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Patent Cross-License Agreement - Terragen Discovery Inc. and Diversa Corp.

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                             CONFIDENTIAL TREATMENT

                         PATENT CROSS-LICENSE AGREEMENT


       This agreement ("Agreement"), affective as of the 18th day of November,
1999 ("Effective Date"), is made by and between Terragen Discovery Inc., a
British Columbia corporation ("Terragen"), having Its principal place of
business at Suite 300-2386 East Mail - UBC, Vancouver, British Columbia, Canada
V6T IZ3, and Diversa Corporation, a Delaware corporation ("Diversa"), having its
principal place of business at 10665 Sorrento Valley Road, San Diego, California
92121.

       WHEREAS, Terragen is the owner of certain Terragen Patent Rights (as
hereinafter defined), and Diversa is the owner of certain Diversa Patent Rights
(as hereinafter defined), both embodying technologies applicable in discovery of
multi-gene pathways and biomolecules of interest:

       WHEREAS, each party is desirous of acquiring certain rights under the
other party's patent rights to use the other party's technology for the
development, manufacture, sale and use of products and the provision of
services; and

       WHEREAS, each party is willing to grant the other party such rights in
accordance with the terms and conditions set forth in this Agreement.

       NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and conditions set forth herein, Terragen and Diversa hereby agree as
follows:

                             ARTICLE 1--DEFINITIONS

       "DNA SHUFFLER" shall mean a company whose primary business activity and
technology prior to the Effective Date relates to the area of molecular breeding
involving in vitro DNA shuffling, and all successor entities thereto.

       "DIVERSA PATENT RIGHTS" shall mean patents and patent applications set
forth in Exhibit A hereto, and all continuations-in-part, continuations,
divisionals, reissues, re-examinations or extensions thereof, and any foreign
patents and patent applications corresponding thereto, Diversa may modify
Exhibit A from time to time by providing written notice to Terragen to include
patents and patent applications that may be required in order for Terragen to
practice Diversa Patent Rights or Terragen Patent Rights.

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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       "DIVERSA PRODUCTS" shall refer to all products made, use, sold, offered
for sale or imported by Diversa that but for the licenses granted herein would
infringe Terragen Patent Rights.

       "FIELD 1" shall mean small molecules for pharmaceutical applications.

       "FIELD 2" shall mean all fields except Field 1.

       "PATENT RIGHTS" shall refer to Terragen Patent Flights and Diversa Patent
Rights.

       "POLYKETIDE DISCOVERER" shall mean a company whose primary business
activity and technology prior to the Effective Date relates to the area of
polyketide pathway discovery, and all successor entities thereto.

       "TERRAGEN PATENT RIGHTS" shall mean patents and patent applications set
forth in Exhibit B hereto, and all continuations-in-part, continuations,
divisionals, reissues, re-examinations or extensions thereof, and any foreign
patents and patent applications corresponding thereto. as well as any patents
and patent applications necessary to practice microdroplet screening
technologies as described in the patents and patent applications in Exhibit B.
Terragen may modify Exhibit B from time to time by providing written notice to
Diversa to include patents and patent applications that may be required in order
for Diversa to practice Diversa Patent Rights or Terragen Patent Rights.

       "TERRAGEN PRODUCTS" shall refer to small molecules generated by the
expression of partial, complete or hybrid gene pathways made, used, sold,
offered for sale or imported by Terragen that but for the license granted herein
would infringe Diversa Patent Rights. It is understood that small molecules do
not include proteins or nucleic acids.

       "VALID CLAIM" shall mean: (1) a claim of an issued and unexpired patent
that has not been revoked or held unenforceable or invalid by a decision of a
court or other governmental body of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not been
statutorally disclaimed; or (ii) a claim included in a pending patent
application that is actively prosecuted and which has not been cancelled,
withdrawn, finally determined to be unallowable by the applicable governmental
body pursuant to an unappealable decision and/or abandoned in accordance with
the terms hereof.

