License Agreement

Confidential Treatment Requested

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

200.83 and 230.406





LICENSE AGREEMENT











THE DOW CHEMICAL COMPANY













DIVERSA CORPORATION









*Confidential Treatment Requested







ARTICLE TITLE PAGE NUMBER

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I DEFINITIONS 1

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II PATENT LICENSE GRANT 4

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III PAYMENTS 6

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IV PATENT RIGHTS 9

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V CONFIDENTIALITY 11

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VI ASSIGNMENT 12

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VII THIRD PARTY INFRINGEMENT CLAIMS 12

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VIII PATENT ENFORCEMENT & LITIGATION 13

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IX U.S. EXPORT CONTROL AND GOVERNMENT LICENSES 14

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X PRODUCT LIABILITY AND INDEMNIFICATION 15

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XI WARRANTY & DISCLAIMER, 16

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XII TERM AND TERMINATION 17

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XIII FORCE MAJEURE 18

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XIV DISPUTE RESOLUTION 19

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XV NOTICES 20

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XVI MISCELLANEOUS PROVISIONS 21

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APPENDIX TITLE PAGE

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A PATENT RIGHTS A

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A-1 DIVERSA PATENT RIGHTS A-1

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A-2 DIVERSA PATENT RIGHTS [****] A-2

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ROYALTY BEARING PRODUCTS

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A-3 DIVERSA PATENT RIGHT [****] A-3

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B JOINT PATENT RIGHTS B-1

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C LICENSED PRODUCT C-1

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D ROYALTY BEARING PRODUCT D-1

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E ROYALTY BEARING PRODUCT CLASSIFICATION E-1

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F ROYALTY SCHEDULE F-1

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G OPTION AGREEMENT G-1

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This LICENSE AGREEMENT (including the Appendices hereto, the "License") is by and between THE DOW CHEMICAL COMPANY, a corporation duly formed and existing under the laws of the State of Delaware, having a place of business at 2030 Dow Center, Midland, Michigan 48674, United States of America ("DOW" or a "Party"), and DIVERSA CORPORATION, a corporation duly formed and existing under the laws of the State of Delaware, having a place of business at 10665 Sorrento Valley Road, San Diego, California 92121, United States of America ("DIVERSA" or a "Party").





R E C I T A L S



A. DIVERSA has discovered and developed enzymes and has expertise in the

rearrangement of DNA to produce and discover genes utilizing proprietary

technologies for the rapid discovery, development and optimization of



B. DOW has expertise in the discovery, development and production of chemical



C. DOW and DIVERSA are concurrently with this License entering into a separate

Collaborative Research and Development Agreement ("Agreement") in order to

perform research together to discover and optimize the function of new

genes, processes and products resulting thereupon that can be used by DOW

to produce certain, desired commercial chemical compounds.



D. DIVERSA represents that it has Patent Rights and Know-How that pertain to

this License.



E. DOW is desirous of obtaining, and DIVERSA wishes to grant to DOW, a

worldwide, exclusive royalty-bearing license to use Patent Rights and

Licensed Products in Research Target Processes.



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





ARTICLE I



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When used in this License, the following terms shall have the meanings set out below, unless the context requires otherwise. The singular shall be interpreted as including the plural and vice versa, unless the context clearly indicates otherwise.





1.1 "Affiliate" means any corporation, firm, limited liability company,

partnership or other entity that directly or indirectly controls or is

controlled by or is under common control with a Party to this License.

Control for this purpose means ownership, directly or through one or more

affiliated entities, of 50 percent (50%) or more of the shares of stock

entitled to vote for the election of directors in the case of a

corporation, or 50 percent (50%) or more of the equity interests in the

case of any other type of legal entity, or any other arrangement whereby a

Party controls or has the right to control the board of directors or

equivalent governing body of a corporation or other entity.



1.2 "Agreement" means the Collaborative Research Agreement between DOW and

DIVERSA, executed concurrently with this License.



