Collaborative Research Agreement

EXHIBIT 10.16


COLLABORATIVE RESEARCH AGREEMENT


BETWEEN


THE DOW CHEMICAL COMPANY


AND


DIVERSA CORPORATION


TABLE OF CONTENTS --------------------------------------------------------------------------------------------------- ARTICLE TITLE PAGE NUMBER ---------------------------------------------------------------------------------------------------
1 DEFINITIONS 1 ---------------------------------------------------------------------------------------------------
2 R&D PROGRAM 6 ---------------------------------------------------------------------------------------------------
3 LICENSE RIGHTS 14 ---------------------------------------------------------------------------------------------------
4 PAYMENTS 16 ---------------------------------------------------------------------------------------------------
5 LICENSE AGREEMENT; DEVELOPMENT REPORTS 17 ---------------------------------------------------------------------------------------------------
6 TREATMENT OF CONFIDENTIAL INFORMATION 17 ---------------------------------------------------------------------------------------------------
7 INTELLECTUAL PROPERTY RIGHTS 20 ---------------------------------------------------------------------------------------------------
8 PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF 21
PATENT RIGHTS ---------------------------------------------------------------------------------------------------
9 LEGAL ACTION 22 ---------------------------------------------------------------------------------------------------
10 TERMINATION AND DISENGAGEMENT 23 ---------------------------------------------------------------------------------------------------
11 REPRESENTATIONS AND WARRANTIES 25 ---------------------------------------------------------------------------------------------------
12 INDEMNIFICATION 26 ---------------------------------------------------------------------------------------------------
13 DISPUTE RESOLUTION 27 ---------------------------------------------------------------------------------------------------
14 MISCELLANEOUS 28 ---------------------------------------------------------------------------------------------------


--------------------------------------------------------------------------------------------------- APPENDIX TITLE PAGE ---------------------------------------------------------------------------------------------------
A-1 RESEARCH [*****] A-1 ---------------------------------------------------------------------------------------------------
A-2 [*****] PLANS A-2 ---------------------------------------------------------------------------------------------------
A-3 RMC MEMBERSHIP A-3 ---------------------------------------------------------------------------------------------------
B-1 PATENT RIGHTS [*****] B-1 ---------------------------------------------------------------------------------------------------
B-2 DIVERSA PATENT RIGHTS [*****] B-2 ---------------------------------------------------------------------------------------------------


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--------------------------------------------------------------------------------------------------- APPENDIX TITLE PAGE ---------------------------------------------------------------------------------------------------
B-3 PATENT RIGHTS [*****] B-3 ---------------------------------------------------------------------------------------------------
B-4 [*****] DIVERSA PARENT RIGHTS [*****] B-4 ---------------------------------------------------------------------------------------------------
C MILESTONE PAYMENTS C-1 ---------------------------------------------------------------------------------------------------
D LICENSE AGREEMENT D-1 ---------------------------------------------------------------------------------------------------
E [*****] PROCEDURES E-1 ---------------------------------------------------------------------------------------------------
F MATERIAL TRANSFER AGREEMENT F-1 ---------------------------------------------------------------------------------------------------
G LICENSED [*****] G-1 ---------------------------------------------------------------------------------------------------
H RESEARCH [*****] H-1 ---------------------------------------------------------------------------------------------------


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COLLABORATIVE RESEARCH AGREEMENT


BETWEEN


THE DOW CHEMICAL COMPANY


AND


DIVERSA CORPORATION


COLLABORATIVE RESEARCH AGREEMENT (including the Appendices hereto, the "Agreement") by and between THE DOW CHEMICAL COMPANY, a corporation duly formed and existing under the laws 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 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 enzymes.


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


C. DOW and DIVERSA wish to enter into this Agreement in order to perform research together to discover and optimize the [*****] that can be used by DOW to produce certain, desired [*****].


D. DIVERSA will perform research either independently or with DOW on projects funded and supported by DOW in order to discover and develop such [*****] for the purpose of [*****] of products by DOW.