                           ARTICLE 2--LICENSE GRANT

       2.1  TERRAGEN LICENSE GRANT. Subject to the terms and conditions set
forth herein, Terragen hereby grants to Diversa the following:

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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          a)   a co-exclusive, non-royalty bearing, worldwide,
               non-sublicenseable license under Terragen Patent Rights to make,
               use, sell, offer to sell and/or import Diversa Products in Field
               2. This license shall not extend to [ ]*.

          b)   a non-exclusive, non-royalty bearing, non-sublicenseable,
               worldwide license under Terragen Patent Rights to make, use,
               self, offer to sell and/or import Diversa Products in Field 1,
               provided that for a period of one (1) year from the Effective
               Date, the license under this subparagraph shall not extend to
               [ ]*.

       2.2  DIVERSA LICENSE GRANT. Subject to the terms and conditions set forth
herein, Diversa hereby grants to Terragen the following:

          a)   a non-exclusive, non-royalty bearing, worldwide,
               non-sublicenseable license under Diversa Patent Rights to make,
               use, sell, offer to sell and/or import Terragen Products in
               Field 1.

       2.3  LICENSE LIMITATIONS.

          a)   Diversa agrees that it will not utilize lichens in discovery
               and/or development of Diversa Products in Field 1 for a period of
               [ ]* years from the Effective Date.

          b)   Terragen agrees that it will not utilize insect endosymbionts in
               the discovery and/or development of Terragen Products for a
               period of [ ]* years from the Effective Date.

                            ARTICLE 3--CONSIDERATION

       3.1  FEES. In consideration of the licenses granted to Diversa by
Terragen under the forms of this Agreement, Diversa has granted the license
referred to in Section 2.2 and will pay Terragen the following:

          a)   a one time up front payment of [ ]*;

          b)   an annual maintenance fee of [ ]* until all Valid Claims included
               in the Terragen Patent Rights have expired, unless the Agreement
               is terminated earlier pursuant to Article 7 below.

                        ARTICLE 4--INTELLECTUAL PROPERTY

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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       4.1  Except as permitted below, in further consideration of the licenses
granted under the terms of this Agreement, Terragen will not institute a legal
action challenging the validity and/or enforceability of Diversa Patent Rights,
and Diversa will not institute any legal action challenging the validity and/or
enforceability of Terragen Patent Rights, in each case, during the term of this
Agreement. "Legal action challenging the validity and/or enforceability of
Diversa Patent Rights/Terragen Patent Rights" shall include, but is not limited
to, pre-grant or post-grant opposition proceedings, nullity suits, reexamination
proceedings, declaratory judgement actions, and civil actions under 35 U.S.C.
ss. 291 (interfering patents).

       4.2  Except as permitted below, in further consideration of the licenses
granted under the terms of this Agreement, neither party shall take any action
to hinder or delay prosecution of patents or patent applications owned or
controlled by the other party and within the scope of Patent Rights without the
prior written consent of said other party during the term of this Agreement
"Action taken to hinder or delay prosecution of patent applications" shall
include, but is not limited to, formal or informal protests and third- party
observations.

       4.3  Upon the execution of this Agreement, a party who has brought a
pending legal action challenging the validity or enforceability of any patent or
patent application owned or controlled by the other party and within the scope
of Patent Rights, shall take appropriate steps to terminate said pending legal
action.

       4.4  Notwithstanding the provisions of sections 4.1 and 4.2, a party may
present and prosecute one or more claims that are directed to the same
patentable invention as any claim(s) of the other party. Claims may be presented
to satisfy the provisions of 35 U.S.C.ss.135(b) or otherwise, e.g., at the
request of an Examiner.

       4.5  Notwithstanding the provisions of sections 4.1 and 4.2, in the event
a patent infringement action is brought against a party to this Agreement, the
party charged with infringement shall be permitted to raise all defenses
permitted by law, including invalidity or unenforceability of the patent
asserted against the party charged with infringement.

