Master Collaboration Agreement

EXHIBIT 10.40


CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. (S)(S) 200.80(b) (4), 200.83 AND 240.24b-2


MASTER COLLABORATION AGREEMENT


BETWEEN


DIVERSA CORPORATION


AND


THE DOW CHEMICAL COMPANY


TABLE OF CONTENTS


Article Title Page -----------------------------------------------------------------------------------------------------------

1 Definitions 1 -----------------------------------------------------------------------------------------------------------
2 Grants 6 -----------------------------------------------------------------------------------------------------------
3 Project Agreements 8 -----------------------------------------------------------------------------------------------------------
4 Royalties, Reports and Payments 10 -----------------------------------------------------------------------------------------------------------
5 Confidentiality 12 -----------------------------------------------------------------------------------------------------------
6 Publication 13 -----------------------------------------------------------------------------------------------------------
7 Intellectual Property 14 -----------------------------------------------------------------------------------------------------------
8 Option to [***] 18 -----------------------------------------------------------------------------------------------------------
9 Term and Disengagement 18 -----------------------------------------------------------------------------------------------------------
10 Product Liability and 19
Indemnification -----------------------------------------------------------------------------------------------------------
11 Export and Compliance with Laws 20 -----------------------------------------------------------------------------------------------------------
12 Dispute Resolution 20 -----------------------------------------------------------------------------------------------------------
13 Representations and Warranties 21 -----------------------------------------------------------------------------------------------------------
14 Bankruptcy 22 -----------------------------------------------------------------------------------------------------------
15 Force Majeure 23 -----------------------------------------------------------------------------------------------------------
16 Assignment and Successors 23 -----------------------------------------------------------------------------------------------------------
17 Notice 23 -----------------------------------------------------------------------------------------------------------
18 Miscellaneous 24 -----------------------------------------------------------------------------------------------------------


Exhibits Title ---------------------------------------------------------------------------------------------------------

1 Confidential Disclosure Agreement ---------------------------------------------------------------------------------------------------------
2 [***] --------------------------------------------------------------------------------------------------------- ----------------- * CONFIDENTIAL TREATMENT REQUESTED


Project Agreements*


Appendix Title ---------------------------------------------------------------------------------------------------------

A-1 Schedule of DIVERSA Patent Rights under the Project
Agreement ---------------------------------------------------------------------------------------------------------
A-2 Schedule of DIVERSA Patent Rights predate this MCA
and Project Agreement but needed for Licensed
Products ---------------------------------------------------------------------------------------------------------
B-1 Schedule of TDCC Patent Rights under the Project
Agreements ---------------------------------------------------------------------------------------------------------
B-2 Schedule of TDCC Patent Rights that predate this
MCA and Project Agreement, but needed for Licensed
Product ---------------------------------------------------------------------------------------------------------
C List of Licensed Enzyme and Project Field ---------------------------------------------------------------------------------------------------------
D-1 MTA for an Institute ---------------------------------------------------------------------------------------------------------
D-2 MTA for a Toll Manufacturer ---------------------------------------------------------------------------------------------------------
D-3 MTA for a Customer ---------------------------------------------------------------------------------------------------------
E [***] ---------------------------------------------------------------------------------------------------------
F Schedule of Licensed Patents from DIVERSA Patent
Rights for a Licensed Product (subset or all of
Appendix A-1) ---------------------------------------------------------------------------------------------------------


* Will be provided as each Project Agreement is signed ----------------------------- * CONFIDENTIAL TREATMENT REQUESTED


2


MASTER COLLABORATION AGREEMENT


This Agreement ("MCA") is made by and between 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, CA 92121 (hereinafter "DIVERSA" or "Party"), and 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, MI 48674 (hereinafter "DOW" 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
enzymes.


B. TDCC has a contract manufacturing business for preparing pharmaceutical
products for the pharmaceutical industry.


C. TDCC and DIVERSA desire to work together to discover, manufacture, market
and sell biological enzyme-based chiral products and services for
pharmaceutical applications.