E. DOW will perform research to develop products and technology [*****].


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


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Article 1. DEFINITIONS


When used in this Agreement, 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 Agreement.
Control for purpose means ownership, directly or through one or more
affiliated entities, of [*****] or more of the shares of stock
entitled to vote for the election of directors in the case of a
corporation, or [*****] 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 Term" means [*****] or until this Agreement is otherwise
--------------
terminated as provided herein.


1.3 "Areas of Interest" means the development of [*****] Enzymes (as defined
-----------------
below) for use in the following [*****]:


[*****]


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
hereunder or under the Option Agreement between DIVERSA and DOW dated June
30, 1997, 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:


(i) 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;


(ii) as of the date of disclosure is in, or subsequently enters, the
public domain through no fault or omission of the receiving Party;


(iii) as of the date of disclosure or thereafter is obtained from a Third
Party free from any obligation of confidentiality; or


(iv) 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


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documentation.


1.5 "Consultants" means a non-Affiliate person who is under confidentiality to
-----------
and paid by a Party to act or advise on that Party's behalf under this
Agreement.


1.6 "Controls" or "Controlled" means, with respect to intellectual property,
-------- ----------
possession (other than by virtue of this Agreement) of the ability to
grant licenses or sublicenses to the other Party hereto without violating
the terms of any agreement or other arrangement with any Third Party
[*****].


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


1.8 "DIVERSA Know-How" means know-how Controlled solely by DIVERSA. The term
----------------
"know-how" means all Research Results and all know-how, nonpatented
inventions, improvements, discoveries, data, instructions, [*****]
information (including, without limitation, [*****] and information),
processes, procedures, devices, methods and trade secrets which are
conceived, discovered or invented during the Research Term in the course
of performance of the R&D Program or which have been conceived, discovered
or invented by DIVERSA prior to this Agreement, and which are necessary or
appropriate to develop and commercialize Licensed Products; and does not
include inventions within the Patent Rights.


1.9 "DIVERSA Patent Rights" means Patent Rights Controlled solely by DIVERSA
[*****].


1.10 "DIVERSA Research Results" means Research Results invented or discovered
------------------------
solely by DIVERSA.


1.11 "DOW Intellectual Property" means DOW Patent Rights and DOW Know-How and
-------------------------
Joint Intellectual Property.


1.12 "DOW Know-How" means Know-How Controlled solely by DOW.
------------


1.13 "DOW Patent Rights" means Patent Rights Controlled solely by DOW.
-----------------


1.14 "DOW Research Results" means Research Results invented or discovered
--------------------
solely by DOW.


1.15 "Effective Date" means the date of last signature set forth at the end of
--------------
this Agreement.


1.16 "Field" means [*****]; all Areas of Interest shall fall within this field.
-----


1.17 "FTE" means the equivalent of one full year of work on a full time basis
---
by a scientist or other professional [*****]


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[*****].


1.18 "Intellectual Property" means Diversa Intellectual Property and Dow
---------------------
Intellectual Property.


1.19 "[*****] Enzyme" means an enzyme or enzymes, either ex vivo or in vivo,
--------------
provided to Dow by Diversa which is within the claims of DIVERSA Patent
Rights or that incorporates, is derived from, or is identified,
discovered, developed or made through the use of DIVERSA Know-How, which
is developed from the [*****].


1.20 "Jointly Developed" or "Jointly Invented" means any item developed or
----------------- ----------------
invented by both Parties in the course of the performance of the R & D
Program during the Research Term. If the item developed or invented is a
patentable invention, such invention is jointly developed if both Parties'
employees or consultants are considered inventors under 35 U.S.C. et.
seq., as interpreted by the U.S. Patent and Trademark Office and the
United States courts.


1.21 "Joint Intellectual Property" means Joint Patent Rights and Joint Know-
---------------------------
How.


1.22 "Joint Know-How" means Know-How which is Jointly Developed or Jointly
--------------
Invented.


1.23 "Joint Patent Rights" means Patent Rights which are Jointly Developed.
-------------------


1.24 "Joint Research Results" means Research Results which are Jointly
----------------------
Developed or Jointly Invented.