       4.6  Notwithstanding the provisions of sections 4.1 and 4.2, nothing in
this agreement shall prevent a party from disclosing material information to the
Patent and Trademark Office to satisfy the duty of disclosure under 37 C.F.R.
ss. 1.56.

       4.7  If the United States Patent and Trademark Office declares an
interference proceeding involving Terragen Patent Rights and Diversa Patent
Rights, the parties will negotiate a settlement of such an interference in good
faith. These negotiations will address all priority and non-priority issues that
could have been brought in the interference.

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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       4.8  INFRINGEMENT BY THIRD PARTIES.

          a)   In the event that either party determines that a third party is
               making, using, or selling a product that may infringe a patent
               included in the Patent Rights, it will promptly notify the other
               party in writing.

          b)   Except as provided under section 4.8(c), the party in whose name
               the allegedly infringed Patent Rights are registered shall be
               solely responsible for determining whether to bring suit against
               such alleged infringer and controlling such suit, and the other
               party shall take all reasonable steps to assist in such suit,
               provided that the expenses of the other party are paid by the
               controlling party.

          c)   If the matter involves an alleged infringement of the Terragen
               Patent Rights in Field 2, then Terragen shall be initially
               responsible for determining whether to bring suit against such
               alleged infringer. In the event Terragen decides to bring suit,
               it shall give prompt written notice to Diversa of that fact, and
               Diversa shall take all reasonable steps to assist Terragen in
               such suit. Terragen shall be entitled to all amounts recovered in
               such suit (other than amount to be paid to Diversa, should
               Diversa elect to join in such suit as provided for herein),
               except that Diversa shall have the right to elect to pay up to
               [ ]* percent ( *%) of the litigation costs and receive a
               percentage of any recovery equal to the percentage of total
               litigation costs, including reasonable attorneys' fees, paid
               by Diversa. Diversa must make such election within sixty (60)
               days of its receipt of Terragen's notice that it has decided to
               bring suit. Diversa shall also have the right to be represented
               by separate counsel in any such suit, Terragen shall have
               control over any such suit, and decisions as to settlement,
               methods and/or terms and conditions for resolving the suit
               shall be made by Terragen after good faith consultation with
               Diversa. Upon the earlier of (i) Terragen's election not to
               bring a suit against the alleged infringer, as indicated by
               prompt written notice to Diversa, or (ii) 180 days after
               Terragen has notice of such alleged infringement if Terragen
               has not been able to cause the alleged infringer to cease
               infringement, Diversa shall have the right. at its option, to
               commence such action at its own cost and expense, in which
               case Diversa shall have control over such suit and be entitled
               to all amounts recovered in such action, subject to payment of
               any

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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                                      -6-

               costs of Terragen in assisting in such suit. Subject to the right
               to receive payment for its costs out of amounts recovered as
               aforesaid, Terragen shall take all reasonable steps to assist
               Diversa in such suit.

       4.9  PARTIES TO MAINTAIN PATENT RIGHTS. Each party shall have the
obligation and be responsible at its own cost and expense for maintaining and
extending those Patent Rights under its control for the term of this License.
Subject to section 4.10, each party shall use good faith efforts to prosecute,
issue and maintain all Patent Rights.

       4.10 NOTICE OF PATENT LAPSE OF PATENT RIGHTS. In the event that a party
elects to abandon any of the Patent Rights under its control, it shall promptly
advise the other party of the grant, lapse, nullification, revocation,
surrender, or invalidation of any such Patent Rights at least in advance of any
abandonment to enable the other party (the "Assuming Party") to assume that
prosecution, at the Assuming Party's expense, should the Assuming Party not
agree to such abandonment.

                         ARTICLE 5--LIMITED WARRANTIES/
                           INDEMNIFICATION/LITIGATION

       5.1  LIMITED WARRANTY. Each party warrants to the other that it has the
full right and power to make the representations and agreements set forth
herein. Terragen warrants that Exhibit B lists patent applications filed on or
before the Effective Date owned by Terragen, and Diversa warrants that Exhibit A
lists patent applications filed on or before the Effective Date owned by
Diversa.