D. TDCC and DIVERSA are concurrently with this MCA entering into separate
Project Agreements in order to perform research together to have DIVERSA
discover and optimize the function of new genes, and to have TDCC develop
and maximize processes and products for making chiral products resulting
therefrom for use in the pharmaceutical marketplace.


E. DIVERSA represents that it has Patent Rights and Know-How that pertain to
this MCA.


F. TDCC is desirous of obtaining, and DIVERSA wishes to grant, a worldwide
license to sell enzymes discovered or developed by DIVERSA for making
chiral compounds for the pharmaceutical marketplace.


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


Article 1. DEFINITIONS


When used in this MCA, 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 is directly or indirectly controlled by a
Party. Control for this purpose means ownership, directly or through one or
more affiliated entities, of greater than fifty percent (50%) of the shares
of stock entitled to vote for the election of directors in the case of a
corporation, or more than fifty percent (50%) 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.


1.1 "API" means [***].
---


1.2 "CDA" means the Confidentiality Agreement between the Parties, effective
---
February 23, 1999 and its amendment effective May 16, 2000. For ease of
reference a copy thereof is attached hereto as Exhibit 1.


1.3 "Change of Control" means any of the following transactions involving a
-----------------
Third Party:
a) a merger or consolidation of either Party which results in the voting
securities of such Party outstanding immediately prior thereto ceasing
to represent more than 50% 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 either Party;
c) the sale of substantially all the assets relevant to the Field; or
d) any one person (other than the Party, any trustee or other fiduciary
holding securities under an employee benefit plan of the Party or any
corporation owned directly or indirectly by the stockholders of the
Party, in substantially the same proportion as their ownership of
stock of the Party), 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 beneficial owner of more than 50% of the
combined voting power of the outstanding securities of a Party or by
contract or otherwise having the right to control the board or
directors or equivalent governing body of such Party nor the ability
to cause the direction of management of such Party.


1.4 "Confidential Information" means all information which the disclosing Party
------------------------
could reasonably expect to be deemed confidential (e.g., TDCC Know-How,
DIVERSA Know-How, scientific, technical, or non-technical data,
Intermediates, APIs, business plans, identity of a Sublicensee, financial
projections, and marketing and sales information) disclosed by one Party to
the other, 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.


Any information first submitted to the other Party in a non-written form
must be identified as confidential information at that time, then reduced
to writing within thirty (30) days, marked as confidential and provided to
the receiving Party.


1.5 "Controls" or "Controlled" means, with respect to intellectual property,
-------- ----------
possession (other than by virtue of this MCA) of the ability to grant
licenses or sublicenses to the other Party hereto or to its Sublicensee
without violating the terms of any agreement or other arrangement with any
Third Party and to the knowledge and belief of the granting Party without
violating the rights of a Third Party.


-------------------- * CONFIDENTIAL TREATMENT REQUESTED


2


1.6 "Customers" means any entity that is only sold Licensed Enzyme,
---------
Intermediates or API for pharmaceutical applications and is not provided
process information and is not a Sublicensee.


1.7 "DIVERSA" means Diversa Corporation, having a place of business at San
-------
Diego, California.


1.8 "DIVERSA Know-How" means all [***] and any other information of any kind
----------------
(a) which are conceived, discovered or invented during any Project
Agreement under the terms of this MCA or (b) which have been conceived,
discovered or invented by DIVERSA prior to this MCA and Controlled solely
by DIVERSA, which are necessary or appropriate to develop and
commercialize Licensed Products.


1.9 "DIVERSA Intellectual Property" means DIVERSA Patent Rights and DIVERSA
-----------------------------
Know-How.


1.10 "DIVERSA Patent Rights" means (a) all patents and patent applications
---------------------
which are conceived of during the term of the Project Agreements, and
which are necessary for [***]. If such patent rights arise they shall be
listed on Appendix A-1, attached to each Project Agreement and made a part
thereof; (b) the patents and patent applications listed on Appendix A-2,
attached thereto and made a part thereof, are patent rights of DIVERSA
that predate this MCA but which patent rights are necessary for [***]; 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 (a) or (b)
above, and any substitutions, confirmations, patents-of-addition,
registrations or revalidations of any of the foregoing, in each case,
------------
which are Controlled by DIVERSA during the term of the Project Agreements
and which are necessary for [***]. All patents and patent applications
subject to this definition are listed on Appendix A or will be included on
Appendix A attached to each Project Agreement by the expiration of the
research term of each Project Agreement.


