would normally be used by a similarly situated biotech company with respect to a product Controlled by it of similar market potential, taking into account issues of safety, efficiency, targeted product profile, reasonable return on investment, competitiveness of the marketplace, regulatory structure and other relevant factors): (a) to develop Licensed Products; (b) to introduce Licensed Products into the commercial market; and (c) to market Licensed Products following such introduction into the market.

6.1.2.2 As at the Effective Date of this Agreement, not all eventualities resulting from future technical, scientific and economic developments as well as possible changes of legislation in various jurisdictions concerned can be foreseen or taken into account. If during this Agreement, there should be any case of undue hardship for Bayer, as a result of which Bayer cannot reasonably be expected to be bound by the diligence obligations set forth in Section 6.1.2 (e.g. drastic changes in legislation and regulatory environment or market acceptance criteria, political environment influencing public acceptances, not obtaining required field trial permits due to reasons beyond Bayer’s control), then such shall not be seen as a breach of Bayer of its diligence obligations set forth in Section 6.1.2.1 and Bayer and Evogene shall confer in good faith in order to come to an amicable understanding and a solution acceptable for both parties.

For clarity, the provisions of this Section 6.1.2.2 shall not apply to Bayer’s obligations under Sections 6.1.1, 6.2 or 6.3.

6.1.3 Encumbered Collaboration Genes. Without limiting any of the foregoing and notwithstanding anything described hereafter in Section 6, in the event that a diligence obligation of Bayer under this Agreement would not be reached within the time period set forth therefore as a result of provisions of Pre-existing Obligations imposed on an Encumbered Collaboration Gene, then any delay resulting from such Pre-existing Obligations will not be considered as a failure of Bayer to meets its obligations.

6.1.4 Annual Report. Commencing with the expiration or earlier termination of the Collaboration Period (at which time the parties will no longer have reporting obligations under Section 3.4), within sixty (60) days after the end of each calendar year, Bayer shall furnish Evogene with a written report in a form described in Exhibit A, Section A.3 (subsection 10.3) summarizing its, its Affiliates’ and its Sublicensees’ efforts during the prior year to develop and commercialize Licensed Products, including without limitation: (a) research and development activities, including with respect to each Collaboration Gene and each Collaboration SNP Set that has entered the Bayer Pipeline, the stage such Collaboration Gene or Collaboration SNP Set, as applicable, has reached in the Bayer Pipeline, and including, after completion of a seasonal field trial with respect to a Licensed Product, and overview of the results of such trials, including an analysis thereof; and (b) which activities are undertaken by any of its Affiliates under this Agreement in accordance with Section 5.1.3 (including the name of such Affiliates). Each report shall be broken down by Licensed Products.

 

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Within thirty (30) days after the receipt of each such report and, if Evogene, based on the received reports has reasonable doubt about Bayer’s compliance with its obligations under Section 6.2 and 6.3 or a specific concern regarding the contents of such report or would otherwise like clarifications regarding the subject matter of the report, Evogene may request a meeting of the Joint Review Committee (defined below in Section 6.1.5) to review with Bayer the contents of such report and the progress of Bayer’s efforts to meet its obligations under Sections 6.2 and 6.3; such request shall be notified to Bayer and, if Evogene wishes to raise concerns about Bayer’s compliance with its obligations under Section 6.2 or 6.3 in such meeting, its request for a meeting shall contain a short description of such concerns.

6.1.5 Joint Review Committee. During the Collaboration Period, the Steering Committee will also serve as a joint review committee (the “Joint Review Committee”). Following the Collaboration Period, the Joint Review Committee will be comprised of an equal number of full time employees from each party (or an Affiliate of such party, provided that for purposes of this clause, “Control” as it relates to the definition of Affiliate will mean seventy-five (75%) or more ownership and not fifty percent (50%)). Each Party may change its representatives to the Joint Review Committee from time to time, in its sole discretion, effective upon notice to the other party of such change. These representatives shall have appropriate technical credentials, experience and knowledge relevant to the development and commercialization of Licensed Products. The Joint Review Committee will review questions raised by Evogene regarding the subject matter of the reports provided by Bayer pursuant to Section 6.1.4. In addition, the Joint Review Committee will discuss requests brought by Bayer to the Joint Review Committee with respect to milestone fees with respect to Collaboration Genes in accordance with the last paragraph of Section 7.3.1.

Additional representatives of a party may from time to time, by mutual consent of the parties, be invited to attend Joint Review Committee meetings as observer or expert. Decision-making authority is not vested within the Joint Review Committee; however, the parties will consider in good faith all suggestions brought to the Joint Review Committee by the parties. The Joint Review Committee may meet at dates and locations jointly agreed upon within the Joint Review Committee and may meet by means of teleconference, videoconference or other similar communications equipment. Each party will bear its own costs associated with its representative’s participation on the Joint Review Committee.

 

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  6.2 Collaboration Genes.

 

  6.2.1 Collaboration Genes Diligence.

 

  6.2.1.1 Transformation into Wheat.

(a) With respect to each Gene Group 1 to 3, within [* * *] ([* * *]) months of the end of the Gene Group Period for such Gene Group as set forth in Section 1.72 of this Agreement (e.g. with respect to Gene Group [* * *], by [* * *] months), Bayer shall initiate transformation in Wheat with respect to the minimum number of Collaboration Genes within such Gene Group set forth in Section 1 of the Exhibit B (the “Minimum Number of Collaboration Genes For Bayer GM Pipeline”). [* * *].

(b) With respect to each of the [* * *] ([* * *]) and the [* * *] ([* * *]) Gene Groups, Bayer may initiate transformation in Wheat with respect to less than the Minimum Number of Collaboration Genes For Bayer GM Pipeline of such Gene Groups, provided that: [* * *].

(c) [* * *].

6.2.1.2 First Field Trials. With respect to each Gene Group, within [* * *] ([* * *]) months from the Transformation Date of such Gene Group, Bayer shall complete a First Wheat GM Trial with respect to at least [* * *] ([* * *]) [* * *] within such Gene Group. Within [* * *] ([* * *]) months from the Transformation Date of such Gene Group, Bayer shall complete a First Wheat GM Trial with respect to the remaining Minimum Number of Collaboration Genes For Bayer GM Pipeline of such Gene Group. [* * *].

6.2.1.3 Pipeline Advancement. With respect to each Gene Group, Bayer shall advance at least [* * *] ([* * *]) [* * *]within such Gene Group from GM Phase [* * *] to GM Phase [* * *] in the Bayer Pipeline, within the timeframes for advancement to each GM Phase set forth in Section 1 of the Exhibit B. [* * *].

6.2.1.4. Extension of diligence timeframes.

(a) [* * *].

(b) In addition to Bayer’s rights under Section 6.2.1.4(a), if Bayer believes that it will not meet a milestone set forth in Section 6.2.1.3 with respect to a Gene Group within the time period set forth above for the attainment of such milestone, as extended pursuant to Section 6.2.1.4(a), [* * *], without such extension being deemed a failure by Bayer to meet its diligence obligations under Section 6.2.1.3.

(c) In addition to Bayer’s rights under Section 6.2.1.4(b), if Bayer believes that it will not meet a milestone set forth in Section 6.2.1.3 with respect to a Gene Group within the time period set forth above for the attainment of such milestone, as extended pursuant to Section 6.2.1.4(b), [* * *], without such extension being deemed a failure by Bayer to meet its diligence obligations under Section 6.2.1.3.

 

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(d) In addition, with respect to Bayer’s obligations under Section 6.2.1.3 to advance a Collaboration Gene from GM Phase [* * *] and GM Phase [* * *], if after extending the time period for attainment of such milestone in accordance with Sections 6.2.1(b) and 6.2.1(c) Bayer is still unable to meet such milestone within the extended period due to [* * *], Bayer may extend the time period for achieving such milestone by an additional period of up to [* * *] by providing Evogene with written notice of such prior to the end of the then current period for achieving such milestone. Such notice will be accompanied by a detailed explanation for such extension. However, if the concrete circumstances described above are such that they would reasonably justify a period of delay longer than [* * *] ([* * *]) [* * *], then Bayer and Evogene shall confer in good faith in order to come to an amicable understanding and a solution acceptable for both parties, it being understood that the total delay shall not be longer than [* * *] ([* * *]) [* * *].

6.2.2 Collaboration Genes Diligence Failure

6.2.2.1 Failure to Conduct Transformation into Wheat. With respect to each Gene Group, if within the timeframe set forth in Section 6.2.1.1, and subject to Section 6.2.1.4, Bayer does not initiate transformation into Wheat of the Minimum Number of Collaboration Genes For Bayer GM Pipeline for such Gene Group as set forth in Section 6.2.1.1 above, then [* * *].

6.2.2.2 Failure to Conduct First Wheat GM Trials. With respect to each Gene Group, if, subject to Section 6.2.1.4, within [* * *] ([* * *]) [* * *] from the Transformation Date of such Gene Group, Bayer does not complete a First Wheat GM Trial with respect to at least [* * *] ([* * *]) [* * *], then [* * *].

6.2.2.3 Failure to Conduct Pipeline Advancement. With respect to each Gene Group, if Bayer does not advance at least [* * *].

 

  6.3 Collaboration SNPs.

 

  6.3.1 Collaboration SNPs Diligence

6.3.1.1 First Field Trials. With respect to each Collaboration SNP Set: (i) within [* * *]([* * *]) [* * *] from delivery to Bayer of the SNP Computational Summary Report of such Collaboration SNP Set, Bayer shall initiate an introgression process into Wheat with respect to such Collaboration SNP Set; (ii) within [* * *] ([* * *]) [* * *], or within a period of time as discussed in and advised by the Research Committee, from delivery to Bayer of the SNP Computational Summary Report of such Collaboration SNP Set, Bayer shall complete the development of an SNP Assay with respect to such Collaboration SNP Set; and (iii) [* * *].

(a) Notwithstanding the above, if Bayer is unable to [* * *].

(b) [* * *].

 

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6.3.1.2 Pipeline Advancement. Bayer shall advance each Collaboration SNP Set from Breeding Phase [* * *] to Breeding Phase [* * *] in the Bayer Pipeline, within the timeframes for advancement to each Breeding Phase set forth in Exhibit B, Section 2. [* * *].

6.3.1.3 Extension of diligence timeframes.

(a) If Bayer believes that it will not meet a milestone set forth in Section 6.3.1 within the time period set forth above for the attainment of such milestone (as may have been extended pursuant to the provisions of Section 3.3.1.1), [* * *].

(b) In addition to Bayer’s rights under Section 6.3.1.3(a), if Bayer believes that it will not meet a milestone set forth in Section 6.3.1.2 within the time period set forth above for the attainment of such milestone, as extended pursuant to Section 6.3.1.3(a), [* * *].

(c) In addition to Bayer’s rights under Section 6.3.1.3(b), if Bayer believes that it will not meet a milestone set forth in Section 6.3.1.2 within the time period set forth above for the attainment of such milestone, as extended pursuant to Section 6.3.1.3(b), [* * *].

6.3.2 Collaboration SNPs Diligence Failure

6.3.2.1 Failure to Conduct First Field Trials. With respect to each Collaboration SNP Set, if Bayer does not complete any of the milestones set forth in Section 6.3.1.1(iii) within the timeframe set forth in Section 6.3.1.1(iii) above for completion of such milestone, as may be extended pursuant to Section 6.3.1.3(a), then the consequence set forth in Section 6.3.2.3 below will apply with respect to Bayer’s license under Section 5.1 to such Collaboration SNP Set.

6.3.2.2 Failure to Conduct Pipeline Advancement. With respect to each Collaboration SNP Set, if Bayer does not advance such Collaboration SNP Set from Breeding Phase [* * *] to Breeding Phase [* * *] in the Bayer Pipeline within the applicable timeframe for advancement from Breeding Phase to Breeding Phase as set forth in Section 6.3.1.2 above (as such timeframe may be extended in accordance with Section 6.3.1.3 above), or if at any time after such Collaboration SNP Set has been advanced to a next Breeding Phase in the Bayer Pipeline, Bayer discontinues to work in good faith in such Breeding Phase on such Collaboration SNP Set, then the consequence set forth in Section 6.3.2.3 below will apply with respect to Bayer’s license under Section 5.1 to such Collaboration SNP Set.

6.3.2.3 Consequences of Bayer Diligence Failures. With respect to any Collaboration SNP Set as to which Bayer has incurred diligence failure as set forth in Section 6.3.2.1 or 6.3.2.2 above, [* * *].

 

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7. Consideration.

7.1 Upfront Fees. In partial consideration for rights granted with respect to Collaboration Genes and related assets and Know-How developed prior to the Effective Date, Bayer shall pay Evogene a non-refundable technology access and license fee in an aggregate amount of [* * *] Euro (€[* * *]) in two equal installments as follows: [* * *].

7.2 Research Payments to Evogene.

7.2.1 General. Subject to the terms and conditions of this Agreement (including early termination or partial termination of the Collaboration in accordance with Section 14.3), Bayer shall pay Evogene the following annual payments for ongoing research, (each, an “Annual Research Payment”), which Annual Research Payments shall each be made in four equal, quarterly installments, payable upon receipt of the corresponding invoices in accordance with Section 8.2, which invoices shall be issued after the last day of each quarter of the relevant years, in arrears,:

7.2.1.1 For Collaboration Year 1, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro

(€[* * *]);

7.2.1.2 For Collaboration Year 2, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro
(€[* * *]);

7.2.1.3 For Collaboration Year 3, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro
(€[* * *]);

7.2.1.4 For Collaboration Year 4, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro
(€[* * *]);

7.2.1.5 For Collaboration Year [* * *], Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]); and

7.2.1.6 For the year following the end of Collaboration Year [* * *], during which Evogene will perform the Validation Tail, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]).

7.2.2 Payments in Case of Extension. In case Bayer decides to continue activities in Collaboration Year [* * *] with respect to both the ATHLETE Program and the EvoBreed Program, in accordance with Section 3.1.3.1(g), the Annual Research Payments specified above in Section 7.2.1.5 and 7.2.1.6 shall be replaced by the Annual Research Payments specified below in Section 7.2.2.1, 7.2.2.2. and 7.2.2.3 :

7.2.2.1 For Collaboration Year [* * *], Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro
(€[* * *]);

7.2.2.2 For Collaboration Year [* * *], Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro
(€[* * *]); and

 

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7.2.2.3 For the year following the end of Collaboration Year [* * *], during which Evogene will perform the Validation Tail, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]).

 

  7.3. Milestone Fees.

7.3.1 Collaboration Genes. As further consideration for the grant to Bayer of the licenses granted under this Agreement, Bayer shall pay Evogene the following non-refundable milestone fees upon the occurrence of the following events with respect to each Collaboration Gene:

7.3.1.1 [* * *] Euro (€[* * *]) upon achievement of Technology Proof of Concept, or, in the absence of such Technology Proof of Concept, the promotion of a Collaboration Gene to GM Phase 2 [* * *];

7.3.1.2 [* * *] Euro (€[* * *]) upon achievement of Commercial Proof of Concept, or, in the absence of such Commercial Proof of Concept, promotion of a Collaboration Gene to GM Phase 3 with respect to the first Licensed Product containing such Collaboration Gene;

7.3.1.3 [* * *] Euro (€[* * *]) upon Elite Event Selected, or, in the absence of such Elite Event, the promotion of a Collaboration Gene to GM Phase 4 [* * *]; and

7.3.1.4 [* * *] Euro (€[* * *]) upon the earlier of (a) Regulatory Approval in at least two of the Major Wheat Countries for Regulatory Purposes, [* * *].

The parties acknowledge that there are certain circumstances in which Bayer may wish to advance a number of Collaboration Genes through a certain milestone, even though it anticipates that such Collaboration Genes will be stacked in a single License Product for purposes of addressing a single Trait and will not be commercialized as part of separate Licensed Products or separate Traits within a Licensed Product independently of each other (for example, if the contribution of each Collaboration Gene to the Trait of interest is not significant enough, but the stacking of the Collaboration Genes has the desired effect on the Trait). In such circumstances, Bayer may request Evogene to consider allowing Bayer to make only one milestone payment with respect to such milestone (rather than one payment with respect to each of such Collaboration Genes that Bayer intends to stack in the single Licensed Product for purposes of addressing a single Trait). Such request will be raised by Bayer at a Joint Review Committee meeting and will be accompanied by a detailed explanation supporting such request, including the reason and supporting data (e.g. data relating to the effect of each Collaboration Gene on the Trait of interest) for Bayer’s conclusion that the Collaboration Genes in question will only be stacked into a single Licensed Product for purposes of addressing the same Trait and not commercialized as part of separate Licensed Products or separate Traits within a Licensed

 

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Product independently of each other. Evogene shall consider such request in good faith, taking into account the recommendations of the Joint Review Committee, but final decision on the matter shall be made by Evogene at its sole discretion. If Evogene decides to approve such request, such approval may include a mechanism for compensating Evogene if it turns out that different combinations of such Collaboration Genes end up being commercialized as part of separate Licensed Products or separate Traits within a Licensed Product (e.g. one Licensed Product incorporates one of such Collaboration Genes and another Licensed Product incorporates either (a) other of such Collaboration Genes or (b) other of such Collaboration Genes together with the former Collaboration Gene).

7.3.2 Collaboration SNP Sets. As further consideration for the grant to Bayer of the licenses granted under this Agreement, Bayer shall pay Evogene the following non-refundable milestone fees upon the occurrence of the following events with respect to each Collaboration SNP Set included in a Licensed Product; provided that with respect to each of the following milestones, the relevant payment will be due a maximum of [* * *] times:

7.3.2.1 [* * *] Euro (€[* * *]) upon achievement of Commercial Proof of Concept, or, in the absence of such Commercial Proof of Concept, the promotion of a Collaboration SNP Set to Breeding Phase 2 with respect to the first Licensed Product containing such Collaboration SNP Set;

7.3.2.2 [* * *] Euro (€[* * *]) upon achievement of Extended Commercial Proof of Concept, or, in the absence of such Extended Commercial Proof of Concept, the promotion of a Collaboration SNP Set to Breeding Phase 3 [* * *]; and

7.3.2.3 [* * *] Euro (€[* * *]) upon the earlier of (a) Regulatory Approval in at least two of the Major Wheat Countries For Regulatory Purposes, [* * *] and (b) the First Commercial Sale of the first Licensed Product containing such Collaboration SNP Set.

[* * *].

7.3.3. Notice of Milestone. Bayer shall notify Evogene in writing within thirty (30) days following the achievement of each milestone described in Section 7.3.1 or 7.3.2, as applicable, with respect to a Collaboration Gene or Collaboration SNP Set, as applicable, and shall make the appropriate milestone payment within forty-five (45) days after receipt of the corresponding invoice in accordance with Section 8.2, which invoice shall be issued after the achievement of such milestone.

7.3.4 Successive Milestones. The milestones set forth in Sections 7.3.1 and 7.3.2 are intended to be successive. If a Licensed Product is not required to undergo a particular milestone set forth above (“Skipped Milestone”), such Skipped Milestone will be deemed to have been achieved upon the achievement by such Licensed Product of the next successive milestone (“Achieved Milestone”). Payment for any Skipped Milestone that is owed in accordance with the provisions of this Section 7.3.1 or 7.3.2 shall be due within forty-five (45) days after receipt of an invoice in accordance with Section 8.2, which invoice shall be issued after the achievement of the Achieved Milestone.

 

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7.4 Royalty Payments. As further consideration for the licenses granted under this Agreement, Bayer agrees to pay to Evogene royalties on Net Trait Revenue and Net Feature Revenue as set forth in this Section 7.4. For clarity, the sale, lease or other transfer or use of a Licensed Product may entitle Evogene (a) to Net Trait Revenue on more than one Collaboration Genes, (b) to Net Feature Revenue on more than one Collaboration SNP Sets and/or (c) to both Net Trait Revenue and Net Feature Revenue.

7.4.1 Net Trait Revenue.

7.4.1.1 Royalty Rates. [* * *]:

(a) [* * *].

(b) [* * *]:

(i) [* * *]; or

(ii) [* * *].

[* * *].

(c) [* * *].

(d) [* * *].

7.4.1.2 Royalty Term. Royalties under Section 7.4.1.1 with respect to each Collaboration Gene will be payable [* * *] basis until the later of (i) the date that is [* * *] ([* * *]) years after the date of the First Commercial Sale of a Licensed Product containing such Collaboration Gene in such country and (ii) the last date on which the making, using or selling of a Licensed Product containing such Collaboration Gene falls within the scope of a Valid Claim of the Evogene Patent Rights in the country in which such Licensed Product is made, used or sold. [* * *].

