Collaborative Agreement

EXHIBIT 10.18



Confidential Treatment Requested

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

200.83 and 230.406





Addendum to the "COLLABORATION AGREEMENT" between Novartis Agribusiness Biotechnology Research, Inc. and Diversa Corporation.



This addendum dated and effective as of the date last below written (the "Effective Date") is between Diversa Corporation ("Diversa"), a Delaware corporation, and Novartis Agribusiness Biotechnology Research, Inc. ("Novartis"), a corporation organized under the laws of Delaware, (collectively, the "Parties").



WHEREAS, Diversa has isolated and characterized a [*****];



WHEREAS, Novartis would like to receive such [*****] for [*****] against a [*****];



NOW, THEREFORE, in consideration of the mutual covenants set forth in this addendum, the Parties hereby agree as follows:



(1) Diversa will [*****]. to Novartis, which are Diversa [*****]. Novartis

will [*****] to [*****] The cost associated with the transfer of such

[*****] is set at [*****].



(2) If and when [*****] are [*****] as [*****] (as defined in clause 1 of the

Collaboration Agreement) by the Research Committee, [*****] will be

conducted under the terms set forth in the Collaboration Agreement.



(3) The scope of a [*****] license will be the use in [*****], applying to

Crops the definition set forth in Collaboration Agreement.



(4) This addendum, when fully executed, will be made an integral part of the

Collaboration Agreement.



Accepted and Agreed to:



NOVARTIS AGRIBUSINESS DIVERSA CORPORATION BIOTECHNOLOGY RESEARCH, Inc.



/s/ Stephen V. Evola /s/ Jay M. Short - ---------------------------- -------------------------- By: Dr. Stephen V. Evola By: Dr. Jay M. Short Co-President Chief Executive Officer



*Confidential Treatment Requested

COLLABORATION AGREEMENT





NOVARTIS AGRIBUSINESS BIOTECHNOLOGY RESEARCH, INC.





DIVERSA CORPORATION





COLLABORATION AGREEMENT



This Collaboration Agreement, dated and effective as of January 25, 1999 (the "Effective Date"), is between Diversa Corporation ("Diversa"), a Delaware corporation, and Novartis Agribusiness Biotechnology Research, Inc., ("Novartis"), a corporation organized under the laws of Delaware (collectively, the "Parties").



R E C I T A L S



WHEREAS, Diversa has discovered and developed [*****] (as defined below), as well as proprietary technologies for the [*****] and is in the possession of Diversa Technology (as defined below) relating to said [*****] and technologies;



WHEREAS, Novartis discovers, develops, and commercializes products useful in [*****] including [*****] as well as applied products which confer similar benefits;



WHEREAS, Novartis and Diversa desire to collaborate to apply the [*****] and Diversa Technology to produce [*****]



NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the parties hereby agree as follows:



1. Definitions.



"ADR" shall have the meaning set forth in Section 11.3.



"Advanced Field Trials" shall mean advanced testing trials of a [*****] after successful testing in [*****] in a manner representative of [*****] including determining the [*****] of a [*****] in [*****] under [*****]



"Affiliate" shall mean any entity that directly or indirectly Owns, is Owned by or is under common Ownership, with Novartis, NADI or Diversa, as the case may be, where "Owns" or "Ownership" means direct or indirect possession of [*****] of the outstanding voting securities of a corporation or a comparable equity interest in any other type of entity.



"Agreement" shall mean this Collaboration Agreement.



"Alternate" shall have the meaning set forth in Section 3.4.



1. *Confidential Treatment Requested

"Audited Party" shall have the meaning set forth in Section 6.9.



"Auditing Party" shall have the meaning set forth in Section 6.9.



"[*****] Project" shall have the meaning set forth in Section 2.1.4.



"Biomolecule(s)" shall mean [*****] regardless of whether they [*****] including [*****]



"[*****] Project" shall have the meaning set forth in Section 2.1.



"Change of Control" shall mean any of the following [*****] [*****] (a) a merger or consolidation of Diversa which results in the voting securities of Diversa outstanding immediately prior thereto ceasing to represent at least [*****] of the combined voting power of the surviving entity immediately after such merger or consolidation; (b) the sale of all or substantially all of the assets of Diversa; or (c) any one person (other than Diversa, any trustee or other fiduciary holding securities under an employee benefit plan of Diversa, or any corporation owned directly or indirectly by the stockholders of Diversa, in substantially the same proportion as their ownership of stock of Diversa), together with any of such person's "affiliates" or "associates", as such terms are used in the Securities Exchange Act of 1934, as amended, becoming the beneficial owner of [*****] of the combined voting power of the outstanding securities of Diversa or by contract or otherwise having the right to control the Board of Directors or equivalent governing body of Diversa or the ability to cause the direction of management of Diversa.