1.11 "Effective Date" means September 1, 2000.
--------------


1.12 "Enzyme" means [***].
------


1.13 "Field" means the discovery, development, manufacture, marketing and sale
-----
of Licensed Products, [***]and services for [***] used in [***].


1.14 "FTE" means the equivalent of one full year of work on a full time basis
---
by a DIVERSA scientist or other professional possessing the skills and
experience necessary to carry out the Work Plans under a Project
Agreement. It is understood that a full year for any given scientist or
professional may not be required so that partial years for any given
person could result. FTE needs shall form a part of the Staffing Level of
each Project Agreement.


1.15 "Intermediate" means [***].
------------


1.16 "Joint Patent Rights" means Patent Rights that are developed or invented
-------------------
by both Parties in the course of the performance of any Project Agreement.
If the item developed or invented results in a patentable invention, such
invention is jointly developed if both Parties' employees or consultants
are considered inventors under 35 U.S.C. et seq. and


----------------------- * CONFIDENTIAL TREATMENT REQUESTED


3


37 C.F.R. et seq., as interpreted by the U. S. Patent and Trademark Office
and the United States Federal Courts.


1.17 "License" means the license agreement(s) attached to each Project
-------
Agreement as Exhibit 4 thereto.


1.18 "Licensed Enzyme" means any Enzyme, which is commercialized under this
---------------
MCA, for use in a Project Field. The Licensed Enzyme and Project Field
shall be designated on each Project Agreement and listed in Appendix C
attached thereto and made a part thereof.


1.19 "Licensed Product" means (a) [***] or (b) [***].
----------------


1.20 "Licensed Patents" means DIVERSA Patent Rights that are necessary to have
----------------
the freedom to practice Licensed Products and are indicated on Appendix F
attached to each Project Agreement and made a part thereof. It is expected
that such Licensed Patents will be all or a subset of the DIVERSA Patent
Rights listed in Appendix A with each Project Agreement.


1.21 "MTA" means a material transfer agreement for exchange of any Licensed
---
Enzyme (with or without DIVERSA Know-How or TDCC Know-How) to any Third
Party by DIVERSA or TDCC, a copy of which is attached hereto as Appendix D
for transfer between TDCC or DIVERSA and a Third Party. Appendix D-1 for
an Institute; Appendix D-2 for a Toll Manufacturer; and Appendix D-3 for a
Customer. Any MTA shall be used only under the terms of a Project
Agreement. Any transfer of Enzymes or Licensed Enzymes between TDCC and
DIVERSA shall be deemed Confidential Information (provided under the
confidentiality provisions of this MCA) and not require an MTA.


1.22 "Patent Rights" means DIVERSA Patent Rights, TDCC Patent Rights and Joint
-------------
Patent Rights.


1.23 "Project Agreements" means each individually executed agreement detailing
------------------
a specific research objective in the Project Field, budget with FTE
requirements, and Work Plan, that is attached hereto and made a part
hereof and incorporating the terms of this MCA that are referenced
therein. One Project Agreement shall be signed within 60 days of this MCA;
and other Project Agreements may be appended at any time during the Term
of this MCA.


1.24 "Project Field" means a [***].
-------------


1.25 "Purpose" means having the Parties provide an integrated, full service
-------
offering of [***] to Customers. This service and Licensed Products may be
offered as early as [***]. Specifically excluded from this Purpose is the
identification of [***].


1.26 "Signature Date" means the date of last signature to this MCA.
--------------


1.27 "Staffing Level" shall have the meaning set forth in each Project
--------------
Agreement.


1.28 "Sublicensee" means a Third Party that has a license agreement with TDCC
-----------
in the Project Field for Licensed Products.


1.29 "TDCC" means The Dow Chemical Company, having a place of business at
----
Midland, Michigan.