1.3 "Areas of Interest" means the development of Improved Enzymes (as defined

below) for use in the following [****] specific areas:

(a) [****]

(b) [****]

(c) [****]



1.4 "Confidential Information" means all information, Know-How, scientific,

technical, or non-technical data, samples and Materials, business plans,

and marketing and sales information disclosed by one Party to the other

under this License, and including information disclosed under the Agreement

regarding Licensed Products, whether disclosed or provided in oral, written

(including but not limited to electronic, facsimile, paper or other means),

graphic, photographic or any other form, except to the extent that such

information:

(a) as of the date of disclosure is known to the receiving Party as

shown by written documentation, other than by virtue of a prior

confidential disclosure from the disclosing Party to the

receiving Party;

(b) as of the date of disclosure is in, or subsequently enters, the

public domain through no fault or omission of the receiving

Party;

(c) as of the date of disclosure or thereafter is obtained from a

Third Party free from any obligation of confidentiality; or

(d) as of the date of disclosure or thereafter is developed by the

receiving Party independent of the disclosure by the disclosing

Party as evidenced by written documentation.



1.5 "Controls" or "Controlled" means, with respect to intellectual property,

possession by DIVERSA (other than by virtue of this License) of the ability

to grant licenses or sublicenses to DOW without violating the terms of any

agreement or other arrangement with any Third Party and to the reasonable,

good faith knowledge and belief of DIVERSA, without violating the rights of

a Third Party.



*Confidential Treatment Requested



1.6 [****] means a [****] that is not [****] whereupon the [****] shall be

[****] on the [****] and [****] of the [****] including a [****] of [****]

an [****].



1.7 "Effective Date" means the date of last signature of the Parties at the end

of this License.



1.8 "Field" means [****]



1.9 "Improved Enzyme" means an enzyme or enzymes, either ex vivo or in vivo,

provided to DOW by DIVERSA which is within the claims of Patent Rights or

Joint Patent Rights or that incorporates, is derived from, or is

identified, discovered, developed or made through the use of Know-How,

which is developed in the Areas of Interest under the Agreement.



1.10 "Joint Patent Rights" means patent rights, which are jointly developed or

invented by both Parties under the Agreement in accordance with its terms,

as shown in Appendix B, which Appendix B-1 may be modified to include joint

patent rights obtained during the Research Term under the Agreement, and

which rights pertain to a Licensed Product. Joint Patent Rights concern

only the scope of the claims that have not been held invalid or

unenforceable after all appeals have been exhausted. Claims shall be deemed

valid unless held otherwise.



1.11 "Know-How" means all Research Results, as defined and obtained under the

Agreement, and all know-how, nonpatented inventions, improvements,

discoveries, data, instructions, processes, formulas, sequences,

information (including, without limitation, chemical, physical and

analytical, safety, manufacturing and quality control data and

information), procedures, devices, methods and trade secrets which are

conceived, discovered or invented during the term of the Agreement, and

which are necessary or appropriate to develop and commercialize Licensed

Products. (Know-How does not include inventions within the Patent Rights or

Joint Patent Rights.)



1.12 "Licensed Product" means (i) any Improved Enzyme which is used to convert a

Research Target (as defined in the Agreement) into a product using a

Research Target Process, or (ii) any Improved Enzyme which is based on or

incorporates or is identified, discovered, or developed under the

Agreement, for which both (i) and (ii) are designated by the RMC, and



*Confidential Treatment Requested



within DIVERSA Patent Rights or Joint Patent Rights and listed on Appendix

C, which is attached hereto and made a part hereof and which is identical

to Appendix G of the Agreement.



1.13 "Material" means the original, tangible materials of any type provided by

DOW or DIVERSA to the other Party in order that the recipient can perform

its obligations under this License.



1.14 "Net Sales" means the amount invoiced on sales of Royalty Bearing Product

by DOW and its Affiliates to a Third Party, less the following deductions

to the extent included in the amounts invoiced:

(a) [****] and

(b) [****] and

(c) [****] and

(d) [****] and

(e) [****]



Net Sales shall not include sales between or among DOW and its Affiliates.