"Committee Member" shall have the meaning set forth in Section 3.



"Confidential Information" shall have the meaning set forth in Section 7.1.



"Crop" shall mean any [*****]



"[*****]" shall mean all [*****] that are derived from Licensed [*****] through [*****] and all [*****] through [*****] to any Licensed [*****] and any [*****] of such [*****]



"[*****]" shall mean all [*****] that are [*****] through [*****] and all [*****] that are [*****] through [*****] to any Novartis [*****] and any [*****] of such [*****]



2. *Confidential Treatment Requested

"[*****] Biomolecule" shall mean any [*****] or [*****] which exhibits [*****] in the [*****] Field and which the [*****] has elected to [*****].



"[*****] Net Sales" shall mean the [*****] and [*****] determined in accordance with the definition of Net Sales [*****] as established by competent written records, with the intent of determining the [*****].



"Disclosing Party" shall mean that Party disclosing Confidential Information to the other Party under Section 7.



"Dispute" shall have the meaning set forth in Section 11.3.



"Diversa Biomolecules" shall mean all [*****] which are provided by Diversa to Novartis under the Collaboration Agreement and [*****].



"Diversa Inventions" shall mean those Inventions over which Diversa has exclusive ownership and control as provided in Sections 5.1 and 5.2.3.



"Diversa Know-How" shall mean all know-how, trade secrets, inventions, data, processes, procedures, devices, methods, formulas, media and/or all lines, reagents, protocols and marketing and other information, including improvements thereon, whether or not patentable, which are not covered by the Diversa Patent Rights, but which are necessary or useful for the commercial exploitation of the Diversa Patent Rights or the conduct of the Projects or otherwise relate to [*****] or Royalty-Bearing Products, and which are owned by or licensed to Diversa, with the right to license, as of the Effective Date or otherwise during the Research Period.



"Diversa Patent Rights" shall mean all patent and provisional patent applications, issued and subsisting patents and substitutions, divisionals, continuations, continuations-in-part, reissues, reexaminations, extensions and supplementary protection certificates thereof, including foreign counterparts of the foregoing owned by or licensed to Diversa, with the right to license, [*****] [*****]. Without limiting the generality of the foregoing, [*****] under Sections 5.1.1, 5.1.3 and 5.1.4, or [*****] under Section 5.2.3.



"[*****]" will document the research phase to be performed by [*****] including [*****].



3. *Confidential Treatment Requested

"Diversa Technology" shall mean the Diversa Know-How and the Diversa Patent Rights.



"[*****]" shall mean [*****].



"[*****]" shall mean [*****].



"Indemnitees" shall have the meaning set forth in Section 9.1.



"Indemnitor" shall have the meaning set forth in Section 9.1.



"Initial Projects" shall mean the [*****] Project, the [*****] Project, the [*****] Project and the [*****] Project.



"Inventions" shall have the meaning set forth in Section 5.1.





"[*****] Project" shall have the meaning set forth in Section 2.3.



"License" shall have the meaning set forth in Section 4.1.



"License Agreement" shall have the meaning set forth in Section 4.4.



"Licensed Biomolecule" shall mean each [*****] subject to a License granted [*****] of the [*****] (a) [*****] of which [*****] is within the [*****] or (b) which [*****] is [*****].



"License Fees" shall have the meaning set forth in Section 6.4.



"[*****] Activity Level" shall mean, with respect to each Project, [*****].



"[*****] Project" shall have the meaning set forth in Section 2.1.2.



"[*****]" shall mean [*****].





"Net Sales" shall mean the [*****] less [*****]. For each Royalty-Bearing Product, the gross invoice price shall [*****] including, without limitation, [*****].



With respect to sales by Novartis [*****] Affiliates [*****] of any product which incorporates both (i) [*****] and (ii) [*****], Net Sales shall be calculated by [*****] by the [*****] as used herein, shall mean a [*****] and the [*****] The [*****] of such components shall be equal to the [*****] provided, however, that, in the event that the [*****].



"[*****] Project" shall mean a [*****], undertaken pursuant to the terms of this Agreement.



"Novartis Biomolecules" shall mean all [*****] which are provided by Novartis to Diversa under the Collaboration Agreement.