7.4.1.3 Stacking. [* * *].

[* * *].

(i) [* * *];

 

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(ii) [* * *].

(iii) [* * *].

If Bayer does not have sufficient relevant data to support a good faith determination of the Relative Trait Contribution, the Relative Trait Contribution shall be determined by the following formula: A/(A+B), where A is the number of Collaboration Gene(s), and B is the number of the other Gene(s) (i.e., excluding the Collaboration Gene(s)) contained in the Licensed Product that are required in order for such Trait(s) to add commercial value to the Licensed Product.

7.4.1.4 Third Party Offsets.

(a) Dominating Patents. [* * *].

(b) Enabling Technologies. [* * *].

(c) [* * *].

7.4.2 Net Feature Revenue.

7.4.2.1 Royalty Rate. [* * *].

7.4.2.2 Royalty Term. Royalties under Section 7.4.2.1 with respect to each Collaboration SNP Set will be payable [* * *] basis until the date that is [* * *] ([* * *]) [* * *] after the date of the First Commercial Sale of a Licensed Product containing such Collaboration SNP Set in such country.

7.4.3 Bad Debt. [* * *].

7.5 Non-Royalty Sublicense Income. [* * *].

 

8. Reports; Payments; Records.

 

  8.1 Reports and Payments.

8.1.1 Annual Reports. Within ninety (90) days after the conclusion of each Calendar Year commencing with the first Calendar Year in which Net Product Revenue is generated or Non-Royalty Sublicense Income is received, Bayer shall deliver to Evogene a report containing the following information (in each instance, with a Licensed Product-by-Licensed Product, country-by-country and selling entity-by-selling entity breakdown) and which will be treated by Evogene as Confidential Information of Bayer:

 

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8.1.1.1 The date of First Commercial Sale with respect to a Licensed Product in each country with a description of such Licensed Product, including the Collaboration Gene(s) and/or Collaboration SNP Set(s) contained in such Licensed Product.

8.1.1.2 The number of units of Licensed Products sold, leased or otherwise transferred by Bayer, its Affiliates and Sublicensees for the applicable Calendar Year;

8.1.1.3 A calculation of Net Bayer Trait Revenue, Net Bayer Feature Revenue, Net Sublicensee Trait Revenue and Net Sublicensee Feature Revenue for the applicable Calendar Year, including: (a) the gross amount billed or invoiced for such Licensed Product sold or otherwise transferred by Bayer, its Affiliates and Sublicensees during the applicable Calendar Year; (b) a calculation of Net Product Revenue for such Licensed Product for the applicable Calendar Year, including an itemized listing of allowable deductions; (c) the basis used for determining Assumed Net Similar Product Revenue for each Collaboration Gene and/or Collaboration SNP Set contained in such Licensed Product in each country; (d) if there was no Similar Product, the facts that served as the basis for Bayer’s good faith determination of Net Trait Revenue and/or Net Feature Revenue for such Collaboration Gene and/or Collaboration SNP Set;

8.1.1.4 A detailed accounting of all Non-Royalty Sublicense Income received during the applicable Calendar Year; and

8.1.1.5 The total amount payable to Evogene in Euro on Net Trait Revenue and Net Feature Revenue with respect to each Collaboration Gene and each Collaboration SNP Set contained in such Licensed Product in such country, including a description and justification for any adjustments pursuant to Section 7.4.1.3 and offsets pursuant to Section 7.4.1.4; and

8.1.1.6 The total amount payable to Evogene in Euro on Net Trait Revenue and Net Feature Revenue with respect to all Licensed Products and Non-Royalty Sublicense Income for the applicable Calendar Year, together with the exchange rates used for conversion.

If no amounts are due to Evogene for a particular Calendar Year, the report shall so state. Each such report shall be certified on behalf of Bayer by an authorized Bayer officer as true, correct and complete in all material respects.

8.1.2 Semi-Annual Information. In addition to the reports described in Section 8.1.1, and for Evogene internal accounting purposes only, within sixty (60) days after the 30th of June of each year commencing with the first Calendar Year in which Net Product Revenue is generated or Non-Royalty Sublicense Income is received, Bayer shall deliver to Evogene an informal interim overview containing the following information (in each instance, with a Licensed Product-by-Licensed Product breakdown) and which will be treated by Evogene as Confidential Information of Bayer. Evogene expressly acknowledges that such interim overview cannot be considered as part of Bayer’s reporting obligations on which Section 8.3 applies, and shall not be used by Evogene in any audit process:

8.1.2.1 the number of units of Licensed Products sold, leased or otherwise transferred by Bayer, its Affiliates and Sublicensees for the six-month period ending June 30th of such year;

 

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8.1.2.2 the gross amount billed or invoiced for such Licensed Products sold or otherwise transferred by Bayer, its Affiliates and Sublicensees during the six-month period ending June 30th of such year.

8.2 Payment; Currency Conversion. Any payment due under this Agreement will be payable in Euro within forty-five (45) calendar days following the receipt of a respective invoice and will be paid by check or bank wire transfer in immediately available funds to such bank account as may be designated in writing by Evogene to Bayer from time to time and shall be marked so as to refer to this Agreement. Royalty Payments according to Section 7.4 for each Calendar Year shall be due at the same date as such written report according to Section 8.1.1 for the respective Calendar Year.

Royalties due that are based on amounts invoiced in currencies other than Euros shall be converted into Euros using the average exchange rate for the applicable Calendar Year (January 1 to December 31), calculated in accordance with Bayer’s internal IFRS-compliant accounting and reporting process described in Exhibit I hereto. If the Euro ceases to be the official currency throughout the Economic and Monetary Union of the European Union (Euro area), or if the Euro ceases to be the official currency of Germany and Germany reverts to a national currency, then the German currency shall be used. Such payments will be without deduction of exchange, collection or other charges.

The invoices to Bayer shall be marked so as to refer to this Agreement (Hecate: 4/10/b00917) shall refer to Bayer’s VAT number (DE 813 359 838) and shall be sent to

Bayer CropScience AG

t. attn. BCS controlling HQ-AG

Alfred-Nobel-Str. 50

40789 Monheim am Rhein, Germany

8.3 Records. Bayer shall maintain, and shall cause its Affiliates and Sublicensees to maintain, complete and accurate records of Licensed Products that are made, used, sold, leased or transferred, any amounts payable to Evogene in relation to such Licensed Products, and all Non-Royalty Sublicense Income received by Bayer and its Affiliates, which records shall contain sufficient information to permit Evogene to confirm the accuracy of any reports or notifications delivered to Evogene under Section 8.1. Bayer, its Affiliates and/or its Sublicensees, as applicable, shall retain such records relating to a given Calendar Year for at least three (3) years after the conclusion of that Calendar Year, during which time Evogene will have the right to cause (or with respect to Sublicensees, at Bayer’s option, have Bayer cause) an independent, certified public accountant (or, in the event of a non-financial inspection, other appropriate

 

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auditor), acceptable to Bayer (which acceptance shall not be unreasonably withheld or delayed), to inspect such records during normal business hours for the sole purpose of verifying the accuracy of any reports and payments delivered under this Agreement and Bayer’s compliance with the terms hereof. Furthermore, such inspection shall not take place more than once during a Calendar Year per inspected party and only with respect to periods that have not been previously inspected in accordance with the provisions of this Section 8.3. Such accountant or other auditor, as applicable, shall not disclose to Evogene any information regarding such inspection, except that such auditor shall provide each party with a statement of the amounts payable to Evogene in the opinion of such auditor. Such inspection shall be at the sole expense of Evogene, unless it reveals an underpayment by Bayer of at least [* * *] percent or €[* * *] (whichever is less), in which case the reasonable costs of such audit shall be reimbursed by Bayer. If any underpayment is found, Bayer will promptly pay Evogene such underpaid amount, together with interest thereon pursuant to Section 8.4. If any overpayment is found, Evogene will refund Bayer such excess amount. The inspecting auditors will be bound by confidentiality restrictions to Bayer by provisions no less stringent than those specified in this Agreement.

8.4 Late Payments. Any payments due under this Agreement shall be due on such date as is specified in this Agreement and, in the event such date is not a Business Day, then the next succeeding Business Day. Any failure by either Party to make a payment within fourteen (14) calendar days after the date when due shall obligate that Party to pay computed interest, with the interest period commencing on the due date and ending on the payment date to the respective other Party. The interest shall be computed at a rate per annum equal to the EURIBOR for one month quoted two (2) days prior to due date by the European Banking Federation, plus a premium of [* * *] percent ([* * *]%). In case no such EURIBOR quotation is available because such due date is a “TARGET closing day”, then the EURIBOR quotation from the day prior to such closing day shall be used (“TARGET closing days” are the days on which the Trans-European Automated Real-time Gross settlement Express Transfer (TARGET) system are closed as published on the website of the European Central Bank, including Saturdays and Sundays). These rates are currently published by Reuters on screen <EURIBOR>. The interest rate shall be adjusted monthly and compounded annually. Interest shall be calculated based on the actual/360 adjusted day count convention.

Payment of such interest by Bayer shall not limit, in any way, Evogene’s right to exercise any other remedies Evogene may have as a consequence of the lateness of any payment. For the avoidance of doubt, payments not made when due because no respective invoice has been received shall not be considered a late payments.

8.5 Withholding and Similar Taxes. All payments and fees required to be paid pursuant to this Agreement are net of any sales tax, use tax, value-added tax or other similar tax or governmental charge imposed upon the transactions giving rise to such payments and fees, and any such sales tax, use tax, value-added tax or other similar tax or governmental charge shall be borne and paid by the party paying such payments and fees. Bayer shall be entitled to deduct and withhold from any amount payable to Evogene under this Agreement withholding tax only in the

 

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amount which it is obliged to deduct at source from such payments under the provisions of any applicable tax law. If Bayer is required by law to retain withholding taxes, the parties shall cooperate to complete the documents required by applicable laws or double tax treaties. If the withholding tax rate is reduced according to a relevant double tax treaty, no deduction shall be made or a reduced amount shall be deducted only if Bayer is timely furnished with necessary documents (e.g. Freistellungsbescheid) by Evogene issued from the German Tax Authority (Bundeszentralamt für Steuern) or any other applicable tax authority, certifying that the payment is exempt from withholding tax or subject to a reduced withholding tax rate. Any withheld tax shall be treated as having been paid by Bayer to Evogene for all purposes of this Agreement, provided Bayer shall timely forward to Evogene the tax receipts certifying the payments of withholding tax on behalf of Evogene.

If Bayer does not deduct withholding tax but is still required by tax law to pay withholding tax on account of Evogene to the tax authorities, Evogene shall assist Bayer with regard to all procedures required in order to obtain reimbursement by tax authorities or, in case tax authorities will not reimburse withholding tax to Bayer, Evogene will immediately refund the tax amount.

 

  8.6 Reporting and Change of Control by Bayer Competitor

In the event of a Change of Control of Evogene by a Bayer Competitor, if all Gene and similar license agreements, in which payment is based on sales of seeds to Growers or distributors, between Bayer and such Bayer Competitor require that reporting be provided to an independent third party rather than to the licensing party, Bayer shall have the right to provide the reports it is required to provide to Evogene according to its reporting obligations under this Agreement, to an independent Third Party reasonably acceptable to both parties. Such Third Party shall have received from the Bayer Competitor the necessary authority to act on behalf of the Bayer Competitor to receive the reports and information to be provided by Bayer according to this Agreement and to review those and act thereon according to the terms of this Agreement, including the review and potential subsequent actions as referred to in the definitions of Net Feature Revenue, Definition of Net Trait Revenue and in Section 7.4.1.3 and the presence in the Joint Review Committee.

Such Third Party shall not disclose to the Bayer Competitor any information received from Bayer, except for statements with regard to Bayer’s compliance or lack of compliance with its reporting obligations.

Without limiting the foregoing, it is expressly understood that the Third Party shall in no event submit Bayer information which could be considered as potentially not in compliance with EU and/or applicable national competition laws.

 

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9. Intellectual Property.

 

  9.1 Ownership.

9.1.1 Determination of Inventorship. Inventorship of Collaboration Inventions shall be determined in accordance with United States patent law.

9.1.2 Ownership by Inventorship or Contribution. Except as stated otherwise in Section 9.1.3 below:

9.1.2.1 Evogene or its designated Affiliate shall own all rights, title and interest in and to all Collaboration Inventions and Collaboration Know-How for which each inventor or contributor is an employee or Contractor of Evogene or its Affiliates.

9.1.2.2 Bayer or its designated Affiliate shall own all rights, title and interest in and to all Collaboration Inventions and Collaboration Know-How for which each inventor or contributor is an employee or Contractor of Bayer or its Affiliates.

9.1.2.3 The parties will jointly own all rights, title and interest in and to all Collaboration Inventions and Collaboration Know-How for which (i) one or more inventor(s) or contributor(s) is an employee or Contractor of Bayer or its Affiliate(s) and (ii) one or more inventor(s) or contributor(s) is an employee or Contractor of Evogene or its Affiliate(s).

9.1.3 Exceptions.

9.1.3.1 Bayer Owned Exceptions. Notwithstanding Section 9.1.2, and regardless of inventorship or contribution:

(a) All rights, title and interest in and to Bayer Wheat Data, including all Intellectual Property rights therein, shall be owned solely and exclusively by Bayer; and

(b) All rights, title and interest in and to Collaboration Material, including all Intellectual Property rights therein, shall be owned solely and exclusively by Bayer, subject to any rights Evogene may have in any underlying Intellectual Property (e.g. Evogene Know-How) contained therein; and

(c) All rights, title and interest in and to any Event in Wheat made by or on behalf of Bayer or its Affiliates, including all Intellectual Property rights therein, shall be owned solely and exclusively by Bayer, subject to Evogene’s rights in the Collaboration Genes and any Evogene Know How contained therein.

Evogene hereby assigns and agrees to assign in the future, and shall ensure that each of its Affiliates and Contractors assigns, (when any such Intellectual Property is first reduced to practice or first fixed in a tangible medium, as applicable) any right, title or interest it or they may have in and/or to any of the Intellectual Property owned by Bayer under this Section 9.1.3.1, and any Intellectual Property rights therein, whether or not patentable or registrable under patent, copyright, plant variety protection rights, or similar statutes, to Bayer.

 

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9.1.3.2 Evogene Owned Exceptions. Notwithstanding Section 9.1.2, and regardless of inventorship or contribution:

(a) All rights, title and interest in and to Evogene Wheat Data, including all Intellectual Property rights therein, shall be owned solely and exclusively by Evogene;

(b) All rights, title and interest in and to any Collaboration Invention with respect to a Collaboration Gene or its use, including all Intellectual Property rights therein, shall be owned solely and exclusively by Evogene;

(c) All rights, title and interest in and to any improvement, modification or derivative work of, or any addition to, ATHLETE, EvoBreed or any other Evogene computational platform or tool, including all Intellectual Property rights therein, shall be owned solely and exclusively by Evogene.

Bayer hereby assigns and agrees to assign in the future, and shall ensure that each of its Affiliates and Contractors assigns, (when any such Intellectual Property is first reduced to practice or first fixed in a tangible medium, as applicable) any right, title or interest it or they may have in and/or to any of the Intellectual Property owned by Evogene under this Section 9.1.3.2, and any Intellectual Property rights therein, whether or not patentable or registrable under patent, copyright or similar statutes, to Evogene.

9.1.4 Use of Jointly-Owned IP. Subject to the licenses granted herein, Bayer and Evogene each shall have the full right to grant licenses under its interest in jointly-owned Collaboration Inventions and Collaboration Know-How without any obligation to seek the consent of the other or to account for any profits made as a result of any such license.

9.2 Patent Filing, Prosecution and Maintenance.

9.2.1 Solely-Owned IP. Each party will have sole Control, at its sole discretion and expenses (except as set forth in Section 9.2.2 below), over the preparation, filing, prosecution and maintenance of patents and patent applications claiming Collaboration Inventions owned by it.

9.2.2 Evogene Patent Rights.

9.2.2.1 Collaboration Genes. Prior to providing Bayer with a Gene Computational Report, Evogene will determine whether it has already filed a patent application claiming the relevant Collaboration Gene and its use.

 

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(a) With respect to Collaboration Genes for which Evogene has not filed a patent application, Evogene shall file a provisional patent application prior to delivering the relevant Gene Computational Report to Bayer. In addition, Evogene will prepare, file, prosecute and maintain Evogene Patent Rights with respect to each such Collaboration Gene in each of the countries listed in Exhibit D (the “Bayer Requested Countries”). For those Bayer Requested Countries which are member states of the Patent Cooperation Treaty (PCT), such preparation, filing, prosecution and maintenance will be done by filing an international patent application under the PCT, followed by the national phase filings prior to the relevant deadlines. For clarity, nothing in the above shall limit Evogene’s right to prepare, file, prosecute or maintain Evogene Patent Rights with respect to any such Collaboration Gene in any country that is not a Bayer Requested Country.

Prior to any due date in the patent prosecution and maintenance process with respect to Evogene Patent Rights, at which date a decision not to file or register an Evogene Patent Right in a particular country may result in irrevocable relinquishing of patent right in that territory (including extended filing at the end of the priority year, entry into national or regional phase of an international patent application or validation of a granted regional patent in respective contracting states), Bayer may (a) request Evogene to file patent applications with respect to such Evogene Patent Rights in additional countries not included in the Bayer Requested Countries, in which case Evogene shall make all reasonable efforts to file such Evogene Patent Rights in such territories prior to the expiration of the relevant filing deadline or (b) subject to Section 9.2.2.6(g), notify Evogene that it does not wish to continue paying for the prosecution of such Evogene Patent Rights in one or more Bayer Requested Countries.

(b) With respect to Collaboration Genes for which Evogene has previously filed patent application(s), Evogene will provide Bayer, together with the relevant Gene Computational Report, a list of the countries in which Evogene Patent Rights covering such Collaboration Gene have been filed and are being prosecuted and maintained by Evogene (“Already Covered Countries”). If there are certain Bayer Requested Countries in which Evogene has not filed Evogene Patent Rights covering such Collaboration Gene and the filing deadline for filing in such countries has not yet expired, Bayer may request Evogene to file such Evogene Patent Rights in one or more of such Bayer Requested Countries by providing written notice to Evogene, at the latest forty-five (45) days prior to the filing deadline for filing in such countries, of such Bayer Requested Countries in which Bayer wishes Evogene to file such Evogene Patent Rights. If Bayer provides such notice to Evogene, Evogene shall make all reasonable efforts to file Evogene Patent Rights covering such Collaboration Gene in such Bayer Requested Countries prior to the expiration of the relevant filing deadline.

(c) At least once a year, Evogene will provide to Bayer a status update of the Evogene Patent Rights in the Bayer Requested Countries. Upon request from Bayer, Evogene will provide Bayer with a copy of all the claims that are pending or issued for those Evogene Patent Rights in those Bayer Requested Countries listed in such request of Bayer.

Such status updates and copy of claims shall be sent to Bayer BioScience NV, Licensing and Patent Department, Technologiepark 38, 9052 Gent, Belgium, or such other address as communicated by Bayer to Evogene.

 

Initials Bayer :    page 57 of 89    Initials Evogene :

 

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9.2.2.2 Collaboration SNP Sets

(a) Evogene acknowledges that Bayer may prefer to keep Collaboration Inventions with respect to Collaboration SNP Set(s), or the use of Collaboration SNP Set(s) confidential and therefore not have patent applications filed with respect thereto. As a result, Evogene will not file any such patent application with respect to a Collaboration SNP Set without first obtaining Bayer’s approval.

(b) If a Collaboration Invention owned by Evogene with respect to a Collaboration SNP Set, and/or the use of a Collaboration SNP Set, has been conceived and reduced to practice by or on behalf of Evogene or its Affiliates in a manner that would enable the filing of a patent application (e.g. it has sufficient plant validation results displaying that the relevant Collaboration SNP Set, or relevant allele(s) is useful in addressing a desired Feature), Evogene may notify Bayer of such and request Bayer to allow Evogene to file such patent application. If Bayer agrees to the filing of such an application or otherwise requests Evogene to file an application with respect to a Collaboration SNP Set, Evogene shall file a provisional patent application with respect to such Collaboration Invention. In addition, Evogene will prepare, file, prosecute and maintain Evogene Patent Rights with respect to such Collaboration Invention in each of the Bayer Requested Countries.