1.15 "Patent Rights" means patent and patent applications Controlled solely by

DIVERSA as shown in Appendix A, including:

(a) all patents and patent applications which are conceived of under the

Agreement, and which are necessary (but for this License DOW would

infringe these patents) for DOW to make, use or sell the Royalty

Bearing Products; and are listed on Appendix A-1, attached hereto and

made a part hereof, which Appendix A-1 may be modified to include

Patent Rights obtained during this License;

(b) the patents and patent applications listed on Appendix A-2, attached

hereto and made a part hereof, are patent rights of DIVERSA that

[****] and

(c) any divisions, continuations, continuations-in-part, reissues,

reexaminations, extensions or other governmental actions which extend

any of the subject matter of the patent applications or patents in





*Confidential Treatment Requested





(i) or (ii) above, and any substitutions, confirmations, patents-of-

addition, registrations or revalidations of any of the foregoing,

which Patent Rights are necessary (but for this License DOW would

infringe these patents) for DOW to make, use or sell the Royalty

Bearing Products, which shall be listed on Appendix A-1 or A-2,

respectively;

(d) [****]



in each case, which are Controlled by DIVERSA. All patents and patent

applications subject to this definition are listed on Appendix A or will be

included on Appendix A as they are developed or obtained under the

Agreement and this License. Patent Rights concern only the scope of the

claims that have not been held invalid or unenforceable after all appeals

have been exhausted. Claims shall be deemed valid unless held otherwise.



1.16 "Royalty Bearing Product" means the material resulting from the application

of a Licensed Product or a Licensed Product in a Research Target Process

(defined in the Agreement), which shall be classified by its Royalty

Bearing Product Classification and listed in Appendix D, attached hereto

and made a part hereof. (If DIVERSA manufactures for DOW a Licensed Product

using an in vivo Improved Enzyme, it shall be subject to a separate

agreement.)



1.17 "Royalty Bearing Product Classification" means the [****] in accord with

Appendix E, as attached hereto and made a part hereof. The Royalty Bearing

Product [****]



1.18 "Royalty Schedule" means the [****] Royalty Bearing Product, as determined

by the [****] read from the [****] on Appendix F, attached hereto and made

a part hereof.



1.19 "Territory" means the world.



1.20 "Third Party" means anyone other than DOW or DIVERSA, or their respective



*Confidential Treatment Requested





ARTICLE II



PATENT LICENSE GRANT

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2.1 Grant of License to DOW - Subject to the terms and conditions of this

License, DIVERSA hereby grants to DOW, and DOW hereby accepts:

(a) an a exclusive, royalty-bearing, worldwide license, including the

right to grant sublicenses pursuant to Section 2.4, under the DIVERSA

Patent Rights and Joint Patent Rights to make, have made, import,

have imported, use, have used, sell, have sold and otherwise exploit

Royalty Bearing Products;

(b) an exclusive, world-wide license, including the right to grant

sublicenses pursuant to Section 2.4, under DIVERSA's enzymes [****]

to use enzymes to convert Research Target(s) into products via

Research Target Processes (Research Target and Research Target

Processes are defined as in the Agreement). The royalty for this

grant is obtained by DIVERSA under (a);

(c) a non-exclusive, royalty-bearing, world-wide license to [****] and

(d) a royalty-free license to any Know-How required to exploit the rights

granted under (a), (b), and (c), and for DOW or its Affiliates to

perform research on any Improved Enzyme.



2.2 Grant of Right to DIVERSA - If DOW desires that any Licensed Product be

further modified after DIVERSA supplies it to DOW under the terms of the

Agreement, then DOW may request that:

(a) DIVERSA perform such added modification under the Agreement, if it is

still in effect; or

(b) if the Agreement is no longer in effect, then using good faith, the

Parties shall negotiate terms consistent with the intent of obtaining

a Licensed Product; or

(c) if DIVERSA declines to do such modification within thirty (30) days

or an agreement is not reached within three (3) months having terms

similar to the Agreement and providing for the work to commence

within thirty (30) days of the signature date, [****]





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Notwithstanding the above, [****] if (i) a transfer or sale of

substantially all of the business of DIVERSA to which this License relates

occurs, whether by merger, sale of stock, sale of assets or otherwise, to a

[****] or (ii) bankruptcy, insolvency, dissolution or winding up of DIVERSA

(other than dissolution or winding up for the purposes of reconstruction or

amalgamation). [****]. DOW would continue to pay DIVERSA for any Royalty

Bearing Product under this License.