       5.2  NO OTHER WARRANTIES BY TERRAGEN. WITH RESPECT TO TERRAGEN PATENT
RIGHTS AND TERRAGEN TECHNOLOGY, TERRAGEN EXPRESSLY DISCLAIMS ALL WARRANTIES OF
ANY KIND AND MAKES NO EXPRESS OR IMPLIED WARRANTIES WHATSOEVER INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY, SATISFACTORY QUALITY
OR FITNESS FOR A PARTICULAR PURPOSE, EXCEPT AS EXPRESSLY PROVIDED IN PARAGRAPH
5.1 ABOVE. TERRAGEN EXPRESSLY DISCLAIMS ALL WARRANTIES AS TO THE VALIDITY OR
SCOPE OF TERRAGEN PATENT RIGHTS, OR THAT THE TERRAGEN TECHNOLOGY WILL BE FREE
FROM INFRINGEMENT OF PATENTS OR PROPRIETARY RIGHTS OF THIRD PARTIES, OR THAT NO
THIRD PARTIES ARE IN ANY WAY INFRINGING TERRAGEN PATENT RIGHTS. In no event
shall Terragen be liable for any consequential, indirect, or incidental damages.
Further, Diversa shall make no statements, representations or warranties
whatsoever to any third party which are inconsistent with this disclaimer by
Terragen.

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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                                      -7-

       5.3  NO OTHER WARRANTIES BY DIVERSA. WITH RESPECT TO DIVERSA PATENT
RIGHTS AND DIVERSA TECHNOLOGY, DIVERSA EXPRESSLY DISCLAIMS ALL WARRANTIES OF ANY
KIND AND MAKES NO EXPRESS OR IMPLIED WARRANTIES WHATSOEVER INCLUDING, WITHOUT
LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY, SATISFACTORY QUALITY OR
FITNESS FOR A PARTICULAR PURPOSE, EXCEPT AS EXPRESSLY PROVIDED IN PARAGRAPH 5.1
ABOVE. DIVERSA EXPRESSLY DISCLAIMS ALL WARRANTIES AS TO THE VALIDITY OR SCOPE OF
DIVERSA PATENT RIGHTS, OR THAT THE DIVERSA TECHNOLOGY WILL BE FREE FROM
INFRINGEMENT OF PATENTS OR PROPRIETARY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD
PARTIES ARE IN ANY WAY INFRINGING DIVERSA PATENT RIGHTS. In no event shall
Diversa be liable for any consequential, indirect, or incidental damages.
Further, Terragen shall make no statements, representations or warranties
whatsoever to any third party which are inconsistent with this disclaimer by
Diversa.

       5.4  INFRINGEMENT LITIGATION. Each party shall notify the other party in
writing in the event that any third party shall commence or threaten to commence
an action against Terragen or Diversa alleging that the practice of a method or
process embodied in one or more claims of Diversa Patent Rights or Terragen
Patent Rights infringes a patent of a third party. Each party shall keep the
other reasonably informed with respect to the progress of any such action from
time to time. Upon a party's reasonable request and at its expense, the other
party shall cooperate with the requesting party and its counsel with respect to
the defense of any such action against the requesting party.

                           ARTICLE 6--CONFIDENTIALITY

       6.1  DEFINITION OF CONFIDENTIAL INFORMATION. Confidential Information
shall mean any technical, business or other proprietary information, whether
orally or in writing, furnished by one party (the "Disclosing Party") to the
other party (the "Receiving Party") in connection with this Agreement. Such
Confidential Information shall include, without limitation, the terms of this
Agreement, Diversa Patent Rights, arid Terragen Patent Rights.