9.2.2.3 Derived Collaboration Gene. If Bayer initiates transformation activities with respect to a Derived Collaboration Gene that was not previously provided to Bayer as a Collaboration Gene as part of a Computational Gene Report, Bayer shall notify Evogene in writing of such within thirty (30) days of the commencement of such transformation activities. In such notice, Bayer shall describe the Derived Collaboration Gene. If Evogene has not previously claimed such Derived Collaboration Gene and its use in a patent application, Evogene shall file a patent application covering such Derived Collaboration Gene.

9.2.2.4 Derived Collaboration SNP. If Bayer initiates an introgression process into Wheat with respect to a Derived Collaboration SNP that was not previously provided by Evogene to Bayer as part of a Collaboration SNP Set, Bayer shall notify Evogene in writing of such within thirty (30) days. In such notice, Bayer shall describe the Derived Collaboration SNP. The provisions of Section 9.2.2.2 shall apply with respect to such Derived Collaboration SNP.

9.2.2.5 Bayer Supporting Data. If Bayer possesses data with respect to any specific Collaboration Gene, Collaboration SNP Set, Derived Collaboration Gene or Derived Collaboration SNP that is needed for the support of Evogene Patent Rights claiming such Collaboration Gene, Collaboration SNP Set, Derived Collaboration Gene or Derived Collaboration SNP, e.g. validation results from field trials, Evogene may request Bayer to provide such data to Evogene, subject to Sections 9.2.2.2 and 9.2.2.6. Subject to Sections 9.2.2.2 and 9.2.2.6, upon such a request from Evogene and within a reasonable time, Bayer will provide

 

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Evogene with information reasonably requested by Evogene and needed for the prosecution of the relevant Evogene Patent Rights covering such Collaboration Gene, Collaboration SNP Set, Derived Collaboration Gene or Derived Collaboration SNP.

9.2.2.6 Expenses.

(a) With respect to all Evogene Patent Rights described in Section 9.2.2.1(a), Evogene shall incur all costs with respect to the relevant provisional and PCT applications.

(b) Bayer shall reimburse Evogene for all documented, out-of-pocket expenses incurred by Evogene in the preparation, filing, prosecution and maintenance of Evogene Patent Rights described in Sections 9.2.2.1(a) in Bayer Requested Countries, as well as with respect to any other filings requested by Bayer in other countries.

(c) Bayer shall reimburse Evogene for all documented, out-of-pocket expenses incurred by Evogene in the preparation, filing, prosecution and maintenance of Evogene Patent Rights described in Section 9.2.2.1(b) that Bayer requests Evogene to filed in Bayer Requested Countries that are not Already Covered Countries.

(d) Bayer shall reimburse Evogene for all documented, out-of-pocket expenses incurred by Evogene in the preparation, filing, prosecution and maintenance of Evogene Patent Rights in Section 9.2.2.2(b) that Bayer agrees or requests to have filed in accordance with Section 9.2.2.2(b).

(e) With respect to Evogene Patent Rights described in Section 9.2.2.1(b), in the event that Evogene (or any licensee of Evogene, as applicable) should decide to cease prosecution and/or maintenance of any Evogene Patent Rights in an Already Covered Country, Evogene shall notify Bayer in writing and offer Bayer the opportunity to cause Evogene to continue prosecution and/or maintenance of such Evogene Patent Rights in such country, at Bayer’s expenses. If Bayer instructs Evogene to continue prosecution and/or maintenance of such patent in such country and continues reimbursing Evogene for all related out-of-pocket documented expenses, Bayer will be entitled to credit such expenses incurred under Section 9.2.2.6(b) against royalties due with respect to Net Trait Revenue on the Collaboration Gene covered by such Evogene Patent Rights from sales of Licensed Products in such country.

(f) Without limiting the foregoing, Evogene shall notify Bayer no less than sixty (60) days in advance of taking any action with respect to the Evogene Patent Rights, or of any date in respect of which the decision by Evogene not to take action, would prejudice Bayer’s rights under the licenses granted herein, including resulting in the invalidation of any patent or abandonment of any patent application included within the Evogene Patent Rights. Bayer may, but is not obliged to, provide recommendations on the course of action by Evogene. In such case, the parties will discuss such recommendations and other possible courses of action in good faith and agree on a course of action, it being understood however that Evogene shall not unreasonably withheld its consent with a Bayer recommendation.

 

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(g) Bayer may choose to no longer reimburse Evogene for expenses as foreseen in 9.2.2.6 (b) or (c) in a particular country or with regard to a particular patent or patent application, in which case the licenses granted to Bayer and its Affiliates under this Agreement will terminate solely with regard to such particular Evogene Patent Rights in such particular country for which the notice applies. Bayer shall provide Evogene in such case with a 90 days prior written notification thereof. Upon receipt of such notice by Evogene, Bayer shall be released from its obligation to reimburse Evogene for the expenses incurred thereafter as to such Evogene Patent Rights in such country; provided, however, that costs already authorized or committed to by Evogene prior to Evogene’s receipt of such notice shall be borne by Bayer.

9.2.3 Jointly Owned IP. Except as set forth in Section 9.2.4, the parties will discuss in good faith matters relating to the preparation, filing, prosecution and maintenance of patents applications and patents claiming Collaboration Inventions jointly-owned by the parties (“Joint Patent Rights”), including whether to file, which party will take the lead in the preparation, filing, prosecution and maintenance of such patent applications and patents and the allocation of costs between the parties related to such actions.

9.2.4 IP on Collaboration SNP Set(s). If Bayer decides that Joint Patent Rights with respect to a Collaboration SNP Set, and/or the use of a Collaboration SNP Set should be filed, Bayer shall be responsible for the preparation, filing, prosecution and maintenance of the relevant patent applications and patents at its expense; provided, however, that Bayer may elect to waive such right on a case-by-case basis, in which case Bayer shall notify Evogene promptly in writing and Evogene shall have the right, but not the obligation, to take responsibility for such patent applications and patents. The responsible party will reasonably coordinate filing and prosecution activities for such patent applications and patents and keep the other party reasonably informed.

9.3 Enforcement of Patent Rights.

9.3.1. Notice. If either party becomes aware of any possible or actual infringement of any Evogene Patent Rights due solely to the making, using or selling of a Licensed Product by an unlicensed third party (a “Wheat Infringement”), that party shall promptly notify the other party and provide it with details of its knowledge regarding such Wheat Infringement. For clarity, any possible or actual infringement of any Evogene Patent Rights that involves a crop other than Wheat shall not be considered a Wheat Infringement and Bayer will have no rights with respect thereto, unless and to the extent rights have been granted to Bayer with respect thereto in a separate agreement(s), such as the Research & License Agreement related to Rice made between the parties dated April 12, 2009.

 

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9.3.2. Enforcement.

9.3.2.1 Except as set forth in Sections 9.3.2.6 and 9.3.2.7, Bayer will have the exclusive right and will be solely responsible for taking any action or suit against such Wheat Infringement and to conduct such action or suit in accordance with its best judgment (subject however to close consultation with Evogene) and at its own cost. Such right shall include the right to enter into settlements involving the Wheat Infringement, but only in so far as the terms and conditions of such settlement have effect solely with regard to the use of the relevant Collaboration Gene or Collaboration SNP Set in Wheat.

9.3.2.2 In such jurisdictions where only the patent owner would be legally entitled to act for patent infringement before a court, such action or suit for patent infringement will be taken under Evogene’s name, and Evogene will provide Bayer with an appropriate Power of Attorney to represent Evogene in such action or suit before such court. However, in jurisdictions which require the patent owner to be co-plaintiff, Evogene agrees to join Bayer as co-plaintiff, provided that Bayer reimburses Evogene for all documented, reasonable, out-of-pocket expenses incurred by Evogene in connection therewith.

9.3.2.3 Upon Bayer’s request, Evogene shall provide reasonable assistance to Bayer in connection with such action or suit and Evogene shall sign such documents as may be required by applicable law in order to allow Bayer to exercise its right to bring and/or conduct an action or suit pursuant to this Section 9.3.2. Bayer will reimburse Evogene for any reasonable out of pocket expenses, which are documented in writing, incurred by Evogene for rendering such assistance.

9.3.2.4 Bayer will keep Evogene continuously informed of any actions or suits pursuant to this Section 9.3.2, will act in close cooperation with Evogene and will take into account the interests of Evogene and other business partners of Evogene insofar as it has been informed thereon by Evogene. Evogene shall have the right to participate in all decisions and actions concerning the validity of any Evogene Patent Rights claim, including the right to join as a party any such action for infringement brought by or against Bayer where a defense or claim of patent invalidity or unenforceability with respect to the Evogene Patent Rights has been or will be raised. Evogene shall have the right to retain its own counsel for the purpose of defending the validity or enforceability of any Evogene Patent Rights claim. Any costs incurred by Evogene in relation to this involvement will be borne by Evogene, without derogating from Section 13. Evogene will be entitled to inform Monsanto of such action, under confidentiality, and only in the event and to the extent such action relates to Collaboration Gene(s) licensed to Monsanto, and Evogene will communicate to Bayer if it has informed Monsanto.

9.3.2.5 All compensation and other amounts awarded to Bayer in such litigation or settlement (net of any out-of-pocket costs, including attorney fees, to Bayer in undertaking such action) will be deemed “Non-Royalty Sublicense Income” and subject to payment of royalties to Evogene therefore. If such award or settlement involves the receipt of any non cash consideration by Bayer for the use of any Collaboration Gene or Collaboration SNP Set, then Bayer shall pay Evogene according to the cash equivalent of such compensation.

 

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9.3.2.6 In the event that Bayer does not take appropriate action against such acts as aforesaid other than if Bayer determines in good faith that such prosecution may impair the Evogene Patent Rights, Evogene shall have the right to do so at Evogene’s costs, and in such event all compensation and other amounts awarded in such litigation will be payable to Evogene, except in case Evogene’s action is required according to Section 9.3.2.2 after requested by Bayer to take such action.

9.3.2.7 Notwithstanding the foregoing, if (a) in an action commenced by Bayer pursuant to Section 9.3.2, a defense or claim of patent invalidity or unenforceability with respect to the Evogene Patent Rights is raised by the other party or (b) a declaratory judgment action is brought naming Bayer and/or any of its Affiliates or Sublicensees as a defendant and alleging invalidity or unenforceability of any claims within the Evogene Patent Rights, Evogene may elect, upon written notice to Bayer, to take over the sole defense of the invalidity and/or unenforceability aspect of the action at its own expense.

9.3.3 With regard to any acts of infringement of the Evogene Patent Rights involving the use of Collaboration Gene(s) or Collaboration SNP Set in plants other than Wheat, Evogene or anyone on its behalf shall have the exclusive right and will be solely responsible for initiating and conducting any action or suit for patent infringement of the Evogene Patent Rights against such acts and to conduct such action or suit in accordance with its best judgment and at its own cost and Bayer will have no obligations with regard to such action or suit. Evogene shall however inform Bayer of any such action, subject to Evogene’s confidentiality obligations towards Third Parties to which Evogene has licensed the right to use the Collaboration Gene(s) or Collaboration SNP Set in plants other than Wheat. If Evogene is prevented from notifying Bayer of any action or suit for patent infringement of the Evogene Patent Rights due to confidentiality obligations towards a Third Party, then Evogene shall make commercially reasonable efforts to obtain the Third Party’s consent to the disclosure of such information to Bayer, and in any event, shall bring information about such action or suit to Bayer’s attention promptly after such information becomes publicly available.

10. Regulatory Data.

10.1 Collaboration Gene Licensed to Bayer and Third Party(ies).

10.1.1 With respect to Collaboration Genes licensed by Evogene to both Bayer and one or more other Third Party licensee(s) of Evogene (i.e. for use in crops other than Wheat), Bayer agrees to cooperate with such licensee(s) with respect to regulatory approval matters relating to each such Collaboration Gene as set forth in this Section 10.1, provided that, with respect to each Collaboration Gene, the Third Party licensee has agreed to be bound by substantially the same terms (i.e. the same in all material respects) with respect to such

 

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Collaboration Gene. Evogene will use good faith efforts to include in agreements with such Third Party licensee(s) entered into after the Effective Date, other than pursuant to Pre-existing Obligations, provisions pursuant to which such Third Party agrees to cooperate with Bayer with respect to regulatory approval matters as set forth in this Section 10.1 and that such Third Party Licensee(s) will be bound by the same regulatory obligations as those applying on Bayer set forth in this Section 10.1 with respect to Collaboration Genes and the products containing a Collaboration Gene in crops other than Wheat. Such agreements shall be referred to as “Compliant Future Agreements”.

10.1.2 Bayer shall notify Evogene when it has reached the stage of preparing data for inclusion in filings for Regulatory Approval with respect to a Licensed Product containing a Collaboration Gene. Promptly after receipt of such notice and subject to confidentiality obligations to Third Parties, Evogene will notify Bayer whether the Collaboration Gene(s) contained in such Licensed Product is subject of another license(s) and, if so, will identify the other licensee(s), and will inform Bayer whether the license agreement made with such Third Party is a Compliant Future Agreement.

Compliant Future Agreements will provide that Evogene shall receive notifications from the Third Party licensee(s) when these have reached the stage of preparing data for inclusion in filings for regulatory approval with respect to a product containing a Collaboration Gene in crops other than Wheat and Evogene, subject to confidentiality obligations to Bayer, shall inform such Third Party whether the Collaboration Gene(s) contained in such product is subject to a license to Bayer.

10.1.3 Except as set forth in Section 10.1.5 below, the following shall apply on Bayer and the Third Party licensee(s) in the case a Compliant Future Agreement has been made between Evogene and the Third Party:

10.1.3.1 Unless Bayer and such other licensee(s) agree otherwise, prior to the commencement by Bayer or such other licensee(s) of preparation of data intended for inclusion in filings for regulatory approval with respect to a Collaboration Gene, Bayer and the Third Party licensee will enter into a mutually acceptable confidentiality agreement covering the potential disclosures and discussions for the purpose of Section 10.1.3.2;

10.1.3.2 Thereafter, Bayer and such other licensee(s) shall consult with each other to review relevant regulatory and product stewardship issues and will use reasonable good faith efforts to agree upon the appropriate reasonable strategic plans and actions that will serve to preserve the registrability of and ability to respectively commercialize Licensed Products containing such Collaboration Gene and products containing such Collaboration Gene in crops other than Wheat. Such plans and actions may include performance of certain studies, sharing of protocols and payment of a reasonable access fees for regulatory data obtained up to a certain point in time.

 

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10.1.4 The above requirements relating to regulatory approval shall apply to Collaboration Genes licensed for as long as such Collaboration Genes remain licensed to both Bayer and such other licensee(s).

10.1.5 Notwithstanding the above, if the relevant Collaboration Gene is licensed to Monsanto, the provisions of Section 10.2 shall apply.

10.2 Collaboration Genes Licensed to Bayer and Monsanto.

10.2.1 [* * *].

10.2.2 [* * *].

10.2.3 [* * *]:

10.2.3.1 [* * *].

10.2.3.2 [* * *].

10.3.3 [* * *].

11 Confidentiality.

11.1 Each Receiving Party (as defined in the definition section under the definition of Confidential Information), will keep any Confidential Information of Disclosing Party (as defined in the definition section under the definition of Confidential Information) strictly confidential and will not disclose same to any other party, except to those employees, consultants or Contractors of the Receiving Party or, to whom it is necessary to grant access thereto for the purposes of this Agreement, and who are bound by confidentiality and non-use obligations no less restrictive than those set forth herein, and for whom Receiving Party is responsible towards the Disclosing for compliance with the obligations of confidentiality and non-use. The Receiving Party will not use the Confidential Information of Disclosing Party except for purposes of exercising Receiving Party’s rights and performing its obligations under this Agreement. The Receiving Party will safeguard all Confidential Information of Disclosing Party against unauthorized copying, use and/or disclosure, applying at the least the same degree of care (including security practices) as they use to protect their own assets of like importance, but not less than reasonable care. The Receiving Party will notify the Disclosing Party promptly if it learns of the unauthorized disclosure or use of Confidential Information of Disclosing Party. The Receiving Party understands that the unauthorized disclosure of such Confidential Information may cause irreparable harm to the Disclosing Party and, as such, the Disclosing Party shall be entitled to seek an injunction or other equitable relief to prevent such unauthorized disclosure.

 

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11.2 Notwithstanding the foregoing;

11.2.1 Bayer may disclose Evogene Confidential Information to its Sublicensees, subject to confidentiality and non-use terms no less restrictive than those in this Section 11, provided that it limits any such disclosure to the minimum information that Bayer reasonably determines is required to be disclosed;

11.2.2 A Receiving Party may disclose Confidential Information of the Disclosing Party if and to the extent required by any securities laws or regulations or stock exchange laws and regulations applicable to Receiving Party. However, in such event, the Receiving Party shall promptly inform the Disclosing Party before making such disclosure and shall limit the disclosure to the extent of the requirement;

11.2.3 Receiving Party may disclose Disclosing Party’s Confidential Information to patent attorneys and patent offices in the event and to the extent required to exercise any rights it may have under Section 9 to file, prosecute, maintain and defend patent applications, provided however that the Disclosing Party has previously been informed thereof and has provided its approval to such disclosure, which shall not be unreasonably withheld. Without limiting the foregoing, Bayer will not withhold or delay its approval to such disclosure with respect to field trial data in Wheat relating to a Collaboration Gene that, in the opinion of the independent patent counsel prosecuting the Evogene Patent Rights covering such Collaboration Gene, is needed in order to secure a claim covering use of such Collaboration Gene in Wheat, whereby it is understood that Bayer may however delay its approval for such period of time that is reasonably needed to secure protection of the field trial data;

11.2.4 Bayer may disclose Evogene Confidential Information to Regulatory Authorities to the extent required to receive Regulatory Approval for a License Product; provided in each case that (a) Bayer provides Evogene sufficient prior notice and time to file a patent application or obtain any other form of intellectual property protection for its unprotected Know-How; and (b) shall cooperate with Evogene, at Evogene’s cost and expense, in any effort by Evogene to secure a protective order blocking the disclosure of, or otherwise affording confidential treatment to, such Confidential Information, and will limit any disclosure to the minimum information that the Bayer reasonably determines is required to be disclosed; and

11.2.5 The Receiving Party may disclose this Agreement and Confidential Information of the Disclosing Party disclosed in a report delivered in performance of a reporting obligation under this Agreement to the Receiving Party’s existing or proposed financial investors and to potential acquirers who propose (i) to acquire Control, directly or indirectly, of Receiving Party (including, in each case, to any legal, accounting, tax or similar advisor of such) or (ii) to acquire all or substantially all of the assets of the Receiving Party pertaining to the subject matter of this Agreement, and that have entered into a written confidentiality and non-use agreement no less restrictive than the terms set forth herein. Such disclosure shall in any event be strictly limited to what is required by such investor or acquirer for purposes of evaluating its potential risk in, or other material aspects relating to, such investment or potential acquisition and shall be

 

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organized in the frame of a due diligence process, and any use by such investor or acquirer shall be limited to such purpose. The Receiving Party making such disclosure shall ensure it has appropriate systems in place monitoring which information has been disclosed to whom and when, and shall remain liable towards the Disclosing Party for compliance of such investors and acquirers with the terms of confidentiality and non-use as set forth in this Agreement. In the event such investor or potential acquirer is a Bayer Competitor, then a disclosure as set forth in this Section 11.2.5 shall be made to an independent attorney or accountant solely for the purpose of allowing such attorney or accountant to advise the Receiving Party regarding potential risks posed by this Agreement relating to a potential investment in or acquisition of the Receiving Party or of (substantially) all of its assets pertaining to the subject matter of this Agreement.

11.2.6 Receiving Party shall be free to use, for any purpose, the “residuals” from access to or work with Disclosing Party’s Confidential Information, provided that Receiving Party shall maintain the confidentiality of the Confidential Information as provided herein. The term “residuals” means information in non-tangible form, and which may have been retained in unaided human memory by persons who have had access to the Confidential Information, such as general ideas, concepts, know-how or techniques contained therein.

11.3 Press Releases. Promptly after the execution of this Agreement, the parties will issue a joint press release substantially in the form attached hereto as Exhibit J and will coordinate other public disclosures regarding the execution of this Agreement and the commencement of the Collaboration. In addition, the parties intend to issue additional press releases and other public announcements relating to the Collaboration and the progress under this Agreement. To facilitate such disclosures, on an annual basis the parties will develop and share a communication plan regarding the Collaboration and the development of Licensed Products in the Bayer Pipeline that includes a framework for the timing and content of press releases, analyst presentations and each party’s annual report, to the extent they relate to the Collaboration and/or the development of Licensed Products in the Bayer Pipeline. Drafts of any such press releases issued by a party relating to the Collaboration or the development of Licensed Products shall first be made available to the other party at least two (2) weeks prior to such publication, or such shorter time as may be required for a party to comply with obligations described in Section 11.2.2, for the other party’s approval as to its content and timing of publication, such approval not to be unreasonably withheld and the publication not to be unreasonably delayed. Once a press release or other public statement is permitted hereby, nothing in this Section 11.3 shall restrict either party from the subsequent issuance thereof or public reference thereto.