2.3 Grant of Rights to Use Licensed Products for New Research Targets within

the Field after Termination of the Agreement - In the event DOW desires to

obtain exclusive or non-exclusive rights to Licensed Products to make, have

made, use, sell, offer for sale and import products in new Research Targets

within the Field, DIVERSA and DOW agree to negotiate such rights in good

faith, subject to any prior obligations DIVERSA has regarding the granting

of said rights. If DIVERSA becomes aware of new Research Targets for

Licensed Products within the Field, then DIVERSA shall notify DOW of such

Licensed Product application, and [****]. If DOW declines to negotiate a

license and DIVERSA and a Third Party desire to use a Licensed Product for

a new Research Target, DIVERSA and DOW agree to negotiate for DIVERSA to

pay DOW royalties on net sales of such Licensed Product in such Research

Target consistent with the royalties DOW pays to DIVERSA under this License

as indicated in Table 1 of Appendix F attached hereto.



2.4 Sublicensing - The exclusive license granted under Section 2.1(a) to DOW

includes the right to sublicense Third Parties, whether or not Affiliates

of DOW, including the right to enter into distributor contracts,

manufacturing contracts, or other commercial transactions, including but

not limited to sublicensing a competitor of DOW. DOW will be responsible

for all payments due to DIVERSA as a result of any sublicensee and

Affiliate Net Sales in the Field in the Territory. DOW will be responsible

for the observance by all sublicensees of all applicable provisions of this

License and will use its reasonable good faith efforts to cause all

sublicensees to observe the covenants in this License (i.e., regarding

confidentiality, maintaining records, reporting Net Sales, and governmental

regulations). All sublicenses, other than a label license for DOW Net

Sales, shall be in writing. DOW shall notify DIVERSA in writing within

thirty (30) days of the grant of any





*Confidential Treatment Requested





sublicense hereunder. Notwithstanding the foregoing, DOW shall have no

right under any circumstances to sublicense any rights to the DIVERSA

Patent Rights listed on Appendix A-3, and licensed to DOW hereunder.



2.5 Reservations by DOW - DOW reserves the right to work with Third Parties

outside the Areas of Interest, or after the Agreement terminates within the

Areas of Interest, or to conduct its own research within the Areas of



2.6 Ex vivo Improved Enzyme Production - If DOW chooses not to exclusively

manufacture a Licensed Product, DIVERSA shall be given a right of first

refusal to manufacture such Licensed Product. DIVERSA must submit a bid

which is competitive with any other Third Party supplier. Any bid received

by DIVERSA shall be held confidential by DOW. If DIVERSA is the lowest

cost, most effective producer of the Licensed Product, DOW and DIVERSA

shall negotiate in good faith a separate manufacturing agreement for

DIVERSA to provide the relevant Licensed Product to or on behalf of DOW.

Such agreement may include the development of additional technology for

such production. If such an agreement is negotiated, it shall contain at a

minimum terms for a worldwide, non-exclusive license for the Know-How and

any Patent Rights required (whether under this License in Appendix B-2 or

developed separately). This [****].



2.7 Prior Option Agreement - DOW exercised its rights under a prior Option

(copy attached for reference as Appendix H) for a license to a precursor

for an Improved Enzyme and paid DIVERSA the exercise fee. This License

shall also be a grant to the technology and the precursor Improved

Enzyme(s) developed under that Option in the same manner for a Licensed







ARTICLE III



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3.1 Milestone Payment for Option under Section 2.7 - To meet the milestone

payment due DIVERSA under the Option in accord with Section 2.7, DOW shall

pay DIVERSA Two Hundred Thousand Dollars ($200,000) within thirty (30) days

from the Effective Date. This License shall suffice for the exercise of the

Option for a license.



*Confidential Treatment Requested





3.2 License Product Nomination - When an Improved Enzyme is identified by the

RMC under the Agreement as being adequately developed for

commercialization, then DOW must inform DIVERSA in writing within sixty

(60) days whether such Improved Enzyme shall become a Licensed Product

under this License. If DOW desires to designate an Improved Enzyme as a

Licensed Product, then it shall be listed on either Appendix C or D under

the terms of this License and classified by DOW under the Royalty Bearing

Product Classification of Appendix E as to which Royalty Schedule applies

in accord with Appendix F. Up to three (3) Improved Enzymes pe ...