"[*****] Field" shall mean, with [*****] the [*****]. The [*****] Field for [*****] is set forth in this Agreement. The [*****] Field for each [*****] is as set forth in the [*****].



"Novartis Inventions" shall mean those Inventions over which Novartis has exclusive ownership and control as provided in Section 5.1 and 5.2.3.



"Novartis Patent Rights" shall mean all patent and provisional patent applications, issued and subsisting patents and substitutions, divisionals, continuations, continuations-in-part, reissues, reexaminations, extensions and supplementary protection certificates thereof, including foreign counterparts of the foregoing owned by



5. *Confidential Treatment Requested

or licensed to Novartis, with the right to license, as of the Effective Date or [*****] claiming inventions owned (or in-licensed) and controlled by Novartis which are necessary or useful for the [*****] or [*****] Royalty-Bearing Products. Without limiting the generality of the foregoing, Novartis Patent Rights include any patents and patent applications claiming Inventions owned by Novartis under Sections 5.1.2, 5.1.3 and 5.1.4, or transferred to Novartis under Section 5.2.3.



"Novartis [*****]" shall mean a [*****]. Such documentation will include the [*****] Any Novartis [*****] submitted with respect to any [*****] will also include the [*****] Field and the [*****] for [*****] under such [*****] The [*****].



"Option" shall have the meaning set forth in Section 4.1.



"Option Effective Date" shall have the meaning set forth in Section 4.1.



"Option Exercise Date" shall have the meaning set forth in Section 4.3.



"Option Period" shall have the meaning set forth in Section 4.2.



"Party" means Diversa or Novartis.



"[*****]" shall mean, with respect to each [*****] [*****] may include [*****].



"Projects" shall mean [*****] and [*****], collectively.



"Project Plans" shall mean [*****] and [*****], collectively.



"Receiving Party" shall mean that Party receiving Confidential Information under Section 7.1.



"Research Committee" shall have the meaning set forth in Section 3.



6. *Confidential Treatment Requested

"Research Period" shall mean the period beginning on the [*****] and ending [*****].



"Royalty-Bearing Product" shall mean a commercial product containing any Licensed [*****], provided that a Licensed [*****] alone shall not be a [*****]



"Royalty Period" shall mean, with respect to each Royalty-Bearing Product in any country, [*****] of such Royalty-Bearing Product in such country and ending upon the later to occur of (a) [*****] or (b) [*****] or (c) [*****].



"Senior Executives" shall have the meaning set forth in Section 11.3.



"[*****]" shall mean [*****].



"Sublicensee" shall mean any third party (other than an Affiliate of Novartis, NADI or an Affiliate of NADI or an Affiliate of Diversa) licensed by Novartis or NADI or their respective Affiliates to make, use (except where the implied right to use accompanies the sale to the third party of any Royalty- Bearing Product by Novartis, NADI or their respective Affiliates or Sublicensees), sell, import, export, advertise, promote and otherwise commercialize any Royalty-Bearing Product.



"Use" shall mean each use or application for which any Licensed [*****] is [*****] or any Royalty-Bearing Product [*****]. In the event of [*****] each [*****] will represent a [*****].



"Valid Claim" shall mean a claim included in any pending patent application or any issued patent included within the [*****] which, if with respect to any pending claim, has not been irrevocably abandoned or held to be unpatentable by a court or other authority of competent jurisdiction in a proceeding which is not reversed, not appealable and not appealed, or, with respect to any issued claim, has not been held invalid by a decision of a court or other authority of competent jurisdiction which is not reversed, not appealable and not appealed.



The above definitions are intended to encompass the defined terms in both the singular and plural tenses.



7. *Confidential Treatment Requested

2. Collaboration.



2.1 Projects. The scope of the collaboration between Novartis and Diversa during [*****] will be the areas of [*****] with the following [*****] Projects being defined in more detail in the [*****] Projects which are attached hereto as Exhibit A:



2.1.1 [*****]



2.1.2 [*****]



2.1.3 [*****] and



2.1.4 [*****]



It is further understood that the Parties will, through the auspices of the Research Committee, also [*****] define additional projects (each a "[*****] Project").



The Parties contemplate that either Party may have certain of the work to be performed by such Party in support of a Project performed by an Affiliate of such Party (and, in the case of Novartis, by NADI or its Affiliates). Each Party shall remain primarily responsible for the work to be performed by such Party in support of Projects under this Agreement.