       6.2  OBLIGATIONS. The Receiving Party agrees that it shall:

          (a)  Maintain all Confidential Information in strict confidence,
               except that the Receiving Party may disclose or permit the
               disclosure of any Confidential Information to its Affiliates,
               directors, officers, employees, consultants and advisors who are
               obligated to maintain the confidential nature of such
               Confidential Information and who need to know such

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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                                      -8-

               Confidential Information for the purposes set forth in this
               Agreement;

          (b)  Use all Confidential Information solely for the purposes set
               forth in, or as permitted by, this Agreement; and

          (c)  Allow its Affiliates, directors, officers, employees, consultants
               and advisors to reproduce the Confidential Information only to
               the extent necessary to effect the purposes set forth in this
               Agreement, with all such reproductions being considered
               Confidential Information.

Each Party shall be responsible for any breaches of this Section 6.2 by any of
its Affiliates, directors, officers, employees, consultants and advisors.

       6.3  EXCEPTIONS. The obligations of the Receiving Party under Section 6.2
above shall not apply to any specific Confidential Information to the extent
that the Receiving Party can demonstrate by written record that such
Confidential Information;

          (a)  Was in the public domain prior to the time of its disclosure
               under this Agreement:

          (b)  Entered the public domain after the time of its disclosure under
               this Agreement through means other than an unauthorized
               disclosure resulting from an act or omission by the Receiving
               Party or its Affiliates, directors, officers, employees,
               consultants, advisors or agents;

          (c)  Was or is independently developed or discovered by the Receiving
               Party without use of the Confidential Information;

          (d)  Is or was disclosed to the Receiving Party at any time, whether
               prior to or after the time of its disclosure under this
               Agreement, by a third party having no fiduciary relationship with
               the Disclosing Party and having no obligation of confidentiality
               to the Disclosing Party with respect to such Confidential
               Information; or

          (e)  Is required to be disclosed to comply with applicable laws or
               regulations (such as disclosure to the SEC, the EPA, the FDA, or
               the United States Patent and Trademark Office or to their foreign
               equivalents), or to comply with a court or administrative order,
               provided that the Disclosing Party receives prior written

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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                                      -9-

               notice of such disclosure and that the Receiving Party takes all
               reasonable and lawful actions to obtain confidential treatment
               for such disclosure and, if possible, to minimize the extent of
               such disclosure.

       6.4  SURVIVAL OF OBLIGATIONS. The obligations set forth in sections 6.1,
6.2 and 6.3 shall remain in effect after termination or expiration of this
Agreement, until such time as the Confidential Information falls into one of the
exceptions listed in section 6.3.

       6.5  PUBLICITY. The parties shall issue a joint press release regarding
this Agreement, the text of which shall be subject to mutual agreement of the
parties. Except for the information disclosed in the joint press release,
neither party shall use the name of the other party or reveal the terms of this
Agreement on any publicity or advertising without the prior written approval of
the other party, except that (i) either party may use the text of a written
statement approved in advance by both parties without further approval, and (ii)
either party shall have the right to identify the other party and to disclose
the terms of this Agreement as required by applicable securities laws or other
applicable law or regulation, provided that the receiving PARTY takes reasonable
and lawful actions to minimize the degree of such disclosure.

                         ARTICLE 7--TERM AND TERMINATION

       7.1  DIVERSA LICENSE TERM. The term of the licenses granted to Diversa by
Terragen pursuant to this Agreement shall expire on a country by country basis,
upon the [ ]*.

       7.2  TERRAGEN LICENSE TERM. The term of the license granted to Terragen
by Diversa pursuant to this Agreement shall expire on a country by country
basis, upon the [ ]*.

       7.3  TERMINATION UPON MATERIAL BREACH. Either party may terminate the
licenses granted to the other party under this Agreement if such other party
breaches any material term of this Agreement and does not cure such breach
within [ ]* days following written notice; except for non-payment of money, in
which case the cure period shall be reduced to [ ]* days. Any right to terminate
arising under this section 7.3 shall be stayed until resolved under section 9.2
if, during the relevant cure period, the party alleged to have been in default
shall:

          (i) have initiated arbitration in accordance with section 9.2 below,
          with respect to the alleged default; and

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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          (ii) be diligently and in good faith co-operating in the prompt
          resolution of such arbitration proceedings.