11.4 Survival. The obligations under this Section 11 will survive termination or expiration of this Agreement for any reason for a period of [* * *] ([* * *]) years.

 

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12. Representations, Warranties and Covenants; Limitation of Liability; Disclaimers

12.1 Representations, Warranties and Covenants.

12.1.1 Evogene represents and warrants that it has the power, authority and capacity to enter into this Agreement, to perform its obligations hereunder and the right to grant the licenses herein granted, subject to Section 12.3, and that it obtained all necessary, currently existing Israeli governmental and regulatory authority approvals required -if any- in order to perform its obligations under this Agreement, as contemplated herein.

12.1.2. Evogene represents and warrants, subject to the disclaimers set forth in Section 3 with respect to its [* * *] validation platform, it has or will have (in each case, when relevant) the necessary resources, capacity and infrastructure available to perform its obligations set forth under this Agreement.

12.1.3. Evogene represents and warrants to comply with all laws applicable to the performance of its obligations under this Agreement, including those with regard to the handling of biological materials.

12.1.4. Evogene warrants and represents that it is not aware of any event or other set of circumstances relating to any pending or outstanding grants, incentives and subsidies granted to Evogene by the government of the State of Israel or any agency thereof (collectively, “Grants”), including Grants from the Office of Chief Scientist (“OCS”), Grants from bi-national or multinational agreements or any other Grants distributed by the OCS under the applicable Israeli Laws, which might lead to any restriction on Bayer’s ability to conduct the business as contemplated herein including the commercialization of Licensed Products and that any such commercialization and further development shall not violate any condition and/or provision associated with, relating to or required under any Grant.

12.1.5. Evogene represents and warrants that the notes it makes in the Gene Computational Report in case an Identified Gene (or Homolog thereof) is an Encumbered Collaboration Gene and the description of the limitation to the parties’ rights and obligations under this Agreement that would be required by the Pre-existing Obligations applicable to such Encumbered Collaboration Gene (application of Section 3.1.1.3.) will be true, correct and complete in all material respects.

12.1.6 Bayer represents and warrants that it has the power, authority and capacity to enter into this Agreement and perform its obligations hereunder and the right to grant the licenses herein granted, subject to Section 12.3.

12.1.7 Bayer represents, warrants and covenants that it will comply, and will ensure that its Affiliates and Sublicensees comply, with all local, state, and international laws and regulations relating to the development, manufacture, use, sale, exportation and importation of Licensed Products.

 

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12.2 Limitations of Liability. Under no circumstance shall either party be liable under this Agreement to the other party for any incidental, consequential, indirect, special or exemplary damages, including damages from loss of profits or opportunities, even if advised of the possibility of such damages, it being understood that the parties’ indemnification obligations hereunder (Section 13) shall not be limited in any way by the aforementioned exclusion of damages.

12.3 Disclaimers

12.3.1 Neither party guarantees that its activities pursuant to this Agreement will lead to any specific result.

12.3.2 Except as set forth in Section 12.1, and except for the representations and warranties set forth in Sections 5 and 10.2.1, each party disclaims all warranties, express or implied, in fact or by operation of law, statutory or otherwise. Without limiting the foregoing:

12.3.2.1 Evogene expressly disclaims any warranty that any of the patent applications included in the Evogene Patent Rights will result in a patent, or that any Evogene Patent Rights will be enforceable or provide commercial value;

12.3.2.2 Evogene expressly disclaims (a) any warranty that any action performed or anticipated pursuant hereto will not infringe intellectual property rights of any Third Party and (b) warranty as to the scope or validity of the Evogene Patent Rights, and excludes all liability due to defects of title unknown to Evogene; and

12.3.2.3 Evogene specifically disclaims any implied warranties of merchantability, suitability, state-of-the-art quality, competitiveness, fitness for a particular purpose or performance of the Collaboration Genes or the Collaboration SNP Sets or any of them for any purpose.

13. Indemnification.

13.1 Indemnification of Evogene. Bayer shall indemnify, defend and hold Evogene and its Affiliates and their respective directors, officers, employees, agents, consultants and counsel, and the successors and assigns of the foregoing (the “Evogene 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 an Evogene Indemnitee, arising from or occurring as a result of (a) Bayer’s breach of its representations, warranties or covenants set forth in Section 12.1, (b) any personal injury, death, property or environmental damage suffered as a result of any Licensed Product made, used or sold by or on behalf of Bayer, its Affiliates or its Sublicensees, or (c) a breach or a claimed breach of any Third Party’s Intellectual Property rights by any

 

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Licensed Products made, used, sold, imported or otherwise transferred by or on behalf of Bayer or any of its Affiliates and Sublicensees; except in each case under clauses (a), (b) or (c) to the extent caused by the gross negligence or willful misconduct of any of the Evogene Indemnitees.

13.2 Indemnification of Bayer. Evogene shall indemnify, defend and hold Bayer and its Affiliates and their respective directors, officers, employees, agents, consultants and counsel, and the successors and assigns of the foregoing (the “Bayer 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 Bayer Indemnitee, arising from or occurring as a result of (a) Evogene’s breach of its representations, warranties or covenants set forth in Section 12.1 or (b) the gross negligence or willful misconduct on the part of Evogene; except in each case under clauses (a) or (b), to the extent caused by the gross negligence or willful misconduct of any of the Bayer Indemnitees.

13.3 Procedure. A party that intends to claim indemnification under this Section 13 (the “Indemnitee”) 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 a stipulation to or admission or acknowledgment of any liability or wrongdoing on the part of the Indemnitee or imposes any obligation on the Indemnitee other than a monetary obligation, and only to the extent the Indemnitor assumes in full such obligation. The failure to deliver 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 materially by the delay. At the Indemnitor’s request and cost, the Indemnitee shall cooperate reasonably 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 13.3, 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.

14. Term and Termination

14.1 Term of Agreement. The term of this Agreement shall commence on the Effective Date and, unless earlier terminated in accordance with provisions of Section 14.4 below, shall continue until the later of (a) the last to expire of the Evogene Patent Rights, or (b) or all licensed Exclusive Know-How has become part of the public domain or (c) the end of the last-to-expire period during which Bayer is obligated to pay Evogene royalties under Section 7. The term of this Agreement shall survive the non-renewal, termination or limitation of any particular license granted hereunder. Certain rights and obligations of the parties may be terminated as provided in this Section 14.

 

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14.2 Extension of Collaboration Beyond Sixth Year.

14.2.1 In the event Bayer (a) exercised its option under Section 3.1.3.1(g) to extend the Collaboration Period with respect to both the ATHLETE Program and the EvoBreed Program to include a Collaboration Year [* * *] and (b) desires to extend the term of the Collaboration in whole or in part (i.e. only with respect to the ATHLETE Program or the EvoBreed Program) beyond the Collaboration Year [* * *], Bayer shall provide Evogene written notice of such desire at least [* * *] ([* * *]) days prior to the end of Collaboration Year [* * *]. In any such notice, Bayer shall state the proposed scope of work to be performed (including whether the proposed extension is with respect to the ATHLETE Program, EvoBreed Program or both) and the term of the proposed extension. For clarity, the scope of work proposed by Bayer will not extend beyond the fields of exclusivity described in Section 4.1.

14.2.2 If Bayer provides such notice to Evogene within the time period set forth above, Bayer and Evogene shall negotiate in good faith the terms and conditions of such extension. Evogene agrees, that commencing [* * *] [* * *]) days prior to the end of Collaboration Year [* * *] and until the earlier of (i) the lapse of [* * *] ([* * *]) months from such date (unless extended as set forth below) and (ii) the date on which Bayer ceases or both parties agree to cease good faith negotiations regarding an extension, Evogene shall not negotiate with a Third Party with respect to a collaboration in the following:

(a) if the proposed extension relates to the ATHLETE Program only: the performance of ATHLETE Discovery Rounds that intentionally target the discovery of Genes that confer Traits for transgenic application in Wheat, it being understood that Genes identified through any ATHLETE Discovery Round not targeted towards the discovery of Genes that confer Traits in Wheat may be useful in Wheat (e.g. Evogene Genes discovered in an ATHLETE Discovery Round for yield improvement in corn, may be useful for use in Wheat);

(b) if the proposed extension relates to the EvoBreed Program only: the performance of any EvoBreed Discovery Round geared at discovering SNPs in Wheat targeted at addressing Features, it being understood that SNPs identified through any EvoBreed Discovery Round not targeted towards the discovery of SNPs that confer Features in Wheat may be useful in Wheat;

(c) if the proposed extension relates to both the ATHLETE Program and the EvoBreed Program: the performance of the activities described in (a) and (b).

 

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If the good faith negotiations between Bayer and Evogene described above in this Section 14.2.2 are progressing but the parties have yet to reach an agreement at the end of the [* * *] period set forth above, Bayer may request to extend such exclusive negotiation period by an additional period of [* * *] ([* * *]) months (for a total of [* * *] ([* * *]) months). Evogene shall not unreasonably withhold its agreement to such request.

14.3 Early Termination of Collaboration

14.3.1 Without Cause.

14.3.1.1 Collaboration Without Cause Termination. If Bayer terminates the Collaboration, in whole, effective at the end of Collaboration Year [* * *] in accordance with Section 3.1.3.1(b), the following provisions will apply:

(a) All Collaboration activities for Collaboration Year [* * *] and Annual Research Payments with respect thereto shall continue as planned;

(b) All EvoBreed Program activities shall cease at the end of Collaboration Year [* * *];

(c) Except for the activities described in Section 14.3.1.1(f), all ATHLETE Program Activities shall cease at the end of Collaboration Year [* * *];

(d) If Bayer provided its written notice of termination prior to the end of Collaboration Year [* * *], Bayer will have no further Annual Research Payment obligations, except for the Validation Tail Payments pursuant to Section 14.3.1.1(f) in case Section 14.3.1.1. (g) does not apply;

(e) If Bayer provided its written notice of termination after the commencement of Collaboration Year [* * *], then in addition to the Validation Tail Payments pursuant to Section 14.3.1.1(f) (in case Section 14.3.1.1. (g) does not apply), Evogene shall be entitled to an additional payment of an amount equal to [* * *] Euro (€[* * *]), (or this amount increased with the amount of the binding financial commitment Evogene would already have made for outsourcing work to a Contractor, it being understood that in such case the total maximum amount due by Bayer would not be higher than [* * *] Euro (€[* * *])) multiplied by a fraction, the denominator of which is 365 and the numerator of which is the number of days between the commencement of Collaboration Year [* * *] and the date on which the termination notice was delivered by Bayer. The full amount of such additional payment shall be made within [* * *] ([* * *]) days of the end of Collaboration Year [* * *] and upon receipt of the corresponding invoice as specified in Section 8.2 above. Other than the amounts set forth in this Section 14.3.1.1(e), Bayer will have no further Annual Research Payment obligations.

 

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(f) Unless Bayer notifies Evogene in writing at least sixty (60) days prior to the delivery by Evogene of the Gene Computational Reports, with respect to Identified Genes discovered in the ATHLETE Collaboration Discovery Round performed in Collaboration Year [* * *], that it does not wish Evogene to perform the Validation Tail with respect to such Identified Genes: (i) Bayer shall pay Evogene, in addition to any payment due under Section 14.3.1.1(e), the Validation Tail Payment during the year following Collaboration Year [* * *]; (ii) Evogene will provide Bayer with the Gene Computational Reports with respect to such ATHLETE Collaboration Discovery Round in accordance with Section 3.1.1.3; (iii) Evogene will perform the Validation Tail on the relevant Identified Genes during the year following Collaboration Year [* * *] in accordance with Section 3.1.1.5; and (iv) Evogene will deliver to Bayer Gene Validation Reports with respect to such Identified Genes in accordance with Section 3.1.1.6;

(g) If Bayer notifies Evogene in writing prior to the delivery by Evogene of the Gene Computational Reports, with respect to Identified Genes discovered in the ATHLETE Collaboration Discovery Round performed in Collaboration Year [* * *], that it does not wish Evogene to perform the Validation Tail with respect to such Identified Genes: (i) Evogene shall not be entitled to Validation Tail Payments; (ii) Evogene will not deliver to Bayer Gene Computational Reports with respect to such ATHLETE Collaboration Discovery Round; (iii) Evogene shall not be obligated to perform the Validation Tail on such Identified Genes; (iv) Bayer shall not be entitled to receive Gene Validation Reports with respect to such Identified Genes; and (v) Bayer shall have no rights with respect to such discovered Identified Genes or their Homologs. For clarity, all such Identified Genes (including Homologs) shall be excluded from the definitions of Identified Genes and Collaboration Genes;

(h) Evogene’s obligations under Section 4.1 shall terminate at the end of Collaboration Year [* * *]; and

(i) Evogene’s obligation under Section 14.2 shall terminate immediately; and

(j) The license granted to Evogene and its Affiliates under Section 5.2 shall terminate and Evogene shall destroy or return to Bayer (at Bayer’s request) all Bayer Wheat Data in its or its Affiliates’ possession, and shall, in case of destruction, certify the confirmation of such destruction to Bayer.

14.3.1.2 ATHLETE Termination.

14.3.1.2.1. If Bayer terminates the ATHLETE Program at the end of Collaboration Year [* * *] in accordance with Section 3.1.3.1(c), the following shall apply:

(a) All Collaboration activities for Collaboration Year [* * *] and Annual Research Payments with respect thereto shall continue as planned;

(b) All EvoBreed Program activities shall continue till the end of Collaboration Year [* * *] until otherwise terminated pursuant to the terms and conditions of this Agreement;

 

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(c) The Annual Research Payment under Section 7.2.1.5 for Collaboration Year [* * *] and under Section 7.2.1.6 for Collaboration Year [* * *] shall be replaced by the following: (i) Collaboration Year [* * *] – [* * *] Euro (€[* * *]) plus any amount due under Section 14.3.1.2.1.(e) below); and (ii) Collaboration Year [* * *] – [* * *] Euro (€[* * *]);

(d) Except for the activities described in Section 14.3.1.2.1(f), all ATHLETE Program Activities shall cease at the end of Collaboration Year [* * *];

(e) If Bayer provided its written notice of termination after the commencement of Collaboration Year [* * *], then in addition to the Annual Research Payments pursuant to Section 14.3.1.2.1.(c) and Validation Tail Payments pursuant to Section 14.3.1.2.1(f) (in case Section 14.3.1.2.1.(g) does not apply, Evogene shall be entitled to a payment of an amount equal to [* * *] Euro (€[* * *]) (or this amount increased with the amount of the binding financial commitment Evogene would already have made for outsourcing work to a Contractor, it being understood that in such case the total maximum amount due by Bayer would not be higher than [* * *] Euro (€[* * *]) that would be due by Bayer) multiplied by a fraction, the denominator of which is 365 and the numerator of which is the number of days between the commencement of Collaboration Year [* * *] and the date on which the termination notice what delivered by Bayer. The full amount of such additional payment shall be made within thirty (30) days of the end of Collaboration Year [* * *] and upon receipt of the corresponding invoice as specified in Section 8.2 above.

(f) Unless Bayer notifies Evogene in writing at least sixty (60) days prior to the delivery by Evogene of the Gene Computational Reports, with respect to Identified Genes discovered in the ATHLETE Collaboration Discovery Round performed in Collaboration Year [* * *], that it does not wish Evogene to perform the Validation Tail with respect to such Identified Genes: (i) Bayer shall pay Evogene, in addition to any payment due under Section 14.3.1.2.1(c) and 14.3.1.2.1(e), the Validation Tail Payment during the year following Collaboration Year [* * *]; (ii) Evogene will provide Bayer with the Gene Computational Reports with respect to such ATHLETE Collaboration Discovery Round in accordance with Section 3.1.1.3; (iii) Evogene will perform the Validation Tail on the relevant Identified Genes during the year following Collaboration Year [* * *] in accordance with Section 3.1.1.5; and (iv) Evogene will deliver to Bayer Gene Validation Reports with respect to such Identified Genes in accordance with Section 3.1.1.6;

(g) If Bayer notifies Evogene in writing prior to the delivery by Evogene of the Gene Computational Reports, with respect to Identified Genes discovered in the ATHLETE Collaboration Discovery Round performed in Collaboration Year [* * *], that it does not wish Evogene to perform the Validation Tail with respect to such Identified Genes: (i) Evogene shall not be entitled to Validation Tail Payments; (ii) Evogene will not deliver to Bayer Gene Computational Reports with respect to such ATHLETE Collaboration Discovery Round; (iii) Evogene shall not be obligated to perform the Validation Tail on such Identified Genes; (iv) Bayer shall not be entitled to receive Gene Validation Reports with respect to such Identified Genes; and (v) Bayer shall have no rights with respect to such Identified Genes or their Homologs. For clarity, all such Identified Genes (including Homologs) shall be excluded from the definitions of Identified Genes and Collaboration Genes;

 

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(h) Evogene’s obligations under Section 4.1 shall terminate, at the end of Collaboration Year [* * *], with respect to Identified Genes for transgenic applications and ATHLETE Discovery Rounds. Accordingly, at the end of Collaboration Year [* * *], Section 4.1 shall be amended to read as follows: “Except as otherwise set forth herein, for the duration of the Collaboration Period, Evogene agrees that: (i) except as required by Pre-existing Obligations, it will not directly or indirectly license to any Third Party the right to use for any breeding application in Wheat (regardless of Feature of interest), any Evogene SNP; and (ii) it shall not, in collaboration with or for the benefit of any Third Party, engage in or perform any EvoBreed Discovery Round geared at discovering SNPs for breeding applications in Wheat targeted at addressing Features (regardless of the Feature), it being understood that SNPs identified through any EvoBreed Discovery Round not targeted towards the discovery of SNPs that confer Features in Wheat may be useful in Wheat. For clarity, in the event of a Change of Control of Evogene in which it is merged into another entity, the restrictions above with respect to Evogene SNPs shall not apply to SNPs, the use of which was discovered by such entity prior to such Change of Control or after the Change of Control through activities not making use of EvoBreed.”

(i) Evogene’s obligation under Section 14.2 shall terminate.

14.3.1.2.2. If Bayer terminates the ATHLETE Program at the end of Collaboration Year [* * *] in accordance with Section 3.1.3.1(d), the following shall apply:

(a) All Collaboration activities for Collaboration Year [* * *] and Annual Research Payments with respect thereto shall continue as planned;

(b) All EvoBreed Program activities shall continue until the end of Collaboration Year [* * *] unless otherwise terminated pursuant to the terms and conditions of this Agreement;

(c) The Annual Research Payments under Section 7.2.1.7 for Collaboration Year [* * *] and under Section 7.2.1.8 for Collaboration Year [* * *] shall be replaced by the following: (i) Collaboration Year [* * *] – [* * *] Euro
(€[* * *]) plus any amount due under Section 14.3.1.2.2(e) below); and (ii) Collaboration Year [* * *] – [* * *] Euro (€[* * *]); the Annual Research Payment for Collaboration Year [* * *] as specified in Section 7.2.1.9 will be [* * *] Euro (€[* * *]);

(d) Except for the activities described in Section 14.3.1.2.2(f), all ATHLETE Program Activities shall cease at the end of Collaboration Year [* * *];

(e) If Bayer provided its written notice of termination after the commencement of Collaboration Year [* * *], then in addition to the Annual Research Payments pursuant to Section 14.3.1.2(c) and Validation Tail Payments pursuant to Section 14.3.1.2.2(f) (in

 

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case Section 14.3.1.2.2(g) does not apply), Evogene shall be entitled to a payment of an amount equal to [* * *] Euro (€[* * *]) (or this amount increased with the amount of the binding financial commitment Evogene would already have made for outsourcing work to a Contractor, it being understood that in such case the total maximum amount due by Bayer would not be higher than [* * *] Euro (€[* * *]) that would be due by Bayer) multiplied by a fraction, the denominator of which is 365 and the numerator of which is the number of days between the commencement of Collaboration Year [* * *] and the date on which the termination notice what delivered by Bayer. The full amount of such additional payment shall be made within [* * *] ([* * *]) days of the end of Collaboration Year [* * *] and upon receipt of the corresponding invoice as set forth in Section 8.2.