2.2 [*****] Use of [*****]. Novartis agrees that it will use [*****] pursuant to [*****] only for [*****] such [*****] in connection with [*****] Project against [*****] and will not [*****] for any [*****]. Novartis may not [*****] such [*****] to [*****]; provided that Novartis may [*****] such [*****] to [*****] subject to the [*****] set forth herein and only to the [*****] to effect the [*****]. Novartis will inform the Research Committee in writing of the [*****] such [*****] prior to commencing such [*****]. Novartis will provide Diversa with regular written reports (no less frequently than once per quarter) identifying the [*****] used in such [*****] and the [*****]. Novartis will employ a [*****] and to ensure that such [*****] are [*****] from any other [*****] used by [*****] if applicable) and will provide Diversa with a detailed description of such system prior to the delivery of any [*****] by Diversa to Novartis under the Project Plans.



8. *Confidential Treatment Requested

2.3 [*****] Provided by Diversa. Diversa shall be responsible for ensuring that all [*****] made available for the [*****] are done so in compliance with [*****] related thereto.



3. Research Committee.



Novartis and Diversa shall establish a research committee (the "Research Committee") comprised of [*****] (each, a "Committee Member"), [*****] of whom shall be appointed by Novartis and [*****] of whom shall be appointed by Diversa. The Research Committee may invite other representatives of the Parties to participate in meetings of the Research Committee, as appropriate, provided that such representatives shall not have the right to vote as a Committee Member.



3.1 Responsibilities. The purpose of the Research Committee shall be to plan, coordinate, and direct the research efforts related to the Projects. Such responsibilities include, but are not limited to, the following:



3.1.1 Approval of [*****] Projects. The Research Committee must approve all [*****] Projects to be performed under the terms of this Agreement. Such approval will be based on, but not limited to, [*****] especially with respect to [*****].



3.1.2 Approval of Project Plans. The Research Committee must approve all Project Plans for all Projects undertaken pursuant to this Agreement. At that time, the Research Committee will also designate reporting milestones for Diversa and Novartis to report progress on the Project to the Research Committee (see Section 3.1.3 below). All amendments to the Project Plans shall also be approved by the Research Committee and incorporated by reference into the Agreement. Resources, including but not limited to [*****] may be [*****] and the Research Committee may [*****]. Project Plans for the [*****] Projects are attached as Exhibit A.



3.1.3 Review of Reports. At certain reporting milestones defined by the Research Committee for each Project, Diversa and Novartis shall deliver to the Research Committee reports disclosing a [*****] including [*****], as appropriate. The Research Committee will review such data to determine progress made on the Projects. Reports to the Research Committee shall be subject to the confidentiality provisions contained herein.



9. *Confidential Treatment Requested

3.1.4 [*****] of [*****] Field and License Fee [*****] Based on the research and development efforts undertaken pursuant to this Agreement, Novartis [*****] to the [*****] for [*****] Such [*****] shall be [*****] a [*****] Plan with respect to such [*****] and an indication by Diversa [*****] Based on the information received, the [*****] shall [*****] as a [*****] In the event the [*****] designates a [*****] as the result of a [*****] Project, the [*****] will also [*****] the [*****] Field for that [*****] in relation to the [*****] Project (see Section 4.4.) and will [*****] the License Fee [*****] (see Section 6.4.3.).



3.1.5 Miscellaneous Matters. The Research Committee will discuss and propose solutions concerning any and all issues related to Inventions, intellectual property and contractual matters not clearly addressed in this Collaboration Agreement.



3.2 Meetings of the Research Committee. The Research Committee shall meet at least [*****] alternating the sites of the meetings between Diversa's facilities in San Diego, California and Novartis' facilities in Research Triangle Park, North Carolina, or at such other times and locations as the Research Committee determines. Within [*****] following each meeting of the Research Committee, the Research Committee shall prepare and deliver to both



Parties a written report describing the decisions made, conclusions and actions agreed upon. Subsequent to written approval by both parties, such report shall be incorporated as part of this Agreement by reference. The members of the Research Committee shall have the right to invite any person to attend its meetings, as mutually agreed.



3.3 Requirements for Action. All actions and decisions of the Research Committee will require the [*****] of all of its voting members. The Committee Members or Alternates of Novartis shall collectively have [*****] on the Research Committee, and the Committee Members or Alternates of Diversa shall collectively have [*****] on the Research Committee.