       7.4  TERMINATION UPON BANKRUPTCY. If either party (the "Insolvent Party")
files for protection under bankruptcy laws, makes an assignment for the benefit
of creditors, appoints or suffers appointment of a receiver or trustee over its
property, files a voluntary petition under any bankruptcy or insolvency act or
has any such petition filed against it which is not discharged within sixty (60)
days of the filing thereof, then the other party may, at its sole election upon
notice to the Insolvent Party, terminate the rights granted to the Insolvent
Party by written notice to such Insolvent Party.

       7.5.  TERMINATION UPON PATENT RIGHT LAPSE. Either party may terminate the
license granted to the other party under this Agreement if the other party's
Patent Rights have lapsed, been canceled or abandoned, been admitted to be
invalid or unenforceable through reissue or disclaimer or have been declared
invalid by decision or judgment of a court of competent jurisdiction.

       7.6  TERMINATION UPON LICENSED RIGHTS REPRESENTING MAJORITY OF ASSETS.
Either party may terminate the licenses granted to the other party under this
Agreement if the licenses granted to the other party under this Agreement
represent more than [ ]*% of the total assets of the other party.

       7.7  TERRAGEN TERMINATION RIGHTS UPON CERTAIN DIVERSA
ACQUISITIONS/MERGERS. Terragen may terminate the licenses granted to Diversa
under this Agreement in the event that Diversa transfers all or substantially
all of its business, whether by way of merger, sale of stock, sale of assets or
otherwise to a Polyketide Discoverer within two (2) years of the Effective Date.
In the event the license to Diversa is terminated by Terragen pursuant this
section 7.7, such termination will be effective upon the date of such transfer.

       7.8  DIVERSA TERMINATION RIGHTS UPON CERTAIN TERRAGEN
ACQUISITIONS/MERGERS. Diversa may terminate the license granted to Terragen
under this Agreement in the event that Terragen transfers all or substantially
all of its business, whether by way of merger, sale of stock, sale of assets or
otherwise to a DNA Shuffler during the term of this Agreement. In the event the
license to Terragen is terminated by Diversa pursuant this section 7.8, such
termination will be effective upon the date of such transfer. Further, in the
event Terragen transfers all or substantially all of its business, whether by
way of merger, sale of stock, sale of assets or otherwise to a DNA Shuffler
without prior written approval from Diversa within five (5) years of the
Effective Date, Terragen shall reimburse Diversa the [ ]* paid to Terragen by
Diversa pursuant to section 3.1 above, within ninety (90) days of such transfer.

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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       7.9  RIGHTS UPON EXPIRATION. Upon expiration of the licenses granted
hereunder, neither party shall have any further rights or obligations with
respect to this Agreement in the countries with respect to which this Agreement
has then expired, except that expiration shall not relieve each party of any
obligations accruing prior to such expiration or of its obligations under
Articles 4, 5 and 6 herein. This section 7.9 (and the sections referenced
herein) shall survive expiration of this Agreement.

       7.10 RIGHTS UPON TERMINATION. Upon termination of the licenses granted by
one party (the "Terminating Party") to the other party (the "Terminated Party")
under this Agreement, the licenses granted by the Terminated Party to the
Terminated Party shall remain in full force effect until expiration or
termination in accordance with this Agreement. Any termination of licenses
granted under this Agreement shall not relieve either party of any obligations
with respect to such licenses accrued prior to the date of such termination or
its obligations under Articles 4, 5 and 6 herein. This section 7.10 (and the
sections referenced herein) shall survive termination of this Agreement.