(f) Unless Bayer notifies Evogene in writing at least [* * *] ([* * *]) days prior to the delivery by Evogene of the Gene Computational Reports, with respect to Identified Genes discovered in the ATHLETE Collaboration Discovery Round performed in Collaboration Year [* * *], that it does not wish Evogene to perform the Validation Tail with respect to such Identified Genes: (i) Bayer shall pay Evogene, in addition to any payment due under Section 14.3.1.2.2(c )and 14.3.1.2.2(e), the Validation Tail Payment during the year following Collaboration Year [* * *]; (ii) Evogene will provide Bayer with the Gene Computational Reports with respect to such ATHLETE Collaboration Discovery Round in accordance with Section 3.1.1.3; (iii) Evogene will perform the Validation Tail on the relevant Identified Genes during the year following Collaboration Year [* * *] in accordance with Section 3.1.1.5; and (iv) Evogene will deliver to Bayer Gene Validation Reports with respect to such Identified Genes in accordance with Section 3.1.1.6;

(g) If Bayer notifies Evogene in writing at least [* * *] ([* * *]) days prior to the delivery by Evogene of the Gene Computational Reports, with respect to Identified Genes discovered in the ATHLETE Collaboration Discovery Round performed in Collaboration Year [* * *], that it does not wish Evogene to perform the Validation Tail with respect to such Identified Genes: (i) Evogene shall not be entitled to Validation Tail Payments; (ii) Evogene will not deliver to Bayer Gene Computational Reports with respect to such ATHLETE Collaboration Discovery Round; (iii) Evogene shall not be obligated to perform the Validation Tail on such Identified Genes; (iv) Bayer shall not be entitled to receive Gene Validation Reports with respect to such Identified Genes; and (v) Bayer shall have no rights with respect to such discovered Genes or their Homologs. For clarity, all such Identified Genes (including Homologs) shall be excluded from the definitions of Identified Genes and Collaboration Genes;

(h) Evogene’s obligations under Section 4.1 shall terminate, at the end of Collaboration Year [* * *], with respect to Genes for transgenic applications and ATHLETE Discovery Rounds. Accordingly, at the end of Collaboration Year [* * *], Section 4.1 shall be amended to read as follows: “Except as otherwise set forth herein, for the duration of the Collaboration Period, Evogene agrees that: (i) except as required by Pre-existing Obligations, it will not directly or indirectly license to any Third Party the right to use for any breeding application in Wheat (regardless of Feature of interest), any Evogene SNP; and (ii) it shall not, in collaboration with or for the benefit of any Third Party, engage in or perform any EvoBreed

 

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Discovery Round geared at discovering SNPs for breeding applications in Wheat targeted at addressing Features (regardless of the Feature), it being understood that SNPs identified through any EvoBreed Discovery Round not targeted towards the discovery of SNPs that confer Features in Wheat may be useful in Wheat. For clarity, in the event of a Change of Control of Evogene in which it is merged into another entity, the restrictions above with respect to Evogene SNPs shall not apply to SNPs, the use of which was discovered by such entity prior to such Change of Control or after the Change of Control through activities not making use of EvoBreed.”

(i) Evogene’s obligation under Section 14.2 shall terminate with respect to ATHLETE Program.

14.3.1.3 EvoBreed Termination.

14.3.1.3.1. If Bayer terminates the EvoBreed Program at the end of Collaboration Year [* * *] in accordance with Section 3.1.3.1(e), the following shall apply:

(a) All Collaboration activities for Collaboration Year [* * *] and Annual Research Payments as specified in Section 7.2.1.4 with respect thereto shall continue as planned;

(b) All ATHLETE Program activities shall continue in Collaboration Year [* * *] until otherwise terminated pursuant to the terms and conditions of this Agreement;

(c) The Annual Research Payments under Section 7.2.1.5 for Collaboration Year [* * *] shall be replaced by the following: (i) Collaboration Year [* * *] – [* * *] Euro (€[* * *]); and Annual Research Payments under Section 7.2.1.6. for Collaboration Year [* * *] shall remain the same, i.e. [* * *] Euro (€[* * *]);

(d) All EvoBreed Program Activities shall cease at the end of Collaboration Year [* * *];

(e) If Bayer provided its written notice of termination after the commencement of Collaboration Year [* * *], then in addition to the Annual Research Payments and Validation Tail Payments pursuant to Section 14.3.1.3.1(c), Evogene shall be entitled to a payment of an amount equal to [* * *] Euro (€[* * *]) (or this amount increased with the amount of the binding financial commitment Evogene would already have made for outsourcing work to a Contractor, it being understood that in such case the total maximum amount due by Bayer would not be higher than [* * *] Euro (€[* * *]) that would be due by Bayer) multiplied by a fraction, the denominator of which is 365 and the numerator of which is the number of days between the commencement of Collaboration Year [* * *] and the date on which the termination notice was delivered by Bayer. The full amount of such additional payment shall be made within [* * *] ([* * *]) days of the end of Collaboration Year [* * *] and upon receipt of the corresponding invoice as specified in Section 8.2 above.

 

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(f) Evogene’s obligations under Section 4.1 shall terminate, at the end of Collaboration Year [* * *], with respect to SNPs for breeding applications and EvoBreed Discovery Rounds. Accordingly, at the end of Collaboration Year [* * *], Section 4.1 shall be amended to read as follows: “Except as otherwise set forth herein, for the duration of the Collaboration Period, Evogene agrees that: (i) except as required by Pre-existing Obligations, it will not directly or indirectly license to any Third Party the right to use for any transgenic application in Wheat (regardless of Trait of interest), any Evogene Gene; and (ii) it shall not, in collaboration with or for the benefit of any Third Party, engage in, undertake, or otherwise pursue any ATHLETE Discovery Round that intentionally targets the discovery of Genes that confer Traits for transgenic application in Wheat, it being understood that Genes identified through any ATHLETE Discovery Round not targeted towards the discovery of Genes that confer Traits in Wheat may be useful in Wheat (e.g. Evogene Genes discovered in an ATHLETE Discovery Round for yield improvement in corn, may be useful for use in Wheat). For clarity, in the event of a Change of Control of Evogene in which it is merged into another entity, the restrictions above with respect to Evogene Genes shall not apply to Genes, the use of which was discovered by such entity prior to such Change of Control or after the Change of Control through activities not making use of ATHLETE.”

(g) Evogene’s obligation under Section 14.2 shall terminate.

14.3.1.3.2. If Bayer terminates the EvoBreed Program at the end of Collaboration Year [* * *] in accordance with Section 3.1.3.1(f), the following shall apply:

(a) All Collaboration activities for Collaboration Year [* * *] and Annual Research Payments with respect thereto shall continue as planned;

(b) All ATHLETE Program activities shall continue until the end of Collaboration Year [* * *] unless otherwise terminated pursuant to the terms and conditions of this Agreement;

(c) The Annual Research Payments under Section 7.2.1.7 for Collaboration Year [* * *] and under Section 7.2.2.8 Collaboration Year [* * *] shall be replaced by the following: (i) Collaboration Year [* * *] – [* * *] Euro (€[* * *]); and (ii) Collaboration Year [* * *] – [* * *] Euro (€[* * *]). The Annual Research Payments for Collaboration Year [* * *] in accordance with Section 7.2.1.9 will remain unchanged;

(d) All EvoBreed Program Activities shall cease at the end of Collaboration Year [* * *];

(e) If Bayer provided its written notice of termination after the commencement of Collaboration Year [* * *], then in addition to the Annual Research Payments and Validation Tail Payments pursuant to Section 14.3.1.3(c), Evogene shall be entitled to a payment of an amount equal to [* * *] Euro (€[* * *]) (or this amount increased with the amount of the binding financial commitment Evogene would already have made for outsourcing work to

 

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a Contractor, it being understood that in such case the total maximum amount due by Bayer would not be higher than [* * *] Euro (€[* * *]) that would be due by Bayer) multiplied by a fraction, the denominator of which is 365 and the numerator of which is the number of days between the commencement of Collaboration Year [* * *] and the date on which the termination notice what delivered by Bayer. The full amount of such additional payment shall be made within thirty (30) days of the end of Collaboration Year [* * *] and upon receipt of the corresponding invoice as stated in Section 8.2.

(f) Evogene’s obligations under Section 4.1 shall terminate, at the end of Collaboration Year [* * *], with respect to SNPs for breeding applications and EvoBreed Discovery Rounds. Accordingly, at the end of Collaboration Year [* * *], Section 4.1 shall be amended to read as follows: “Except as otherwise set forth herein, for the duration of the Collaboration Period, Evogene agrees that: (i) except as required by Pre-existing Obligations, it will not directly or indirectly license to any Third Party the right to use for any transgenic application in Wheat (regardless of Trait of interest), any Evogene Gene; and (ii) it shall not, in collaboration with or for the benefit of any Third Party, engage in, undertake, or otherwise pursue any ATHLETE Discovery Round that intentionally targets the discovery of Genes that confer Traits for transgenic application in Wheat, it being understood that Genes identified through any ATHLETE Discovery Round not targeted towards the discovery of Genes that confer Traits in Wheat may be useful in Wheat (e.g. Evogene Genes discovered in an ATHLETE Discovery Round for yield improvement in corn, may be useful for use in Wheat). For clarity, in the event of a Change of Control of Evogene in which it is merged into another entity, the restrictions above with respect to Evogene Genes shall not apply to Genes, the use of which was discovered by such entity prior to such Change of Control or after the Change of Control through activities not making use of ATHLETE.”

(g) Evogene’s obligation under Section 14.2 shall terminate with respect to the EvoBreed Program.

14.3.2 For Cause. Bayer will be entitled to terminate the Collaboration, in its entirety, in accordance with the provisions of Section 3.3.1.2(d) and Section 3.3.1.2(e). If Bayer terminates the Collaboration pursuant to Section 3.3.1.2(d) or Section 3.3.1.2(e), the following provisions shall apply:

14.3.2.1 Bayer will have no further Annual Research Payment or Validation Tail Payment obligations;

14.3.2.2 Evogene will cease all Collaboration activities (i.e. both ATHLETE Program activities and EvoBreed Program activities);

 

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14.3.2.3 Evogene’s obligations under Section 4.1 shall continue for a period of [* * *] ([* * *]) year following the termination of the Collaboration, except if such termination occurs during Collaboration Year [* * *], in which case Evogene’s obligations under Section 4.1 shall continue until December 31, 2016. At the end of such period, Evogene’s obligations under Section 4.1 shall terminate;

14.3.2.4 Evogene’s obligation under Section 14.2 shall terminate; and

14.3.2.5 The license granted to Evogene and its Affiliates under Section 5.2 shall terminate and Evogene shall destroy or return to Bayer (at Bayer’s request) all Bayer Wheat Data in its or its Affiliates’ possession and shall, in case of destruction, certify the confirmation of such destruction to Bayer.

14.3.3 Change of Control. In the case of a Change of Control of Evogene by a Bayer Competitor, Evogene will notify Bayer in writing of such acquisition immediately following the closing of such transaction. In such case, Bayer will be entitled to terminate the Collaboration with immediate effect, by providing Evogene with written notice of such termination within sixty (60) days of receipt of such notice from Evogene. If Bayer provides such notice of termination within such sixty (60) day period, the following provisions shall apply:

14.3.3.1 [* * *];

14.3.3.2 [* * *];

14.3.3.3 [* * *];

14.3.3.4 [* * *]; and

14.3.3.5 [* * *].

14.3.4 Change of Business Model. If Evogene makes a public announcement that it plans to cease, or actually ceases, its business of performing computational discovery activities in plants, Evogene will notify Bayer in writing of such immediately following such announcement or cessation of activities, as applicable. In such case, Bayer will be entitled to terminate the Collaboration with immediate effect, by providing Evogene with written notice of such termination within sixty (60) days of receipt of such notice from Evogene. If Bayer provides such notice of termination within such sixty (60) day period, the following provisions shall apply:

14.3.4.1 Bayer will have no further Annual Research Payment or Validation Tail Payment obligations;

14.3.4.2 Evogene will cease all Collaboration activities (i.e. both ATHLETE Program activities and EvoBreed Program activities);

14.3.4.3 Evogene’s obligations under Section 4.1 shall terminate;

 

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14.3.4.4 Evogene’s obligation under Section 14.2 shall terminate; and

14.3.4.5 The license granted to Evogene and its Affiliates under Section 5.2 shall terminate and Evogene shall destroy or return to Bayer (at Bayer’s request) all Bayer Wheat Data in its or its Affiliates’ possession and shall, in case of destruction, certify the confirmation of such destruction to Bayer.

14.3.5 Effect on Other Provisions. Except as specifically set forth in this Section 14.3, early termination of the Collaboration (whether in whole or with respect to only the ATHLETE Program or EvoBreed Program) shall not affect the parties’ rights and obligations under this Agreement.

14.4 Early Termination of Agreement (as a whole)

14.4.1 Termination for Breach. In the event that either party commits a material breach of its obligations under this Agreement and fails to cure that breach within [* * *] ([* * *]) days after receiving written notice thereof, the other party may terminate this Agreement immediately upon written notice to the party in breach.

14.4.2 Termination for Failure to Develop Wheat Business. Evogene shall have the right to terminate this Agreement with immediate effect by written notice to Bayer, to be provided to Bayer within sixty (60) days after Evogene’s receipt of written notice from Bayer of the occurrence of any of the following events, if:

14.4.2.1 Bayer makes a public announcement that it plans to cease, or actually ceases, its activities in Wheat; or

14.4.2.2 Bayer has not commenced operations in at least [* * *] ([* * *]) breeding stations as part of its Wheat breeding program by the end of Collaboration Year [* * *]; or

14.4.2.3 Bayer has not Initiated Transformation in Wheat of at least [* * *] Collaboration Gene within [* * *] ([* * *]) months of the delivery of the last Gene Validation Report for Gene Group 1.

Bayer will notify Evogene in writing of the occurrence of any event described in this Section 14.4.2 immediately following such occurrence.

For the avoidance of doubt, an acquisition of all or substantially all of Bayer’s assets pertaining to the subject matter of this Agreement shall not be considered, in itself, a failure of Bayer to develop its Wheat business as set forth in this Section 14.4.2.

 

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14.4.3 Termination for Diligence Failure. If the licenses granted by Evogene hereunder have terminated with respect to each Collaboration Gene Group in accordance with Section 6.2 and each Collaboration SNP Set in accordance with Section 6.3 because Bayer has failed to meet its diligence obligations with respect to all Gene Groups and Collaboration SNP Sets, Evogene will be entitled to terminate this Agreement forthwith.

14.4.4. Termination for Bankruptcy or Insolvency. Each party shall have the right to terminate this Agreement with immediate effect by written notice to the other party (the “Other Party”) if (a) the Other Party files in any court or agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for the appointment of a receiver or trustee of it or of its assets, or (b) if the Other Party is served with an involuntary bankruptcy petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within 90 days after the filing thereof, or (c) if the Other Party shall make an assignment for the benefit of its creditors.

14.5. Effect of Termination of Agreement (as a whole).

14.5.1 Termination of Rights. Upon termination of this Agreement by either party pursuant to any of the provisions of Section 14.4, the following provisions shall apply:

14.5.1.1 the rights and licenses granted to Bayer under Section 5.1 shall terminate, all rights in and to and under the Evogene Patent Rights and (except as set forth below) the Exclusive Know-How will revert to Evogene and neither Bayer nor its Affiliates may make any further use or exploitation of the Evogene Patent Rights or (except as set forth below) the Exclusive Know-How;

14.5.1.2 any existing agreements that contain a Sublicense shall terminate to the extent of such Sublicense;

14.5.1.3 except as set forth in Section 14.5.2, Bayer shall [* * *];

14.5.1.4 Bayer and its Affiliates (with respect to each Affiliates, only so long as such entity remains an Affiliate of Bayer) will have a non-exclusive, worldwide, royalty-bearing license under the Exclusive Know-How to use Collaboration SNP Sets solely in Wheat to make, have made, market, offer for sale, sell, have sold and import Licensed Products; provided that Bayer shall pay the applicable royalties and payments to Evogene in accordance with Section 7 and provide reports and inspection rights to Evogene pursuant to Section 8; it being understood however that Bayer shall only pay [* * *]% of these payments in the event of termination by Bayer due to breach of Agreement by Evogene (Section 14.4.1) or due to Evogene’s bankruptcy (Section 14.4);

14.5.1.5. the license granted to Evogene and its Affiliates under Section 5.2 shall terminate;

 

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14.5.1.6. Evogene shall destroy or return to Bayer (at and according to Bayer’s request) all Bayer Wheat Data in its of its Affiliates’ possession and shall, in case of destruction certify the confirmation of such destruction to Bayer.

14.5.1.7. In the event of termination of this Agreement, any existing agreements that contain a Sublicense shall terminate to the extent of such Sublicense. With respect to each Sublicensee that is not, at the date of termination, an Affiliate of Bayer, if (a) the Sublicense was granted in conformance with the terms of this Agreement, (b) the Sublicensee is not then in material breach of its Sublicense agreement with Bayer such that Bayer would have the right to terminate such Sublicense, and (c) Evogene has been paid all consideration due to Evogene under this Agreement with respect to the Sublicense, Evogene shall be obligated, at the request of such Sublicensee, to enter into a direct license agreement with such Sublicensee on substantially the same terms as those contained in such Sublicense agreement as they relate to the Sublicense, provided that such terms shall be amended to the extent required to ensure that: (i) such direct agreement does not impose any representation, warranties, obligations or liabilities on Evogene which are not included in this Agreement; (ii) such Sublicensee agrees to assume all of Bayer’s patent reimbursement obligations hereunder with respect to the Evogene Patent Rights licensed to such Sublicensee; (iii) such direct license includes reporting obligations similar to those set forth in Section 8; (iv) the milestone payments and royalty terms of such agreement shall not be less favorable to Evogene than those set forth in this Agreement; and (v) if the Sublicense was granted by Bayer prior to the First Commercial Sale of Licensed Products (or potential Licensed Products) that were the subject of such Sublicense, such direct license will include development diligence obligations similar to those set forth in Section 6 with respect to the Collaboration Gene(s) and/or Collaboration SNP Set covered by such direct license.

14.5.2 In the case of termination by Evogene in accordance with Section 14.4.2 during the Collaboration Period, [* * *]:

(i) [* * *].

(ii) [* * *].

14.5.3 For the avoidance of doubt, in the event of termination of this Agreement by either party, the consequences described in Section 14.5 shall not prevent the terminating party from instituting and prosecuting proceedings in a court of competent jurisdiction, either at law or in equity to obtain damages.

14.5.4 Accruing Obligations. Termination or expiration of this Agreement shall not relieve the parties of obligations accruing prior to such termination or expiration, including obligations to pay amounts accruing hereunder up to the date of termination or expiration. After the date of termination (except in the case of termination by Evogene for Bayer’s failure to make payments when due), Bayer, its Affiliates and Sublicensees may sell Licensed Products then in

 

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stock; provided that Bayer shall pay the applicable royalties and payments to Evogene in accordance with Section 7 and provide reports and inspection rights to Evogene pursuant to Article 8. However and for the avoidance of doubt, the previous shall not limit Bayer’s rights under Section 14.5.1.4.

14.5.5 Survival. The parties’ respective rights, obligations and duties under Sections 4.2, 8, 9.1, 9.2.3, 9.2.4, 11.1, 11.2, 11.4, 12, 13, 14.5, 15, 17.1 and 17.3, 17.4, 17.7, 17.9, 17.10, 17.11 as well as any rights, obligations and duties which by their nature extend beyond the expiration or termination of this Agreement, shall survive any expiration or termination of this Agreement. In addition, Bayer’s obligations under (a) Section 7.4.1.1(b) with respect to Licensed Products that are not covered by a Valid Claim within the Evogene Patent Rights (as adjusted by Sections 7.4.1.3 and 7.4.1.4) and (b) Section 7.5 with respect to Sublicenses granted prior to termination of the Agreement, as well Bayer’s reporting obligations and Evogene’s inspection rights pursuant to Section 8 as they relate to (a) and (b) shall survive termination.

14.6. Partial termination for Patent Challenge

14.6.1 If Bayer or an Affiliate of Bayer commences an action in which it challenges the validity, enforceability or scope of any of the Evogene Patent Rights licensed to Bayer hereunder, then Evogene may terminate this Agreement specifically with respect to the Evogene Patent Rights licensed to Bayer hereunder which are challenged by Bayer, immediately upon written notice to Bayer.