----------------------- * CONFIDENTIAL TREATMENT REQUESTED


4


1.30 "TDCC Intellectual Property" means TDCC Patent Rights and TDCC Know-How.
--------------------------


1.31 "TDCC Know-How" means all TDCC Confidential Information [***] and other
-------------
information of any kind (a) which are conceived, discovered or invented
during any Project Agreement under the terms of this MCA or (b) which have
been conceived, discovered or invented by TDCC prior to this MCA and
Controlled solely by TDCC, which are necessary or appropriate to develop
and commercialize Licensed Products.


1.32 "TDCC Patent Rights" means (a) all patents and patent applications which
------------------
are conceived of during the term of the Project Agreements, and which are
necessary for TDCC to make, have made, use, import, sublicense, export,
sell or have sold the Licensed Products. If such patent rights arise they
shall be listed on Appendix B-1, attached to each Project Agreement and
made a part thereof; (b) the patents and patent applications listed on
Appendix B-2, attached thereto and made a part thereof, are patent rights
of TDCC that predate this MCA but which patent rights are necessary for
TDCC to make, have made, use, sublicense, import, export, sell or have
sold the Licensed Products; 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 (a) or (b) above, and any substitutions,
confirmations, patents-of-addition, registrations or revalidations of any
of the foregoing, in each case, which are Controlled by TDCC during the
------------
term of the Project Agreements and which are necessary for TDCC to make,
have made, use, sublicense, import, export, sell or have sold the Licensed
Products. All patents and patent applications subject to this definition
are listed on Appendix B or will be included on Appendix B attached to
each Project Agreement by the expiration of the research term of each
Project Agreement.


1.33 "Term" means the duration of this MCA which is [***] from the Effective
----
Date, unless extended by mutual written agreement.


1.34 "Territory" means the world.
---------


1.35 "Third Party" means any party who is not a Party, or an Affiliate.
-----------


1.36 "Work Plans" mean the written research plans defining the activities to be
----------
carried out under each Project Agreement, and the budget, for each project
within the Project Field, as more specifically detailed in Appendix E
attached thereto and made a part thereof, which may be modified from time
to time by written amendment.


Article 2: GRANTS


2.1 Exclusive Grants -
-----------------
2.1.1 The Parties agree to a [***] exclusive marketing relationship
starting from the Effective Date for Licensed Enzymes and Licensed
Products in the Territory for the Field and in accordance with the
Purpose.


2.1.2 The Licensed Enzyme and Licensed Product for a specific marketplace
need of a Customer or Sublicensee shall be the subject of separate
Project Agreements, that are attached hereto and made a part hereof,
as described in Article 3. The Licensed Enzyme and Licensed Product
under each Project Agreement is exclusive to TDCC and in accord with
the terms of this MCA and the terms of each Project Agreement.


--------------------- * CONFIDENTIAL TREATMENT REQUESTED


5


2.2 Reservations -
------------
2.2.1 [***] - To achieve the Purpose of this MCA, the Parties agree [***]:
(a) [***]
(b) [***]
(c) [***].


2.2.2 Exercise of [***]- The Party presented with [***].
----------------------------------


2.2.3 Interactions with Third Parties - Both Parties may individually or
-------------------------------
with a Third Party pursue any project opportunity outside the Field.
These project opportunities shall not be subject to [***]. Within
the Field, each Party may interact with any Third Party in accord
with Sections 2.1 and 2.2.


2.3 Nonexclusive Grants - Unless a Project Agreement has been signed (with
-------------------
payment made or work begun, including Work Plans), either Party shall be
free to develop and market its services in the Field to Customers and Third
Parties during the term of this MCA. However, [***].


2.4 Roles and Responsibilities -
--------------------------
2.4.1 DIVERSA - DIVERSA shall be responsible for [***].
-------


2.4.2 TDCC - TDCC shall [***].
----


2.4.3 Licensed Enzyme Manufacture - Where, prior to the signature date of
---------------------------
a Project Agreement, DIVERSA has [***] then [***].


2.4.4 When either Party interac ...