                   ARTICLE 5--ASSIGNMENT, CHANGE OF OWNERSHIP,
                             RIGHTS UPON DISSOLUTION

       8.1  ASSIGNMENT. Except as otherwise expressly provided herein, neither
this Agreement nor any interest hereunder shall be assignable, nor any other
obligation delegable, by either party without the prior written consent of the
other, provided, however, that (subject to sections 7.7 and 7.8 above) a Party
may assign this Agreement to any affiliate of it or to any successor by law or
by sale of all or substantially all of its assets, provided that the assigning
party shall guarantee and remain liable and responsible for the performance and
further observance of all the assigning party's duties and obligations
hereunder; provided further that, in the event of such transaction, no
intellectual property rights of any person (other than Diversa or Terragen) that
is an acquiring party shall be included in the technology licensed hereunder.
The terms and provisions of this Agreement shall be binding upon the successors
and permitted assigns of the parties. Any assignment not in accordance with this
section 8.1 shall be void.

       8.2  DIVERSA RIGHTS UPON DISSOLUTION, LIQUIDATION, WINDING UP OF
TERRAGEN. Diversa will have a right of first option to negotiate the purchase of
the Terragen Patent Rights in the event of the dissolution. liquidation or
winding up of Terragen (an "Event") (subject to section 9.12 hereof and to
applicable bankruptcy laws) within five (5) years of the Effective Date.
Terragen will provide prompt written notice to Diversa of any Event or proposed
Event. Diversa may exercise its option to negotiate the purchase of the Terragen
Patent Rights by providing Terragen written notice within sixty (60) days after
the date of such notice to Diversa by Terragen. If Diversa elects to exercise
such option the parties shall

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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negotiate in good faith with the goal of entering into a definitive agreement
within ninety (90) days after the date of Diversa's notice to Terragen. If
Diversa does not exercise such option within the sixty (60) day option period or
the parties are unable to enter into a definitive agreement within the ninety
(90) day period after Diversa's notice to Terragen that it has exercised the
option (or such longer period as the parties may mutually agree in writing),
then Terragen shall be free to sell or otherwise transfer the Terragen Patent
Rights to a third party; provided that, for a period of six months following the
end of the negotiation period, Terragen may not sell or otherwise transfer the
Terragen Patent Rights to any third party containing terms and conditions which,
in the aggregate. are more favorable to such third party than the terms and
conditions last offered to Diversa by Terragen, unless Terragen first offers
Diversa the opportunity to purchase the Terragen Patent Rights on such terms and
conditions.

                          ARTICLE 9--GENERAL PROVISIONS

       9.1  INDEPENDENT CONTRACTORS. Terragen and Diversa shall be independent
contractors and shall not be deemed to be partners, joint venturers or each
other's agents and neither party shall have the right to act on behalf of the
other except as is expressly set forth in this Agreement.

       9.2  ARBITRATION. The Parties shall mutually consult in good faith in an
attempt to settle amicably in the spirit of co-operation any and all disputes
arising out of or in connection with this Agreement or questions regarding the
interpretation of the provisions hereof. All controversies or claims under this
Agreement, the enforcement or interpretation hereof, or because of an alleged
breach, default or misrepresentation under the provisions hereof that cannot be
settled amicably within one (1) month from the date of notification of either
party to the other of such dispute or question, which notice shall specify the
details of such dispute or question, shall be settled by final and binding
arbitration in English, by one arbitrator appointed by the American Arbitration
Association ("AAA"). If the parties cannot agree on the arbitrator to be so
appointed, each party shall be entitled to appoint one (1) arbitrator, and the
two (2) arbitrators so appointed shall agree upon a third. The arbitrator(s)
shall have the technical expertise required to understand and arbitrate the
dispute. The arbitration shall be conducted in San Diego, California, if
initiated by Terragen and in Vancouver, British Columbia, if initiated by
Diversa, in each case, in accordance with the then existing Commercial
Arbitration Rules of the AAA. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof; provided.
however, that the law applicable to any controversy shall be the law of the
State of California or Federal Patent Law, as applicable, regardless of its or
any other jurisdiction's choice of law principles. Notwithstanding the
foregoing, either party may apply to any court of competent jurisdiction for a
temporary restraining order, preliminary injunction or other interim or
conservatory relief, as necessary, without

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

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breach of this arbitration agreement and without any abridgement of the powers
of the arbitrator. In no event shall the demand for arbitration be made after
the date when institution of a legal or equitable proceeding based on such
claim, dispute or other matter in question would be barred by the applicable
statute of limitations. The costs of any arbitration, including administrative
and arbitrators' fees, shall be shared equally by the parties and each party
shall bear its own costs and attorneys' and witness' fees, provided however,
that the prevailing party, if determined by the arbitrator(s), shall be entitled
to an award against the other party in the amount of the prevailing party's
costs (including arbitration costs) and reasonable attorneys' fees.