14.6.2 Notwithstanding Section 14.6.1, in the case of a legal proceeding initiated on or behalf of Evogene or any of its Affiliates asserting that Bayer or any of its Affiliates or any of their customers (which customers have received from Bayer or any of its Affiliates any promise of indemnification, hold harmless, or infringement defense with respect to the Evogene Patent Rights) is infringing any of the Evogene Patent Rights because of the making, using or selling of a products(s) that is a plant, tissue or seed of a crop other than Wheat, and Bayer and/or its Affiliate believes in good faith that such Evogene Patent Rights do not cover use of the relevant Collaboration Gene or Collaboration SNP in such crop, Bayer and/or its Affiliates may challenge the assertion that such Evogene Patent Rights cover use of the relevant Collaboration Gene or Collaboration SNP in such crop without such challenge giving rise to termination rights under Section 14.6.1, provided that such challenge does not, in any way, challenge the validity, enforceability or scope of such Evogene Patent Rights as they apply to use of the relevant Collaboration Gene or Collaboration SNP in Wheat.

15. Dispute Resolution.

15.1 Informal Negotiation; Mediation. If a dispute arises out of or relates to this Agreement or a breach thereof, or a Deadlock arises among the members of the Steering Committee, the parties shall first try to resolve such dispute or Deadlock through informal and good faith negotiation between the Chief Executive Officer of Evogene and the Head of

 

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BioScience of Bayer (who are not member of any of the committees installed under this Agreement), or equivalent within the respective parties. If said officers cannot resolve the dispute or Deadlock within fifteen (15) calendar days after the date on which the matter is referred to the parties’ executive officers listed above, then the parties may, but are under no obligation to, mutually agree first to try in good faith to settle the dispute by mediation by a mutually acceptable mediator, with a proven track of experience in the specific subject matter, before resorting to arbitration under Section 15.2.1. or litigation under Section 15.2.2. (if such litigation is permitted in accordance with the terms hereof). Neither Party may unreasonably withhold consent to the selection of a mediator. If the parties decide to submit the dispute or the Deadlock to mediation, then each party shall bear its own expenses and an equal share of all costs and fees of the mediation.

15.2 Arbitration.

15.2.1 General. Any dispute, claim or controversy arising out of or relating to this Agreement, including the breach, termination or validity of this Agreement, that is not settled by mutual consent, by the informal negotiations procedure or by the mediation procedure (if such has been initiated) set forth in Section 15.1 above, shall be finally settled by binding arbitration, conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce, by one or more arbitrators appointed in accordance with said Rules. The place of arbitration shall be Delaware, US, the language to be used in the arbitral proceedings shall be English, and the proceedings shall be confidential. Upon request of a Party, any documents or other information it provides in discovery shall be subject to a protective order with respect to, among other things, confidentiality and use. Unless the arbitrator determines that equity requires otherwise, the arbitrator shall award to the prevailing Party (as determined by the arbitrator) the costs of the arbitration, as well as the reasonable, out-of-pocket fees and expenses of the prevailing party’s attorneys. A disputed performance or suspended performance pending the resolution of the arbitration must be completed within a reasonable time period following the final decision of the arbitrator. Any arbitration subject to this Section shall be completed within six (6) months from the filing of notice of a request for such arbitration, and the decision of the arbitrator shall be in written form, setting forth findings of fact and conclusions of law with the reasons for such findings and conclusions stated. The decision of the arbitrator shall be the sole, exclusive and binding remedy between the parties regarding any and all disputes, controversies, claims and counterclaims presented to the arbitrator. Any award may be entered in a court of competent jurisdiction for a judicial recognition of the decision and an order of enforcement. Each Party has the right before or, if the arbitrator cannot hear the matter within an acceptable period, during the arbitration, to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction and replevin, to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the arbitration.

15.2.2 Infringement Claims. Notwithstanding anything in Section 15.2.1 to the contrary but subject to Section 15.1, claims for infringement, invalidity or misappropriation of any Intellectual Property rights, or regarding the breach of the Parties’ confidentiality obligations hereunder, will not be subject to mediation or arbitration, and the party alleging such

 

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infringement, invalidity, misappropriation or breach, or defending said allegation, expressly reserves the right to submit any such claim, including any factual or legal issues relating to such a claim, and all claims for legal and equitable relief in respect thereof, to any court of competent jurisdiction, and to pursue without limitation all rights and remedies available under this Agreement and at law and in equity.

16. Effectiveness

This Agreement shall become effective on and as of the Effective Date.

17. Miscellaneous

17.1 Governing Law. This Agreement will be governed by, and construed in accordance with, the substantive laws of Delaware, US, without giving effect to any choice or conflict of law provision, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted.

17.2 Force Majeure. Notwithstanding anything to the contrary in this Agreement, 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 riot, civil commotion, war, terrorist act, governmental law, order or regulation, embargo, action by the government or any agency thereof or by a regulatory authority, act of God, storm, fire, earthquake, accident, labor dispute or strike, sabotage, explosion, plant disease, contamination (water, soil, air, etc), electricity failure, refusal or delay in receipt of any export/import or field trials approvals, or other similar or different contingencies, in each case, beyond the reasonable control of such party (a “Force Majeure Event”); provided in each case, that a Force Majeure Event shall not relieve a party to the extent any delay caused by such Force Majeure Event exceeds one year, or exceeds two years in the event the nature of the Force Majeure Event reasonably justifies this longer period for delay. The party affected by Force Majeure Event 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. For the avoidance of doubt, any delay caused due to a Force Majeure Event shall be in addition to, and not in lieu of, any delay or failure otherwise permitted this Agreement.

17.3 Notices

17.3.1 Any notice or other communication given under this Agreement or in connection herewith must be in writing in the English language and signed by or on behalf of the party giving it and must be served by one of the following methods: (a) delivering it personally; (b) sending it by pre-paid recorded delivery or registered post or by registered airmail; or (c) sending it by fax (provided that the sender’s fax machine generates a confirmation of transmission and the transmission is verified by phone with the recipient); in each case, to the address and for the attention of the relevant party specified hereinafter (or as otherwise notified by that party for the purpose of this Agreement).

 

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17.3.2 Notice will be deemed to have been received: (a) if delivered personally, at the time of delivery;(b) in the case of pre-paid recorded delivery or registered post, 96 hours from the date of posting; and (c) in the case of fax at the time of transmission; provided that if deemed receipt occurs before 9am (local time of the recipient) on a Business Day in the country to which the notice is sent the notice will be deemed to have been received at 9am (local time) on that day, and if deemed receipt occurs after 5pm (local time) on a Business Day in the country to which the notice is sent, or on a day which is not a Business Day in such country, the notice will be deemed to have been received at 9am (local time) on the next Business Day in such country. For the purpose of this clause, “Business Day” means any day which is not a Saturday, a Sunday (in the case of Belgium and Germany), a Friday (in the case of Israel), or a public holiday in the place at which the notice is left or to which it is sent.

The addresses and fax numbers of the parties for the purpose of this Section 17.3 are:

for Bayer:

Bayer CropScience AG

Alfred-Nobel-Str. 50

40789 Monheim

Germany

Attention: General Counsel BCS

Fax number: + 49-2173-38 51 43

With a copy to:

Bayer BioScience N.V.

Technologiepark 38

9052 Gent

Belgium

Attention: Head of Technology Licensing

Fax number: +32.383.67.31

for Evogene:

Evogene Ltd.

P.O. Box 2100

76121 Rehovot,

Israel

Attention: Chief Executive Officer

Fax number: +972-8-9466724

or such other address or facsimile number as may be notified from time to time by the relevant party to the other party.

 

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17.3.3 To prove service it will be sufficient to prove that: (a) the envelope containing the notice was addressed to the address of the relevant party set out in Section 17.3.2 or as otherwise notified in writing by that party for the purpose of this Agreement and delivered either to that address or into the custody of the postal authorities as a pre-paid recorded delivery, registered post or airmail letter; or (b) the notice was transmitted by fax to the fax number of the relevant party set out in Section 17.3.2 or as otherwise Notified in writing by that party.

17.3.4 For the avoidance of doubt, notice given under this Agreement will not be validly served if sent by e-mail.

17.4 Entireness of Covenants. This Agreement including its Exhibits, when dated and signed by each of the Parties, form an indivisible whole, comprising the entireness of what has been agreed between the parties in connection with the subject matter of this Agreement and replacing and superseding all prior covenants between the parties relating to the subject matter of this Agreement.

17.5 Amendments. This Agreement may be amended only by a written document signed by duly authorized representatives of the Parties.

17.6 Number of Copies. This Agreement is being executed in two (2) copies. Each of those copies shall be deemed to be an original and each party shall receive one such a signed original.

17.7 Descriptive Headings. The descriptive headings in this Agreement are for convenience only and shall not be interpreted so as to limit or affect in any way the meaning of the language in the pertaining Article, Section or clause.

17.8 Assignability. Neither party shall have the right to assign its rights and/or obligations under this Agreement to any Third Party without the prior written consent of the other party, except as expressly stated in this Agreement.

17.8.1 Evogene shall have the right to assign its rights and obligations under this Agreement to its Affiliates, or by operation of law to any Person that acquires all or substantially all of its assets pertaining to the subject matter of this Agreement, and Bayer hereby consents to such assignment; provided, in each case, that the assignee agrees in writing to be bound by the terms of this Agreement.

17.8.2 Bayer shall have the right to assign its rights and obligations under this Agreement to its Affiliates, or to its successors by operation of law, or to any Person that acquires all or substantially all of its assets pertaining to the subject matter of this Agreement and Evogene hereby consents to such assignment; provided, in each case, that the assignee agrees in writing to be bound by the terms of this Agreement.

 

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In the event of assignment allowed under this Section, the assigning party shall promptly notify the other party thereof and it understood that assignment to Affiliates as set forth herein shall not jeopardize the performance of and the compliance with the obligations under this Agreement.

Any assignment purported or attempted to be made in violation of the terms of this Section 17.8 shall be null and void and of no legal effect.

17.9 Severability. Should any provision of this Agreement be illegal, invalid or unenforceable under applicable law, the remaining provisions of this Agreement shall be construed as if such illegal, invalid or unenforceable provision had not been contained herein. Such provision will be limited in a manner that will make it legal, valid and enforceable; however, if such limitation is not possible, such provision will be severed and disregarded, and the parties shall attempt to negotiate a provision replacing such provision and providing comparable benefits to each party.

17.10 No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by both parties hereto to express their mutual intent and no rule of strict construction against either party shall apply to any term or condition of this Agreement.

17.11 Relationship of Parties. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, franchise or an association of any kind between the parties or otherwise. Without derogating from the confidentiality and intellectual property provisions hereof, or from the licenses under this Agreement, nothing contained in this Agreement, in the relationship pursuant thereto or otherwise will require either party to negotiate, continue to negotiate or enter into any further research, development or commercial agreements whatsoever (including, without limitation, in connection with the Biological Materials, and/or Confidential Information) with the other party.

17.12. Registration. At Bayer’s request, the parties shall register this Agreement in jurisdictions where such registration is required to make it opposable vis-à-vis third parties as indicated by Bayer. The cost of registration will be borne by Bayer.

17.13. Authorities. The persons signing on behalf of Evogene and Bayer hereby represent, in their capacity as officers of the respective party, that they have authority to execute this Agreement on behalf of the party for whom they have signed.

 

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

 

Bayer CropScience AG     Evogene Ltd.
By:   /s/ Gerhart Marchand     By:   /s/ Ofer Haviv
Name:   Dr. Gerhart Marchand     Name:   Ofer Haviv
Title:   General Counsel     Title:   President & CEO

 

By:   /s/ Rüdiger Scheitza     By:   /s/ Hagai Karchi
Name:   Dr. Rüdiger Scheitza     Name:   Hagai Karchi
Title:   Head of Strategy and Business Management and Member of the Board of Management     Title:   Head of R&D

 

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List of Exhibits to Wheat Collaboration and License Agreement:

Exhibit A – Multi-Year Workplan

A.1 – Outline of GM and Breeding discovery and validation activities

A.2 – Model Plant Validation

A.3 – Reports

A.4 – SNP Genotyping Technology

Exhibit B – Bayer Diligence Obligations

Exhibit C – Details on Evogene Core Collection

Exhibit D – Bayer Requested Countries

Exhibit E – Arbitration Process

Exhibit F – Pre-Screen Process

Exhibit G – Pre-Existing Obligations Description

Exhibit H – Book of Traits

Exhibit I – Calculation of Average Exchange Rates

Exhibit J – Joint Press Release

 

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Exhibit A – Multi-Year Workplan

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit B – Bayer Diligence Exhibit

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit C – Details on Evogene Core Collection

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit D – Bayer Requested Countries

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit E

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit F – Pre-Screen Process

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit G – Pre Existing Obligations description

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit H – Book of Traits

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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Exhibit I – Calculation of Average Exchange Rates

[* * *]

 

Initials Bayer :       Initials Evogene :

 

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EXHIBIT J – Joint Press Release

Bayer CropScience and Evogene Sign Collaboration Agreement to Improve Wheat Seed

 

   

Multi-year collaboration focused on yield, drought tolerance and fertilizer use efficiency

 

   

Use of both advanced breeding and genetic modification methods

 

 

Monheim, Germany, and Rehovot, Israel, December 13, 2010 – Bayer CropScience AG and Evogene Ltd. have entered into a five-year collaboration to accelerate the development and introduction of improved wheat varieties. Improvements will be pursued for wheat yield, drought tolerance, fertilizer use efficiency and certain other wheat traits utilizing a combination of advanced breeding and state of the art genetic modification methods. Bayer will have exclusive rights to commercialize in wheat the traits resulting from this collaboration.

The collaboration further builds on an on-going partnership between Bayer CropScience and Evogene, which was initiated in 2007 and expanded in 2009, for increasing rice productivity and yield.

In a separate agreement, Bayer CropScience will make an equity investment of USD 12 million in Evogene at a price of approximately USD 7 per ordinary share.

On a global basis, wheat is the largest crop in terms of cultivated area and one of the most important food crops. The critical need to provide sufficient wheat to meet the needs of the growing world population is widely recognized and significant efforts are being directed towards addressing this challenge, primarily through programs attempting to increase yields and to sustainably reduce required inputs, such as water and fertilizer.

The collaboration will utilize Evogene’s ATHLETE, RePack and EvoBreed computational genomic technologies for the identification of genetically modified and native traits to improve yield, drought tolerance, fertilizer utilization and certain other traits in wheat.

 

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Bayer CropScience will utilize its capabilities in breeding and product development to incorporate genetically modified and native traits identified by Evogene, into its wheat pipeline for developing elite varieties displaying improved performance. The resulting improved wheat varieties will be commercialized by Bayer CropScience.

Evogene will receive approximately USD 20 million in the form of upfront fees and annual research payments over the term of the agreement. Furthermore, the company will receive development milestone payments and royalties on the commercialization of any resulting products. Further details of the agreement were not disclosed.

“The wheat industry is facing challenges such as changing climate, the decline of mineral resources used for fertilizer and the need to increase crop yields. We look forward to working together with Evogene in the area of wheat research to help to tackle these issues,” said Lykele van der Broek, Chief Operating Officer of Bayer CropScience. “Being market- and innovation leader in crop protection for cereals, we aim to become the partner of choice to wheat growers and the wheat industry by offering superior integrated solutions to improve cereal production in a sustainable way.”

“We are very pleased by this major expansion of our relationship with Bayer CropScience, a worldwide leader in innovative crop science, and we are confident that this joint effort will result in meaningful contributions to meeting the needs of the wheat industry,” stated Ofer Haviv, Evogene’s President and CEO. “A unique aspect of this collaboration is the synergistic combination of the two research approaches for trait improvement: advanced breeding and biotechnology. By combining these two approaches in one truly collaborative program utilizing an array of Evogene’s leading computational genomic technologies and Bayer CropScience’s proven product development expertise, we anticipate opportunities for significantly enhanced results.”

Key figures about wheat:

 

   

Approximately 25 percent of global agricultural land is utilized for wheat cultivation, making wheat the largest food crop worldwide in terms of area.

 

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Wheat is the second most-produced cereal crop after corn with more than 650 million tons produced every year.

 

   

Wheat productivity is increasing at less than 1 percent annually, while the annual global demand is growing at approximately double that percentage.

 

   

Main wheat producing regions are Australia, the Black Sea Region, China, the EU, India and the U.S.

About Bayer CropScience

Bayer is a global enterprise with core competencies in the fields of health care, nutrition and high-tech materials. Bayer CropScience AG, a subsidiary of Bayer AG with annual sales of about EUR 6.5 billion (2009), is one of the world’s leading innovative crop science companies in the areas of crop protection, non-agricultural pest control, seeds and traits. The company offers an outstanding range of products and extensive service backup for modern, sustainable agriculture and for non-agricultural applications. Bayer CropScience has a global workforce of 18,700 and is represented in more than 120 countries. This and further news is available at: www.press.bayercropscience.com.

About Evogene

Evogene is a world leading developer of improved plant traits, such as yield and drought tolerance, for a wide diversity of key crops through the use of plant genomics. The company is focusing on providing a complete solution for plant trait improvement through combining state of the art biotechnology and advanced breeding methods, based on its computational genomic technologies: ATHLETE 3.0 for gene discovery; RePack for gene expression optimization and EvoBreed for breeding enhancement. Evogene’s technology also combines high throughput plant validation systems, field experiments and proprietary genomic data creation. Evogene is collaborating with world leading seed companies to introduce its technology into key commercial crops. Evogene’s headquarters are in Rehovot, Israel, and its stock is traded on the Tel Aviv Stock Exchange (TASE: EVGN). For additional information, please visit Evogene’s website at www.evogene.com.

 

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Contact:

Bayer CropScience: Richard Breum, Tel: +49 2173 38-3270

E-mail: richard.breum@bayer.com

Evogene: Liat Cinamon, Tel: +972 8931 1933

E-Mail: liat.cinamon@evogene.com

Find more information at www.bayercropscience.com.

rib                     (2010-0625E)

Forward-Looking Statements

This release may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Bayer’s public reports which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

 

Initials Bayer :       Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.
EX-10.7 5 d518283dex107.htm EX-10.7 EX-10.7

Exhibit 10.7

Hecate Ref : 4/10/b00917-2

 

AMENDMENT TO WHEAT COLLABORATION AND LICENSE AGREEMENT

This amendment (the “Amendment”) to the Wheat Collaboration and License Agreement dated December 10, 2010 (the “Wheat Collaboration and License Agreement”) by and between BayerCropScience AG (“Bayer”) and Evogene Ltd. (“Evogene”) is made this 14th day of October 2012.

WHEREAS, the parties wish to amend certain provisions of the Wheat Collaboration and License Agreement in connection with the Brachypodium Model Plant Validation, as set forth hereinbelow.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1. Amendment

1.1 Amendment to the Wheat Collaboration and License Agreement. The Wheat Collaboration and License Agreement is hereby amended as follows:

 

  1.1.1 Section 3.1.1.5(b) shall be replaced in its entirety to read as follows:

“(b) In addition to the [* * *] Model Plant Validation described in clause (a), subject to Section 3.1.1.6 below, Evogene will perform [* * *] Model Plant Validation with respect to at least [* * *] ([* * *]) Identified Genes ([* * *]) of the Identified Genes discovered in each of the ATHLETE Collaboration Discovery Rounds that are completed in Collaboration Years [* * *] through [* * *] ([* * *]), within [* * *] ([* * *]) months of the delivery of the Gene Computational Reports with respect to such Identified Genes.[* * *].”

 

  1.1.2 A new Section 3.1.1.5(c) shall be added to read as follows:

“(c) Bayer shall have the option, subject to Evogene’s capacity, to increase the number of Identified Genes from each ATHLETE Collaboration Discovery Round to undergo [* * *]Model Plant Validation. Such option shall be exercisable by Bayer with respect to a minimum of[* * *] ([* * *]) additional Identified Genes, by providing a written notice to Evogene to such effect no later than [* * *] ([* * *]) months prior to the due date for delivery of the Gene Computational Reports under the first applicable ATHLETE Collaboration Discovery Round. [* * *]. In the event that Bayer exercises its option hereunder, then the procedure set forth in Exhibit A, Section A.2 (subsection 6.3) with respect to selection of Identified Genes to undergo [* * *] Model Plant Validation shall apply, mutatis mutandis.”

 

  1.1.3 Section 3.1.1.6(b) shall be replaced in its entirety to read as follows:

“(b) [* * *].”

 

Initials Bayer :    page 1 of 6    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Hecate Ref : 4/10/b00917-2

 

 

  1.1.4 Section 3.1.1.6(c) shall be replaced in its entirety to read as follows:

“[* * *].”