1.25 "Know-How" means all Research Results and all know-how, nonpatented
--------
inventions, improvements, discoveries, data, instructions, [*****]
information (including, without limitation, [*****] and information),
processes, procedures, devices, methods and trade secrets which are
conceived, discovered or invented during the Research Term in the course
of performance of the R&D Program, and which are necessary or appropriate
to develop and [*****].


1.26 "License Agreement" means the agreement described in Section 5.1 hereof.
-----------------


1.27 "Licensed Product" means (i) [*****] which is used to [*****], or (ii)
----------------
[*****] and which is [*****] and which both (i) and (ii) are designated by
the RMC and listed on Appendix G attached hereto, encompassed within
[*****], which is attached hereto and made a part hereof. It is expected
that [*****] at the exercise of each License Agreement.


1.28 "Material" means the original, tangible materials provided by DOW or
--------
DIVERSA to the


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other Party in order that the recipient can perform its obligations under
the R&D Program and any exchange of samples developed during the R&D
Program.


1.29 "Patent Rights" means (i) all patents and patent applications which are
-------------
conceived of by DIVERSA and/or DOW during the Research Term and in the
course of performance of the R & D Program, and which are necessary for
DOW to make, use or sell the Royalty Bearing Products (as defined in the
License Agreement); if such patent rights arise they shall be listed on
Appendix B-1, attached hereto and made a part hereof; (ii) the patents and
patent applications listed on Appendix B-2, attached hereto and made a
part hereof, are patent rights of DIVERSA that [*****]; (iii) the [*****];
and (iv) 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 (i) or (ii)
above, and any substitutions, confirmations, patents-of-addition,
registrations or revalidations of any of the foregoing, in each case,
------------
which are Controlled by DIVERSA or DOW during the Research Term and which
are necessary for DOW to make, have made, use, sell, have sold, export or
import the Royalty Bearing Products. All patents and patent applications
subject to this definition are listed on Appendix B or will be included on
Appendix B by the end of the Agreement Term.


1.30 "R&D Program" means the research and development program to be conducted
-----------
during the Research Term by DIVERSA and DOW pursuant to Section 2, as more
fully described [*****].


1.31 "Research Data" means all data, [*****] and any other information
-------------
obtained or developed in the course of performance of the R&D Program.


1.32 "Research Management Committee" or "RMC" means the committee created
----------------------------- ---
pursuant to Section 2.2 hereof and which membership is defined in Appendix
A-3, attached hereto and made a part hereof.


1.33 "Research Materials" mean all tangible property obtained or developed in
------------------
the course of performance of the R&D Program, including but not limited to
[*****] Enzymes.


1.34 "Research Project Flow Chart" means a chart as Appendix H, attached hereto
---------------------------
for reference, to aid in understanding the efforts made under this
Agreement and the [*****].


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1.35 "Research Results" means Research Data and Research Materials.
----------------


1.36 "[*****]" means a specific target within [*****] as specifically
-------
described in Appendix A-1 hereto and made a part hereof, as may be amended
from time to time by the RMC in its written minutes.


1.37 "[*****]" means a [*****] within [*****] as specifically described in
-------
Appendix A-1 hereto and made a part hereof, as may be amended from time to
time by the RMC in its written minutes.


1.38 "Research Term" means the period commencing on the Effective Date and,
-------------
unless extended by written agreement of the Parties or sooner terminated
as provided herein, terminating on the third (3) anniversary of the
Effective Date.


1.39 "Responsible Party" shall have the meaning set forth in Section 8.1.2.
-----------------


1.40 "Staffing Level" shall have the meaning set forth in Section 2.1.1(d).
--------------


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


1.42 "[*****] Plans" mean the written plans drafted and approved by the RMC
-------------
defining the activities to be carried out for, and the budget for, each
[*****] during each twelve month period of the R&D Program, as more
specifically detailed in [*****] attached hereto and made a part hereof,
as modified from time to time by the RMC in its written minutes. The
[*****] Plan Procedures are provided in [*****], attached hereto and made
a part hereof.