       9.3  ENTIRE AGREEMENT. This Agreement, together with the Non-Disclosure
Agreement signed by the parties dated October 25, 1999, sets forth the entire
agreement and understanding between the parties as to the subject matter hereof.
There shall be no amendments or modifications to this Agreement, except by a
written document signed by both parties.

       9.4  CALIFORNIA LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without giving effect to its
principles of conflicts of taw.

       9.5  SEVERABILITY. If any provision of this Agreement is ultimately held
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

       9.8  NO WAIVER. Any delay in enforcing a party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of a party's right to the future enforcement of its rights
under this Agreement.

       9.7  NOTICES. Any notices in writing and payments to be made provided
herein shall be deemed duly given and made if sent by courier or by certified or
registered nail, postage prepaid, to the addressees below. Either party may
change its address or its designated management representative by written notice
to the other party. The date of giving such notices and payments shall be the
date of mailing.

         To Terragen:

         Terragen Discovery Inc.
         Suite 300
         2386 East Mall
         UBC Vancouver, British Columbia, Canada V6T 1Z3

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

<PAGE>

                                      -14-

         Attention: Dr. Mario Thomas
                    Chief Executive Officer

         To Diversa Corporation:

         Diversa Corporation
         10665 Sorrento Valley Road
         San Diego, California 92121

         Attention: Dr. Jay Short
                    CEO, CTO and President

       9.8  CAPTIONS. Captions and headings are relied on for convenience only
and in no way are to be construed to define, limit or affect the construction or
interpretation hereof.

       9.9  GOVERNMENTAL APPROVALS. Each party shall be responsible for
obtaining all necessary governmental approvals for the development, testing,
production, distribution, sale and use of any products discovered and developed
by such party using Diversa Technology or Terragen Technology licensed
hereunder, at such party's sole expense. Each party shall have sole
responsibility for any warning labels, packaging, instructions to use, and
quality control with respect to any such product.

       9.10 COMPLIANCE WITH LAWS AND REGULATIONS. Each party shall comply with
all United States and foreign taws, regulations, rules and orders applicable to
use of the Diversa Technology or Terragen Technology, as applicable, the
development, testing, production, distribution, export, packaging, labeling,
sales and use of products derived from the use of the Diversa Technology or
Terragen Technology, as applicable.

       9.11 NO USE OF NAME. Neither party shall use in advertising, promotion or
sale of products, or the provision of services using the Diversa Technology or
Terragen Technology, as applicable, any trade name, trademark, servicemark,
trade-dress or other designation, or any confusingly similar variation thereof,
of the other party, unless consented to in writing by such other party.

       9.12 SECTION 365(n). All licenses granted under the Agreement will be
deemed licenses of rights to intellectual property for purposes of Section
365(n) of the US Bankruptcy Code and a licensee under the Agreement will retain
and may fully exercise all of its rights and elections under the US Bankruptcy
Code.

       9.13 COUNTERPARTS. This Agreement may be executed in counterparts. each
of which, when so executed and delivered, shall be deemed to be an original,

*Confidential treatment requested: Material has been omitted and filed with the
Commission.

<PAGE>

                                      -15-

and all of which counterparts, taken together, shall constitute one and the same
instrument.

       IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

Terragen Discovery, Inc.                   Diversa Corporation


/s/ DR. MARIO THOMAS                       /s/ DR. JAY M. SHORT
----------------------------               ----------------------------
Dr. Mario Thomas                           Dr. Jay M. Short
President                                  CEO, President and CTO






*Confidential treatment requested: Material has been omitted and filed with the
Commission.