 

  1.1.5 Section 3.1.1.6(d) shall be replaced in its entirety to read as follows:

[* * *].

 

  1.1.6 Section 7.2 shall be replaced in its entirety to read as follows:

“7.2 Research Payments to Evogene.

7.2.1 General. Subject to the terms and conditions of this Agreement (including early termination or partial termination of the Collaboration in accordance with Section 14.3), Bayer shall pay Evogene the following annual payments for ongoing research, (each, an “Annual Research Payment”), which Annual Research Payments shall each be made in four equal, quarterly installments, payable upon receipt of the corresponding invoices in accordance with Section 8.2, which invoices shall be issued after the last day of each quarter of the relevant years, in arrears:

7.2.1.1 For Collaboration Year 1, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]);

7.2.1.2 For Collaboration Year 2, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]);

7.2.1.3 For Collaboration Year 3, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]);

7.2.1.4 For Collaboration Year 4, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]);

7.2.1.5 For Collaboration Year [* * *], Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]); and

7.2.1.6 For the year following the end of Collaboration Year [* * *], during which Evogene will perform the Validation Tail, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]).

7.2.2 Payments in Case of Extension. In case Bayer decides to continue activities in Collaboration Year [* * *] with respect to both the ATHLETE Program and the EvoBreed Program, in accordance with Section 3.1.3.1(g), the Annual Research Payments specified above in

 

Initials Bayer :    page 2 of 6    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Hecate Ref : 4/10/b00917-2

 

Section 7.2.1.5 and 7.2.1.6 shall be replaced by the Annual Research Payments specified below in Section 7.2.2.1, 7.2.2.2. and 7.2.2.3:

7.2.2.1 For Collaboration Year [* * *], Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]);

7.2.2.2 For Collaboration Year [* * *], Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]); and

7.2.2.3 For the year following the end of Collaboration Year [* * *], during which Evogene will perform the Validation Tail, Bayer shall pay to Evogene an Annual Research Payment of [* * *] Euro (€[* * *]).

7.2.3 Payments in Case of Increased Number of Identified Genes to undergo [* * *] Model Plant Validation. In case Bayer decides to increase the number of Identified Genes from each ATHLETE Collaboration Discovery Round to undergo [* * *] Model Plant Validation in accordance with Section 3.1.1.5(c), then the Annual Research Payments specified above in Section 7.2.1 and in Section 7.2.2, if applicable, for each Collaboration Year starting from the Collaboration Year immediately following the due date for delivery of Gene Computational Reports under the first applicable ATHLETE Collaboration Discovery Round shall be increased by [* * *] Euro (€[* * *]) per each additional Identified Gene to undergo [* * *] Model Plant Validation.

 

1.2 Amendment to Exhibit A of the Wheat Collaboration and License Agreement.

 

  1.2.1 Subsection 4 of Section A.2 shall be replaced in its entirety to read as follows:

[* * *]

- [* * *].

[* * *]:

 

  a. [* * *].

 

  b. [* * *].

[* * *].

[* * *].

 

Initials Bayer :    page 3 of 6    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Hecate Ref : 4/10/b00917-2

 

[* * *].

[* * *].

[* * *].

- [* * *].

- [* * *].

- [* * *].

- [* * *].

- [* * *]

- [* * *].

- [* * *].

- [* * *].

- [* * *].”

 

  1.2.2 Subsection 6 of Section A.2 shall be replaced in its entirety to read as follows:

[* * *]

 

  6.1 [* * *]

 

  a. [* * *]

 

  b. [* * *]

 

  c. [* * *].

 

  d. [* * *]:

 

   

[* * *]

 

   

[* * *]

 

   

[* * *]

[* * *]

 

Initials Bayer :    page 4 of 6    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Hecate Ref : 4/10/b00917-2

 

 

  6.2 [* * *]

[* * *]:

[* * *]

[* * *].

 

  6.3 [* * *]

[* * *].

[* * *].

[* * *].”

2. No other amendments. Except as specifically amended hereby, the provisions of the Wheat Collaboration and License agreement shall remain unchanged.

 

Initials Bayer :    page 5 of 6    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.


Hecate Ref : 4/10/b00917-2

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the Wheat Collaboration and License Agreement to be duly executed in two (2) copies by their authorized representatives effective as of the date first written above.

 

Bayer CropScience AG     Evogene Ltd.
By:   /s/ Gerhart Marchand     By:   /s/ Ofer Haviv             /s/ Hagai Karchi
Name:   Dr. Gerhart Marchand     Name:   Ofer Haviv                       Hagai Karchi
Title:   General Counsel     Title:   President & CEO
By:  

/s/ Antonion Perea

     
Name:   Antonio Perea      
Title:   BCS-ACO-BS      

 

Initials Bayer :    page 6 of 6    Initials Evogene :

 

*** Confidential treatment has been requested for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.
EX-10.8 6 d518283dex108.htm EX-10.8 EX-10.8

Exhibit 10.8

Share Purchase Agreement

This Share Purchase Agreement (the “Agreement”) is made on December 10, 2010 and entered into as of the date of the last signature hereto , by and between Evogene Ltd., a company organized under the laws of the State of Israel, with registered address at 13 Gad Feinstein St., P.O. Box 2100, Rochovot 76121, Israel (the “Company”) and Bayer CropScience AG, a company organized under the laws of Germany, with registered address at Alfred—Nobel—Str. 50, 40789 Monheim am Rhein, Germany (the “Purchaser”).

 

WHEREAS    The Company is a public company whose securities are listed for trading on the Tel Aviv Stock Exchange Ltd. (hereinafter the “TASE”); and
WHEREAS    The Purchaser desires to invest in the Company an amount of US$12,000,000 in consideration for 1,726,619 Ordinary Shares (as defined below) of the Company which constitute, as of December 7, 2010, 5.47% of the outstanding share capital and voting rights in the Company (and 4.08% of the outstanding share capital and voting rights in the Company on a fully diluted basis), assuming the issuance of the Purchased Shares (as defined below) as of December 7, 2010, as more particularly set out in this Agreement;

Now, therefore, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows:

 

1. Preamble, Appendices and Interpretation

 

  1.1 The preamble and the Appendices to this Agreement constitute an integral part hereof and are to be read as one with the remaining clauses thereof.

 

  1.2 Headings in this Agreement arc for convenience only and shall not be used for interpretation of this agreement.

 

  1.3 In this Agreement, unless the context otherwise requires, “include,” “includes,” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of similar import.

 

  1.4 In this Agreement, unless otherwise expressly stated, the terms set out below shall bear the meaning appearing opposite them:

 

  1.4.1

Affiliate”, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by, or under common control with, such Person; provided that, for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause

 

Initials Bayer:    Page 1 of 21    Initials Evogene:


  the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise and provided, further, that an Affiliate of any Person shall also include any Person that directly or indirectly owns more than fifty (50%) of any class of capital stock or other equity interest of such Person.

 

  1.4.2 Business Day” — Any day, other than a Friday (in Israel), Sunday (in Germany), Saturday or a day on which commercial banks are authorized or required to close in Israel and in Frankfurt am Main (Germany).

 

  1.4.3 Closing” — The closing of the purchase and sale of the Purchased Shares (as defined below) which shall take place by teleconference, facsimile or electronic mail communication within three (3) Business Days from the satisfaction or waiver of the last of the conditions precedent set forth in Sections 6.1 and 6.2 below (other than those conditions which by their terms must be satisfied at the Closing, which such conditions shall be satisfied or waived at Closing) or at such other time and place as may be agreed between the parties hereto, it being understood however that the Closing shall not take place prior to January 6, 2011 (the “Closing Date”). For clarification, if the last of the conditions precedent set forth in Sections 6.1 and 6.2 below (other than those conditions which by their terms must be satisfied at the Closing, which such conditions shall be satisfied or waived at Closing) shall have been satisfied or waived prior to January 6, 2011, then the Closing Date shall occur on January 6, 2011 or within (3) Business Days thereafter or at such other time and place as may be agreed between the parties hereto.

 

  1.4.4 Collaboration and License Agreement” — The Wheat Collaboration and License agreement by and between the Company and the Purchaser, dated as of the same date as the date first written above.

 

  1.4.5 Companies Law” — The Israeli Companies Law— 1999.

 

  1.4.6 Encumbrance” — Any mortgage, deed of trust, lien, security interest, retention of title or lease for security purposes, pledge, charge, claim, option, right of first refusal, easement, right of way, preemptive right, condition or restriction, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership or other encumbrances of any kind.

 

  1.4.7 Financial Statements” — (a) The audited consolidated financial statements of the Company as of December 31, 2009 and the year ending on the same date that were filed with the ISA on March 10, 2010 (the “Audited Financial Statements”); and (b) the reviewed consolidated financial statements of the Company as of September 30, 2010 and the period ending on the same date that were filed with the ISA on November 18, 2010.

 

Initials Bayer:    Page 2 of 21    Initials Evogene:


  1.4.8 IFRS” — International Financial Reporting Standards as in effect from time to time, consistently applied.

 

  1.4.9 Investment Amount” — as defined in Section 2.

 

  1.4.10 ISA” — Israel Securities Authority.

 

  1.4.11 Law” — any statute, law, ordinance, rule or regulation of any governmental or regulatory authority.

 

  1.4.12 Material Adverse Effect” — (i) Any material adverse change in or effect on the business, assets, liabilities, prospects, results of operation or condition (financial or otherwise) of the Company and any of its Subsidiaries, taken as a whole; or (ii) Any material adverse change in or effect on (including any material delay) the ability of the Company to perform its obligations hereunder or consummate the transactions contemplated hereby.

 

  1.4.13 Nominee Company” — The nominee company of Bank Leumi le-Israel Nominees Company Ltd.

 

  1.4.14 Ordinary Shares” — the Ordinary Shares of the Company, having a par value of NIS 0.01 each, which shares are listed for trading on the TASE.

 

  1.4.15 Person” — an individual, a partnership, a joint venture, a corporation, a limited liability company, a limited liability partnership, a trust, an incorporated organization and a governmental or regulatory authority or any other legal entity.

 

  1.4.16 Principal Shareholder” — as such term is defined in the Securities Law.

 

  1.4.17 Purchased Shares” — means 1,726,619 Ordinary Shares of the Company, having a par value of NIS 0.01 each.

 

  1.4.18 Price Per Share” — USD 6,95.

 

  1.4.19 Regulations” — the regulations that were promulgated under the Securities Law.

 

  1.4.20 Securities Law” — the Israeli Securities Law —1968.

 

Initials Bayer:    Page 3 of 21    Initials Evogene:


  1.4.21 Subsidiary” — with respect to any Person, any entity in which such Person holds more than 25% of the issued and outstanding share capital, voting rights or other ownership or equity interests.

 

  1.4.22 TASE” — Tel Aviv Stock Exchange.

 

2. The Investment

 

  2.1 Subject to the terms and conditions hereof, at the Closing, the Company shall issue, sell and deliver to the Purchaser, and the Purchaser shall purchase from the Company, the Purchased Shares, free and clear of all Encumbrances other than those set forth in Section 4.5 below, against payment by the Purchaser of US$12,000,000 (hereinafter the “Investment Amount”).

 

  2.2 Promptly upon issuance of the Purchased Shares, the Company shall take all action to register the Purchased Shares for trading on the TASE. All expenses with such registration will be borne by the Company.

 

  2.3

From and after the Closing, so long as the Purchaser holds at least 4% of the Company’s issued and outstanding share capital, the Purchaser shall be entitled to appoint an observer who shall not be an employee of the Purchaser or any of its Affiliates (the “Board Observer”) to attend all meetings of the board of directors of the Company (the “Board”) (whether held in person, by video conference, telephone or other electronic means or whether resolutions are adopted in written form) in a nonvoting capacity. The Board Observer will be advised reasonably in advance of all Board meetings and the Company shall give the Board Observer copies of all notices, minutes, consents and other materials as and when it provides them to members of the Board. The Board Observer may participate in all discussions of matters brought to the Board and receive all the aforesaid materials unless the Company’s chairman of the Board determines that there is reasonable likelihood that the Board Observer’s presence and/or receipt of such materials, as the case may be, would cause a conflict of interest due to him/her being Bayer’s representative on the Board and that it is in the best interest of the Company that he or she would be excluded from such meeting or portion of such meeting of the Company and/or not receive such materials or portions thereof, as the case may be. The Board Observer will agree in writing to be bound by fiduciary duties set—forth in Article 254 of the Israeli Companies Law — 1999 (entitled: Fiduciary Duty) and to hold in confidence and not use or disclose to any third party (including to the Purchaser and any of its Affiliates) any confidential information provided to or learned by it in connection with its rights under this Section 2.3. Additionally, the Board Observer will agree in writing to disclose to the Board, immediately and in any event prior to the Board first discussing such matter, if he or she believe that they are in a conflict of interests with respect to any matter or matters brought to the Board, and to refrain from participating at the

 

Initials Bayer:    Page 4 of 21    Initials Evogene:


  meeting or portion of a meeting in which any such matter is discussed. The Board Observer may be removed or replaced only by the Purchaser, provided that if the Purchaser’s shareholdings fall below the minimum holdings requirement set forth in this Section 2.3 above, then the Board Observer’s office shall automatically expire.

Notwithstanding anything to the contrary in this Agreement, save with the Company’s prior written approval, the Purchaser’s rights according to this Section 2.3 may not be assigned or transferred by the Purchaser.

 

3. Representations of the Company

The Company hereby declares, represents and warrants as follows:

 

  3.1 The Company is a public company (as such term is defined in the Companies Law) duly organized under the laws of the State of Israel, the shares of which are listed for trading on the TASE. The Company has the requisite corporate and other power and authority to conduct its business as it is now being conducted. The Company’s organizational documents filed with the TSA on December 27, 2007, as amended and filed with the ISA on September 13, 2010, are the complete and correct copies of the Company’s organizational documents as presently in effect.

 

  3.2 The shares of the Company are listed for trading on the regular list of the TASE. The Company has not received any notice from the TASE of any intention to delist or suspend its securities from trading and/or to transfer the Company’s securities to the maintenance list and, to the best of the Company’s knowledge, no circumstances exist which may result in the Company’s securities being delisted or suspended from trading or transferred to the maintenance list.

 

  3.3 The Company has timely filed with the ISA and the TASE all the required reports, files, forms and notices required in accordance with the Securities Law, the Regulations, and any other applicable Law (hereinafter the “Reports”).

 

  3.4 Each immediate and periodic report filed by the Company since January 1, 2009 was true, accurate and complete as of the date it was filed with the TASE and/or the ISA, as applicable, and did not contain any untrue statement of a fact or omit to state any fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

 

  3.5 Each of the Financial Statements has been prepared in accordance with the books and records of the Company and its Subsidiaries and in accordance with IFRS applied on a consistent basis throughout the periods covered thereby. Each of the Financial Statements fairly presents, in all material respects, the consolidated financial position of the Company as of the respective dates thereof and the results of operations and cash flows for the respective periods then ended.

 

Initials Bayer:    Page 5 of 21    Initials Evogene:


  3.6 Neither the Company nor any of its Subsidiaries has any claims, obligations, liabilities or indebtedness, whether absolute, accrued, contingent or otherwise, except for (i) claims, obligations, liabilities or indebtedness set forth in the Audited Financial Statements or specifically disclosed in the footnotes thereto and (ii) accounts payable to trade creditors and accrued expenses incurred subsequent to December 31, 2009 in the ordinary course of business consistent with past practice and that, individually and in the aggregate, would not have or reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.

 

  3.7 Since January 1, 2010, there have been no material changes in the accounting policies of the Company, no material revaluation of any assets and obligations of the Company or its Subsidiaries other than as set forth in the reviewed consolidated financial statements of the Company as of March 31, 2010, June 30, 2010 and as of September 30, 2010 and the respective periods covered thereby, and there has been no material adverse change in the consolidated financial position of the Company and its Subsidiaries. The Company and each of its Subsidiaries maintains and, for all periods covered by the Financial Statements, has maintained (i) books, records and accounts which, in reasonable detail, accurately and fairly reflect in all material respects the transactions and dispositions of the assets of the Company or such Subsidiaries and (ii) a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS.

 

  3.8 The registered share capital of the Company is NIS 3 million divided into 300,000,000 Ordinary Shares.

 

  3.9 The Company’s issued and outstanding share capital consists of the following securities, as of December 7, 2010:

 

  3.9.1 29,836,777 Ordinary Shares listed for trade on the TASE;

 

  3.9.2 4,497,805 Series 2 Warrants listed for trade on the TASE (hereinafter “Series 2 Warrants”) exercisable into 4,497,805 Ordinary Shares listed for trade on the TASE;

 

  3.9.3 6,255,742 non—tradable options exercisable into 6,255,742 Ordinary Shares that have been previously granted to investors, employees, consultants and directors of the Company.

 

Initials Bayer:    Page 6 of 21    Initials Evogene:


Capitalization tables of the Company immediately prior to and subsequent to the Closing are attached hereto as Exhibit 3.9.3, subject to the qualification set forth in Section 6.2(i) below.

 

  3.10 The Purchased Shares constitute, as of December 7, 2010, 5.47% of the outstanding share capital and voting rights in the Company (and 4.08% of the outstanding share capital and voting rights in the Company on a fully diluted basis) assuming the issuance of the Purchased Shares as of December 7, 2010.

 

  3.11 None of the Ordinary Shares of the Company are held in the treasury of the Company, and there are no options, warrants or other rights to acquire, sell or issue any Ordinary Shares of the Company, including any rights of conversion or exchange under any outstanding securities, other than as set forth in Section 3.9 above and other than as set forth in Exhibit 3.11. The Company has no phantom stock or similar plans or rights. Other than as set forth in Exhibit 3.11, the Company has no obligation (contingent or otherwise) to purchase, redeem, or otherwise acquire or issue to any person any Ordinary Shares or other interests therein or to pay any dividend or make any distribution in respect thereof or to issue any options, warrants or other rights to acquire, sell or issue any Ordinary Shares or other securities of the Company.

 

  3.12 To the best of the Company’s knowledge based solely on information provided to the Company by its shareholders, at their own initiative and without any investigation by the Company, the Principal Shareholders in the Company and their holdings in the Company (including on a fully diluted basis) are as set forth in the immediate report filed by the Company with the ISA on December 6, 2010. There are no voting agreements among the Company and any of its Principal Shareholders or, to the best of the Company’s knowledge based solely on information provided to the Company by its shareholders, at their own initiative and without any investigation by the Company, among the Principal Shareholders. There are no agreements or obligations of the Company towards any of the Principal Shareholders with respect to the Purchase or Sale of any of the Company’s securities or the issuance thereof other than as set forth in Exhibit 3.11.

 

  3.13 The Purchased Shares will rank equally in all respects with the existing Ordinary Shares.

 

  3.14 The Company has the full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.

 

  3.15

Except as set forth in Sections 6.1(i) and 6.1(h) below, no consents, approvals, authorizations or permits are required in connection with the consummation by the Company of the transactions contemplated by this Agreement. The Company

 

Initials Bayer:    Page 7 of 21    Initials Evogene:


  has duly and validly executed and delivered this Agreement, and no other corporate or other proceedings on the part of Company or its shareholders is necessary to authorize this Agreement and the transactions contemplated hereby. Subject to obtaining the approvals and satisfying the conditions precedent to Closing set forth in Section 6 below, this Agreement when executed by the Company will constitute valid, binding and enforceable obligations of the Company in accordance with its terms.

 

  3.16 Subject to obtaining the approvals and satisfying the conditions precedent to Closing set forth in Section 6 below, the execution and delivery by Company of this Agreement and the consummation of the transactions contemplated hereby does not and will not (a) violate or conflict with any provision of the memorandum or articles of association (or other equivalent instrument) of the Company; (b) violate or conflict with any provision of, or result in breach of, constitute a default under, or permit or result in the termination, cancellation or acceleration of any right or obligation of the Company under any contract to which it is a party; or (c) violate or result in a breach of, or constitute a default under, any law or order of any governmental body applicable to the Company.

 

4. Representations of the Purchaser

  The Purchaser hereby represents and warrants as follows:

 

  4.1 It is a private company organized under the laws of Germany.

 

  4.2 It has the full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. Except as set forth in Section 6 below, no consents, approvals, authorizations or permits are required in connection with the consummation by the Purchaser of the transactions contemplated by this Agreement. The Purchaser has duly and validly executed and delivered this Agreement, and no other corporate or other proceedings on the part of the Purchaser or its shareholders is necessary to authorize this Agreement and the transactions contemplated hereby. Subject to obtaining the approvals and satisfying the conditions precedent to Closing set forth in Section 6 below, this Agreement when executed by the Purchaser will constitute valid, binding and enforceable obligations of the Purchaser in accordance with its terms.