3.4 Members. The initial Committee Members of the Research Committee shall be as follows:



Diversa Representatives Novartis Representatives



Jay Short, Ph.D. Michael Lanahan, Ph.D.

Keith Kretz, Ph.D. Juan Estruch, Ph.D.



A Party may change one or more of its Committee Members, provided, however, that such person is technically qualified as reasonably demonstrated by that Party. All appointments and withdrawals of appointment shall be made by written notice to the other Party.



10. *Confidential Treatment Requested

Each Party may designate in writing an alternate Committee Member ("Alternate") if the designated Committee Member cannot attend a meeting, provided, however, that such Alternate is technically qualified as reasonably demonstrated by that Party. Any action taken with approval of an Alternate shall be as valid as if taken with the approval of the designated Committee Member.



3.5 Visits to Facilities. Committee Members shall have reasonable opportunity to visit the facilities of each Party (and such Party's Affiliates and, with respect to Novartis, NADI and its Affiliates, if applicable) where activities under this Agreement are in progress, but no more frequently than once per quarter and only during normal business hours and with reasonable prior notice. Each Party shall bear its own expenses in connection with such site visits, unless such visits are deemed by the Research Committee to be part of the Project, in which case the costs will be included as part of the applicable Project Plan. Committee Members shall have the right at any time during the visit to ask questions of and receive answers from any personnel regarding their activities and findings hereunder.



3.6 Information Sharing. Each Party shall provide to the Research Committee information that is relevant to make decisions regarding research and commercialization efforts related to the Projects. Without limiting the generality of the foregoing, Novartis will provide Diversa with the opportunity to review data from the [*****] and the [*****] to determine the status of the Projects.



3.7 Dispute Resolution. If the Research Committee fails to reach agreement upon any matter, the dispute will be resolved in accordance with the procedures set forth in Section 11.3.



4. Grant of Rights.



4.1 Option to License. Subject to the terms and conditions of this Agreement, with respect to each Development Biomolecule, Diversa grants to Novartis an exclusive option (the "Option") to receive an exclusive, worldwide, royalty-bearing license (the "License") under Section 4.4 so long as Diversa has not previously granted rights to such Development Biomolecule to a third party; provided that, at Novartis' sole election, such License shall be non-exclusive rather than exclusive, in which case the Parties agree that the License Fee and royalty rate shall be determined by mutual agreement of the Parties taking into account a non-exclusive License. Any such option shall be freely transferable or assignable to an Affiliate of Novartis or to NADI or any of its Affiliates.



4.2 Option Period. The Option will be effective ("Option Effective Date") upon (a) the designation by the Research Committee of a Biomolecule as a Development Biomolecule, and (b) payment by Novartis to Diversa of amounts due under Section 6.3.1 and 6.3.2, as applicable, and will continue in force for the period (the "Option Period") ending on the earliest to occur of:



11. * CONFIDENTIAL TREATMENT REQUESTED



(a) the Option Exercise Date, or



(b) the date Novartis notifies Diversa that Novartis does not intend to proceed with further development of the Development Biomolecule in accordance with the applicable Project Plan, or



(c) thirty (30) days after the projected date for achievement of any technical milestone included in the applicable Novartis Project Plan, as approved by the Research Committee, in the event the results of such milestone have not been made known to Diversa or in the event that achievement of such milestone requires Novartis to make a milestone payment to Diversa and such payment has not been made to Diversa; provided that Novartis shall have sixty (60) days after written notice from Diversa to comply with this provision, or



(d) the Research Committee determines that the results of any technical milestone included in the applicable Novartis Project Plan, as approved by the Research Committee, demonstrate that the applicable Minimum Activity Level was not achieved in accordance with such Novartis Project Plan; provided that the Research Committee will meet within thirty (30) days following the projected date for achievement of such technical milestone to make such determination, and, if the Research Committee does not meet within such thirty (30) day period, the applicable Minimum Activity Level will deemed not to have been achieved provided further that in the event such technical milestone has not been achieved, in accordance with such Novartis Project Plan, the Research Committee may extend the time in which to achieve such technical milestone if it determines that such technical milestone is achievable within a reasonable period of time consistent with the previously defined goals of such Novartis Project Plan; or



(e) the date that Novartis notifies Diversa in writing that it waives its right to the Option, or



(f) the date that this Agreement is terminated pursuant to Section 10.2.



4.3 Exercise of Option. Novartis, or its transferee or assignee with respect to the Option, may exercise the Option with respect to a given Development Biomolecule by providing Diversa written notice of the exercise of such Optio ...