Article 2. R&D PROGRAM


2.1 Implementation of the R&D Program.
----------------------------------


2.1.1 Basic Provisions of Program.


(a) The primary objective of the R&D Program shall be the
identification and development of [*****] Enzymes providing
enhanced or new properties useful in the [*****]. The Research
[*****] indicates the progress expected to occur under this
Agreement; namely, from [*****] discovery to [*****] Enzyme to
identification of a Licensed [*****]. Once a Licensed [*****]
is identified then the License Agreement pertains for the
remainder of the [*****].


(b) DIVERSA and DOW shall use their reasonable good faith efforts
to conduct the research activities set forth in the [*****]
Plans, and to provide Materials as set forth therein. Both
Parties shall employ the best methods they know which are
legally available to them to


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perform the [*****] Plans. However, [*****] (which basis must
be explained to DIVERSA) about the ability of DIVERSA to
[*****], then DOW may request a modification to the [*****]
Plan. DOW accepts that this could effect the ability to obtain
the desired [*****] Enzyme(s) for the [*****].


(c) The Research [*****] and Research [*****], both in [*****], are
defined in the [*****] Plans in [*****], as amended from time
to time by the RMC in its written minutes.


(d) In carrying out the R&D Program, DIVERSA shall devote [*****]
FTEs per year for each of the [*****] years of the Research
Term ("Staffing Level"), and DOW shall pay DIVERSA for the
services of such FTEs as set forth herein. At the request of
DOW, DIVERSA will in good faith consider and discuss proposed
increases or decreases to the Staffing Level with adjustments
in payments. Notwithstanding the foregoing or anything
contained herein to the contrary, that the Staffing Level shall
remain at [*****] FTEs, unless the Parties, in each Party's
sole discretion, agree in writing to increase or decrease the
Staffing Level. Any increase or decrease to the Staffing Level
agreed to by the Parties shall be [*****] in the relevant
[*****] Plan for each Research [*****] or Research [*****] and
the budget associated with such [*****] Plan. Unless previously
consented to in writing by DOW, the budget for the [*****] Plan
for each Research [*****] and Research [*****] shall remain
within the funding proposed in Section 4. No more than [*****]
times per Research Term year, DOW shall have the right to
audit, at its expense, during regular business hours at
DIVERSA's place of business and, if conducted at different
sites also where the work is performed, both for the technology
development and FTEs assigned to the R&D Program.


(e) DIVERSA and DOW shall use commercially reasonable efforts to
perform the tasks set forth in the [*****] Plans, and to
provide the facilities, materials and equipment necessary to
perform the research activities set forth in the [*****] Plans.


(f) DIVERSA shall not be obligated to utilize more than [*****]
FTEs per year in the R&D Program. DOW shall be responsible for
the expense of research activities in the R&D Program that are
[*****], provided that DOW is notified of the reasons why
DIVERSA [*****], is notified of the [*****], and gives its
prior written consent.
-------------


(g) At such time as each [*****] Plan is under consideration by the
RMC, DOW may propose to the RMC to [*****] any selected


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Research [*****] or Research [*****] and upon acceptance of
the proposal by the RMC in its written minutes, DIVERSA will
[*****] in respect of such Research [*****] or Research
[*****], subject to DOW's obligations to maintain the Staffing
Level. In such event, DOW may propose a substitute Research
[*****] or Research [*****] within [*****] of the Areas of
Interest to be included in the R&D Program, which shall be
subject to the approval of the RMC. In the event no replacement
Research [*****] in any Area of Interest can be identified by
DOW and approved by the RMC, then (i) DOW may propose a new
[*****] which when accepted by the RMC would be added by
amendment to this Agreement or a new Research [*****] or
Research [*****] within the Field and if this new replacement
is acceptable to DIVERSA, this new replacement shall be
instituted promptly; or (ii) the Staffing Level will be
adjusted in accordance with Section 2.1.1(d).


(h) Upon any such abandonment under Section 2.1.1(g), DOW shall
have no further commercial rights with respect to any ...