 

  4.3 The execution and delivery by the Purchaser of this Agreement and the consummation of the transactions contemplated hereby do not and will not (a) violate or conflict with any provision of the memorandum or articles of association (or other equivalent instrument) of the Purchaser; (b) violate or conflict with any provision of. or result in breach of, constitute a default under, or permit or result in the termination, cancellation or acceleration of any right or obligation of the Purchaser under any contract to which it is a party; or (c) violate or result in a breach of, or constitute a default under, any law or order of any governmental body applicable to the Purchaser.

 

Initials Bayer:    Page 8 of 21    Initials Evogene:


  4.4 It has sufficient immediately available funds in cash to pay the Investment Amount.

 

  4.5 It is aware that the Purchased Shares are and will be subject to Section 15C of the Securities Law and the Securities Law Regulations (Details with Regard to Sections 15A to 15C of the Law), 2000. which imposes certain restrictions in respect of the transfer of the Purchased Shares.

 

  4.6 On the date of this Agreement, it does not hold any securities of the Company, directly or indirectly.

 

  4.7 No written or oral agreement or voting agreement exists between the Purchaser and any of the equity security holders of the Company or any other Person concerning their shares in the Company or their rights therein.

 

5. Covenants

 

  5.1 Immediately after the date hereof, the Company shall make all necessary filings in a timely manner with applicable governmental or regulatory authorities and other Persons (including the filing of an immediate report with respect to the private issuance of the Ordinary Shares to the Purchaser (the “Private Offering Report”)) and take all other actions in a timely manner, in each case, as required pursuant to the Securities Law and the Regulations (including, the Israeli Securities Regulations (Private Offering of Securities in a Listed Company), 2001 and the Israeli Securities Law Regulations (Periodic and Immediate Statements), 1970) to consummate the transactions contemplated by this Agreement.

 

  5.2 Within seven (7) days after the date on which this Agreement is signed by the parties hereto, the Company shall: (a) file with the TASE a request to register the Purchased Shares for trading on the TASE; and (b) pay the TASE all fees required with respect to the registration of the Purchased Shares for Trading.

 

  5.3 The Company shall provide the Purchaser drafts of the documentation set forth in Sections 5.1 and 5.2 for Purchaser’s review and comments and shall provide copies of such documentation promptly after their filing.

 

  5.4

In order to allow the Company to timely file the Private Offering Report, the Purchaser shall, promptly after execution of this Agreement, deliver to the Company in English all data listed in Exhibit 5.4 attached hereto (to the extent required under the Securities Law and the Regulations). If at any time prior to

 

Initials Bayer:    Page 9 of 21    Initials Evogene:


  Closing the Company shall be required by applicable law or the TASE to provide additional information to that listed in Exhibit 5.4 for the purpose of filing any report with respect to the transaction contemplated hereby, the Purchaser shall use its commercially reasonable efforts to promptly provide the Company with such additional information prior to submission.

 

  5.5 The Purchaser and the Company shall agree on a joint press release to be issued as soon as practicable after Closing, but in any event no later than three (3) Business Days following the Closing. Any other press release with respect to this Agreement or the transactions contemplated hereby issued by any party hereto or on its behalf shall be subject to prior approval in writing by the other party. The Purchaser and the Company shall make reasonable efforts to consult with each other before making any public filing with respect to this Agreement or the transactions contemplated hereby (including the filings listed in Sections 5.1 and 5.2) that are required to be made at or in connection with the signing of this Agreement and the Closing hereof (including the issuance of the Purchased Shares by the Company to the Purchaser).

 

6. Conditions Precedent to Closing

 

  6.1 Joint Condition to Closing. Each party’s obligation to consummate the transaction contemplated hereby is subject to the fulfillment, prior to or at the Closing, of each of the following conditions (any one or more of which may be waived in whole or in part by each party):

 

  (i) The principle approval of the Investment Center of the Ministry of Industry. Trade and Employment shall have been granted; and

 

  (ii) The approval of the TASE to list the Purchased Shares for trading (the “TASE Approval”) shall have been granted.

 

  (iii) The Company shall have secured all permits, consents and authorizations that shall be necessary or required lawfully for it to consummate this Agreement and to issue the Purchased Shares to the Purchaser at the Closing.

 

  (iv) There shall be no unsatisfied premerger notification obligations or investigations under the competition laws of the State of Israel and competition laws applicable in Germany.

 

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  6.2 Conditions to the Purchaser’s Obligation to Close. The Purchaser’s obligation to consummate the transaction contemplated hereby is subject to the fulfillment, prior to or at the Closing, of each of the following conditions (any one or more of which may be waived in whole or in part by the Purchaser):

 

  (i) The representations and warranties of the Company were true and correct when made and shall be true and correct at the Closing as though made again at the Closing Date, other than changes to the Company’s representations and warranties concerning the Company’s issued and outstanding share capital set forth in Sections 3.8, 3.9, 3.10, 3.11 and 3.12 which are caused due to the exercise of options and warrants that are outstanding as of the date on which this Agreement is signed, and are set forth in Section 3.9 and Exhibit 3.11 hereto, and/or due to the expiration of any such options or warrants.

 

  (ii) The Company shall have performed and complied with all obligations and covenants required by this Agreement to be performed or complied with by it prior to or at the Closing.

 

  (iii) The Collaboration and License Agreement shall have been executed on or prior to Closing.

 

  (iv) From the dale hereof until the Closing Date, there shall have occurred no Material Adverse Effect.

 

7. Closing & Post Closing

Closing

At the Closing (with the exception of the actions described in Section 7.1 which shall occur in accordance with the time set forth in Section 7.1), the following actions and occurrences will take place, all of which shall be deemed to have occurred simultaneously and no action shall be deemed to have been completed and no document or certificate shall be deemed to have been delivered, until all actions are completed and all documents and certificates delivered:

 

  7.1 No later than three (3) Business Days prior to the Closing, the Purchaser will furnish the Company with details of an account maintained with a TASE member, in which the Purchased Shares will be deposited, including the name of the holder of the account and the account number (hereinafter the “Account”). Such Account shall either be in the name of the Purchaser, or in the name of the financial institution with which the Purchaser opened a securities account and that has entered into a custodian agreement with the TASE member governing the holding of the Purchased Shares through such TASE member.

 

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  7.2 The Purchaser will wire transfer the Investment Amount in U.S. dollars to the Company’s bank account as detailed below:

First International Bank

Swift Code: FIRBILITXXX

Ramat Hachayal Branch, Branch no. 121

Payable to: Evogene Ltd.

Account no. 600555

Bank telephone number: +972-3-768-0200

Bank facsimile number: +972-3-513-4121

 

  7.3 If required by the Law for the Encouragement of Research and Development in Industry, 1984, or any other applicable laws and regulations, the Purchaser will deliver to the Company an executed copy of an Undertaking towards the Israeli Chief Scientist of the Ministry of Industry, Trade and Employment (the “OCS”) substantially in the form attached hereto as Exhibit 7.3 or in any other form required by the OCS with respect to all OCS funded projects which are still ongoing and/or from which royalties are still due and payments are made.

 

  7.4 The Company shall deliver to the Purchaser a letter from the Company’s Chief Executive Officer confirming that (i) the Board of Directors of the Company has approved the transaction and the issuance of the Purchased Shares to the Purchaser, and (ii) the Company’s representations and warranties herein are true and correct as of the Closing Date as though made again at the Closing Date, subject to the qualification set forth in Section 6.2(i) above, and that the Company has performed and complied with all obligations and covenants required by this Agreement to be performed or complied with by it prior to or at the Closing.

 

  7.5 The Company shall deliver to the Purchaser the following documents:

 

  (i) A copy of the share certificate registered in the name of the Nominee Company representing the Purchased Shares (the “Share Certificate”);

 

  (ii) A copy of the approval by the TASE for registration of the Purchased Shares for trading;

 

  (iii) A copy of the Company’s immediate report with respect to the issuance of the Purchased Shares; and

 

  (iv) A copy of a letter of issuance to the Nominee Company informing it of the issuance of the Purchased Shares (the “Letter of Issuance”).

 

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  7.6 The Company will deliver to the Nominee Company the Share Certificate, the Letter of Issuance, and other documentation necessary to enable the listing for trade of the Purchased Shares immediately after the Closing.

Post Closing Covenants

 

  7.7 Subject to and for as long as the Purchaser holds at least 2.5% of the Company’s issued and outstanding share capital, the Company undertakes to provide the Purchaser with English translations of its quarterly and annual financial reports within 30 days of the filing of such annual and quarterly financial reports with the ISA and the TASE.

 

  7.8 The Company shall not take any actions or fail to take any action which would cause the Purchaser to be in violation of the Undertaking towards OCS referred to in Section 7.3.

 

8. Termination

 

  8.1 This Agreement may be terminated and the transactions contemplated hereby may be abandoned, at any time prior to the Closing: (i) by mutual written consent of the Company and the Purchaser; (ii) at the election of any of the Company or the Purchaser in writing if the Closing shall not have occurred within 90 days (or a longer period if mutually agreed by the parties hereto) following the date of this Agreement; provided that the right of the Company or the Purchaser to terminate this Agreement pursuant to this Section 8.1(H) shall not be available to such party whose failure to fulfill or cause to be fulfilled, in any manner, any obligation or condition under this Agreement has contributed to the failure of the Closing to have occurred by such date; or (iii) by the Company or the Purchaser if there shall be in effect a final nonappealable order or judgment of a governmental or regulatory authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; provided, however, that the right to terminate this Agreement under this Section 8.1(iii) shall not be available to a party if such order or judgment was primarily due to the failure of such party, to perform any of its obligations under this Agreement.

 

  8.2 In the event of termination of this Agreement as provided in Section 8.1 above, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party hereto, or their respective employees, agents or shareholders, if applicable, except that this Section 8.2 and Section 9 shall remain in full force and effect and survive any termination of this Agreement, and except that nothing herein shall relieve the breaching party hereto from liability to the non-breaching party for the breach of any of its covenants, undertakings or agreements set forth in this Agreement prior to such termination.

 

Initials Bayer:    Page 13 of 21    Initials Evogene:


9. Miscellaneous

 

  9.1 The parties will effect all the acts and sign all the documents that will be reasonably required in order to accomplish and fully effectuate the provisions of this Agreement and the intention of the parties that are reflected by the contents thereof.

 

  9.2 This Agreement, including the Exhibits thereto, contains and expresses all the terms and conditions agreed between the parties with respect to the subject matter hereof. Any assurances, guarantees, written or verbal agreements, undertakings or representations regarding the subject matter of this Agreement, including drafts of this Agreement exchanged between the parties and memoranda of understanding, that have been given or made by the parties between them, but prior to the making of this Agreement, will not add to nor derogate from the undertakings and rights prescribed in this Agreement or resulting therefrom, shall not serve to interpretate this Agreement and the parties will not be bound thereby from the date of the signature of this Agreement onwards.

 

  9.3 No waiver, extension, concession or forbearance from exercising any right under this Agreement will be of any effect unless made by express document signed by the waiving party, and if made will only apply with respect to the specific instance mentioned in the document and will not derogate from any other rights of any of the parties under this Agreement. This Agreement may be amended only by a written agreement executed by both parties.

 

  9.4 None of the parties may assign or convey any undertaking, obligation or right which it has under this Agreement without the prior consent of the other party, except that the undertakings, obligations and rights of the Purchaser under this agreement may be transferred and assigned to any of its Affiliates upon written notice to the Company.

 

  9.5 Notices under this Agreement will be conveyed in writing to the addresses of the parties appearing at the preamble of this Agreement and to the email addresses and fax number detailed hereunder. Any notice sent by either of the parties to the other by registered mail will be deemed to have been received after four Business Days from the date of posting. Notice sent by fax or emailed will be deemed to have been received on the same Business Day on which it was sent (subject to despatch confirmation being furnished). Notice given by personal service will be deemed to have been received on the date of service.

Purchaser’s fax number and email address:

+ 49-2173-38 51 43, gerhart.marchand@bayer.com

with copy to +49 214 30 81842, christoph.seulen@bayer.com

 

Initials Bayer:    Page 14 of 21    Initials Evogene:


Company’s fax number and email address:

+972-8-946-6724, haviv@evogene.com

 

  9.6 In case any provision of the Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The parties hereto shall make a reasonable effort to draw up an arrangement in accordance with the meaning and the object of the invalid provision.

 

  9.7 This Agreement, including all Exhibits hereto (other than any Exhibit that is independently executed by the parties thereto which shall be governed by the laws set forth in that Exhibit), shall be governed exclusively by, and construed solely in accordance with, the laws of the State of Israel, without regard to the conflict of laws provisions thereof. All disputes arising under this Agreement or in connection with the transactions hereunder shall be resolved exclusively in the competent court in the district of Tel-Aviv, Israel and no other courts shall have any jurisdiction whatsoever in respect of such disputes.

 

  9.8 This Agreement may be executed in any number of counterparts, each of Which shall be deemed an original but all of which together shall constitute one and the same instrument. A signed Agreement received by a party via facsimile or email will be deemed an original, and binding upon the party who signed it.

 

  9.9 Save as otherwise provided in this Agreement, each party shall be responsible for its own expenses in connection with this Agreement and the consummation of the transactions contemplated herein.

[Remainder of this page intentionally left blank]

 

Initials Bayer:    Page 15 of 21    Initials Evogene:


[Signature Page of Share Purchase Agreement]

In witness whereof the parties have set their hands on the date first above written:

 

/s/ Ofer Haviv     /s/ Hagai Karchi     /s/ Gerhart Marchand     /s/ Rüdiger Scheitza  
Evogene Ltd.     Bayer CropScience AG  

 

Initials Bayer:    Page 16 of 21    Initials Evogene:


Exhibit 3.9.3

Capitalization Tables

Capitalization Table as of December 7, 2010

 

Ordinary Shares

   29,836,777

Series 2 Warrants

   4,497,805

Non-tradable options

   6,255,742

Total

   40,590.324

Capitalization Table—Post Closing

 

         

% (shares only)

  

% (fully diluted)

Purchased Shares

   1,726,619    5.47%    4.08%

Ordinary Shares

   29,836,777    94.53%    70.51%

Series 2 Warrants

   4,497,805       10.63%

Non-tradable options

   6,255,742       14.78%

Total

   42,316,943       100%

 

Initials Bayer:    Page 17 of 21    Initials Evogene:


Exhibit 3.11

 

1. The Company has established an option grant scheme to the Company’s directors, as detailed in the report filed by the Company with the ISA on February 4, 2010.

 

2. The Company has an option to require Monsanto Company to purchase an additional 1,727,273 Ordinary Shares of the Company in consideration for an investment of US$ 12,000,000 in the Company, at the time and as further detailed in the immediate report filed by the Company with the ISA on August 28, 2008.

 

3. The Company has an option to requite AquaAgro Fund L.P. to purchase additional Ordinary Shares of the Company, at a price in US$ that is equal to NIS 4.5 per share, up to an aggregate investment of US$ 2,000,000 in the Company, at the times and as further detailed in the immediate report filed by the Company with the ISA on April 29, 2008.

 

4 Ordinary Shares issuable upon the exercise of options and/or warrants previously granted by the Company and set forth in Section 3.9 of the Agreement to which this Exhibit 3.11 is attached, including Ordinary Shares issuable to certain Principal Shareholders of the Company upon exercise of options and warrants previously granted by the Company to such Principal Shareholders as set forth in Section 3.12 of the Agreement to which this Exhibit 3.11 is attached.

 

Initials Bayer:    Page 18 of 21    Initials Evogene:


Exhibit 5.4—Required Information1

 

Purchaser’s Full Name  
Purchaser’s Identity Number or a different Identification Number & type of number provided  
Purchaser’s Country of Incorporation  
Purchaser’s Complete Address  
The name and details of the controlling shareholder, directly or indirectly, of the Purchaser (including name of such controlling shareholder and its holdings in the Purchaser)  
Information relating to agreements, whether written or oral, with regard to the purchase and/or holdings of Evogene’s securities or with regard to the voting rights therein & stating the material terms thereof  

 

 

1  The information required under this Exhibit (other than the information relating to agreements, with regard to the purchase and/or holdings of Evogene’s securities or with regard to the voting rights) will only be required to the extent the Purchaser shall be issued more than 5% of the outstanding share capital of the Company post money.

 

Initials Bayer:    Page 19 of 21    Initials Evogene:


Exhibit 7.3

 

To The Research Committee

The Office of the Chief Scientist

Jerusalem

Relating to projects that have been financed by or are currently being financed by the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor (the “OCS”) and to projects of the Company (as this term is defined below) that may be financed by the OCS in the future (the “Projects”).

Undertaking

We, the undersigned, of Bayer CropScience AG, a company incorporated, organized and existing under the laws of Germany and whose headquarters are at Alfred-Nobel-Str. 50, 40789 Monheim am Rhein, Germany (“Bayer”), having, by an agreement dated December             , 2010, committed to invest in Evogene Ltd. (the “Company”), in exchange for 1,726,619 Ordinary Shares of the Company;

Recognizing that the Company’s research and development Projects are currently, have been or will be financially supported by the Government of the State of Israel, through the OCS under and subject to the provisions of The Encouragement of Research and Development in Industry Law 5744-1984 (the “R&D Law”) and the regulations, rules and procedures promulgated there under;

Recognizing that the R&D Law places strict constraints on the transfer of know-how and/or production rights, making all such transfers subject to the absolute discretion of the OCS’ research committee (the “Research Committee”), acting in accordance with the aims of the R&D Law and requiring that any such transfer receive the prior written approval of the Research Committee;

 

Initials Bayer:    Page 20 of 21    Initials Evogene:


Hereby declare and undertake:

 

1. To observe strictly all the requirements of the R&D Law and the regulations, rules and procedures promulgated there under, as applied to the Company and as directed by the Research Committee, in particular those requirements stipulated under Sections 19, 19A and 19B of the R&D Law relating to the prohibitions on the transfer of know-how and/or production rights.

 

2. As a shareholder of the Company, to make all reasonable efforts that the Company shall observe strictly all the requirements of the R&D Law and the regulations, rules and procedures promulgated there under, as applied to the Company and as directed by the Research Committee, in particular those requirements stipulated under Sections 19, 19A and 19B of the R&D Law relating to the prohibitions on the transfer of know-how and/or production rights.

 

06.01.2011     /s/ Gerhart Marchand  
Date     Bayer CropScience AG  
    By: Dr. Gerhart Marchand  
    Title: Head of Law & Patents  

 

Initials Bayer:    Page 21 of 21    Initials Evogene:
EX-23.1 7 d518283dex231.htm EX-23.1 EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” and to the use of our report, dated             , 2013 in the Registration Statement on Form F-1 and related Prospectus of Evogene Ltd., dated             , 2013.

Tel Aviv, Israel

            , 2013

KOST FORER GABBAY & KASIERER

A Member of Ernst & Young Global

The foregoing report is in the form that will be signed upon completion of the 1-for-2 reverse share split described in Note 16(a) to the financial statements.

/s/ Kost Forer Gabbay & Kasierer

KOST FORER GABBAY & KASIERER

A Member of Ernst & Young Global

Tel Aviv, Israel

September 23, 2013

EX-23.3 8 d518283dex233.htm EX-23.3 EX-23.3

Exhibit 23.3

CONSENT OF SYMBIOTIC ENGINEERING

We hereby consent to the use of our name in the Registration Statement on Form F-1 of Evogene Ltd. for the registration of its ordinary shares, and any related preliminary prospectuses and prospectuses and any further amendments or supplements thereto (collectively, the “Registration Statement”) and to all references to us, our report concerning the 2010 life-cycle analysis in that report appearing in the Registration Statement.

Date: September 23, 2013

Symbiotic Engineering

 

By:   /s/ Michael Whitaker
Name:   Michael Whitaker
Title:   Principal
EX-23.4 9 d518283dex234.htm EX-23.4 EX-23.4

Exhibit 23.4

CONSENT OF PHILLIPS MCDOUGALL

We hereby consent to the use of our name in the Registration Statement on Form F-1 of Evogene Ltd. for the registration of its ordinary shares, and any related preliminary prospectuses and prospectuses and any further amendments or supplements thereto (collectively, the “Registration Statement”) and to the references to us and our report concerning commercial trait values appearing in the Registration Statement.

Date: September 23, 2013

Phillips McDougall

 

By:   /s/ John McDougall
Name:   Dr. John McDougall
Title:   Director
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