Document:

Prepared by MerrillDirect

Exhibit 10.1

March 6, 2001

Mr. Vern Brunner

Brunner Marketing Solution

245 Maple Court

Lake Forrest, IL  60045

Re:        Natrol Engagement
Outline

Dear Vern:

As a follow-up to our telephone conversation of March 5, 2001, I have
outlined what we discussed with respect to your future role at Natrol.  It is divided into two component parts, but
as we discussed they tie in together.

First, we have offered you a position as a member of the Natrol Board of
Directors and hope you will accept. 
This is currently a vacant seat up for re-election on or about June
2003.  Our annual board fees are $12,000
consisting of a quarterly retainer of $1,000 and a $2,000 per meeting fee.  On an annualized basis this totals $12,000
(based on four board meetings per year). 
As we discussed, the term of a board seats is three years and, although
approximately nine months of the 36 months have expired, the board will award
you the full 30,000 shares of stock options. 
Stock options will be awarded at the price per share on the date your appointment
is formalized.

The second part of the agreement will be the annual consulting contract
with Brunner Marketing Solutions. 
Brunner Marketing Solutions will render services to Natrol and its
companies as follows:

1.          Your focus of attention will be on the
Natrol companies’ marketing, merchandising and sales plans and strategies.

2.          You will make yourself available to
confer and render guidance and advice with all top corporate executives,
including myself.

3.          Attend senior management meetings on a
quarterly basis, typically scheduled around the board of director’s meeting.

4.          Coordinate special projects and
assignments.

5.          Up to 45 travel days per year, plus
telephone communication as well as e-mails, etc.

For these services, Brunner Marketing Solutions will be compensated
$48,000 per annum to include all travel and associated out-of-pocket expenses
and 10,000 shares of stock options annually upon agreement renewal.  Stock options for consulting services will
be fully vested upon issuance.  This
consulting agreement is for a 12month period and may be renewed by mutual
agreement.

As we discussed, it is possible that the consulting agreement will be a
required disclosure on our annual 10Q. 
I would appreciate your acknowledgement that this is the understanding
in principle we have discussed.  Should
you find that an item has been omitted please feel free to let me know.

I would appreciate this acknowledgement as soon as possible so I can
secure final board approval.  We are
excited and anxious to get you on board.

Sincerely,

/s/ Elliott Balbert

Elliott Balbert, Chairman

NATROL, INC.Prepared by MerrillDirect

 

EXHIBIT 10.21

 

DRUG DISCOVERY, DEVELOPMENT, AND LICENSE AGREEMENT

by and between

DIVERSA CORPORATION

and

INTRABIOTICS PHARMACEUTICALS, INC.

TABLE OF CONTENTS

 

1.       DEFINITIONS

2.       R&D PROGRAM

2.1     R&D Program.

2.2     Research and
Development Activities.

2.3     Limited Use
of Materials Provided by Diversa.

2.4     Records.

2.5     Permitted Affiliates, its
Sublicensees and Third Party Subcontractors.

3.       COMMITTEES; SELECTION OF COMPOUNDS AND
COMPOUND DERIVATIVES

3.1     Organization.

3.2     Responsibilities.

3.3     Meetings of
the RMC and Steering Committee.

3.4     Requirements for Action.

3.5     Members.

3.6     Visits to Facilities.

3.7     Information Sharing.

3.8     Dispute Resolution.

3.9     Expenses.

4.       GRANT OF RIGHTS
AND REVERSION OF RIGHTS

4.1     License.

4.2     Rights to Sublicense.

4.3     License Period.

4.4     Reserved Sets.

4.5     IBP Diligence Obligations.

4.6     Reversion of Rights to
Diversa.

4.7     Manufacturing Rights.

4.8     Extension of Research
Period.

4.9     Compound Exclusivity;
Non-Compete.

5.       INTELLECTUAL PROPERTY RIGHTS

5.1     Intellectual Property
Ownership.

5.2     Filing, Prosecution and Maintenance of Patents.

5.3     Cooperation of the Parties.

5.4     Potential Assignments To
IBP.

5.5     Infringement by Third
Parties.

5.6     Third Party Claims of
Infringement.

5.7     Hold Harmless.

6.       PAYMENTS, REPORTS, AND RECORDS

6.1     Technology Access Fee
Payments.

6.2     Research Funding

6.3     Milestone Payments;
Diligence Payment.

6.4     Royalties.

6.5     Reports and Payments.

6.6     Payments by IBP to Diversa.

6.7     Records.

6.8     Late Payments.

7.       CONFIDENTIAL INFORMATION

7.1     Definition of
Confidential Information.

7.2     Obligations.

7.3     Exceptions.

7.4     Survival of Obligations.

7.5     Public Announcement.

7.6     Publication.

8.       REPRESENTATIONS, WARRANTIES, AND
DISCLAIMERS

8.1     Organization; Good Standing.

8.2     Binding
Obligation; Due Authorization; No Conflict.

8.3     No Suit.

8.4     Title to
Intellectual Property Rights.

8.5     No
Violations of Third Party Intellectual Property Rights.

8.6     No Unauthorized Use
Necessary.

8.7     Proper Assignment of
Inventions.

8.8     Disclaimers.

8.9     Limitation
of Liability.

9.       INDEMNIFICATION

9.1     Indemnification.

9.2     Procedures.

10.     TERM AND TERMINATION

10.1   Term.

10.2   Mutual Consent.

10.3   Default.

10.4   Bankruptcy.

10.5   Disposition of
Confidential Information.

10.6   Effect of Termination
or Expiration.

11.     DISPUTE RESOLUTION

11.1   Informal Dispute Resolution.

11.2   Mediation.

11.3   Court of Law.

11.4   Confidentiality.

12.     MISCELLANEOUS

12.1   Relationship of Parties.

12.2   Governing Law.

12.3   Binding Effect.

12.4   Assignment.

12.5   Notices.

12.6   Exports.

12.7   Amendment and Waiver.

12.8   Severability.

12.9   Third Parties.

12.10 Entire Agreement.

12.11 Regulatory Filings.

12.12 Force Majeure.

12.13 Withholding.

12.14 No
Trademark Rights.

12.15 Counterparts.

12.16 Titles
and Subtitles; Form of Pronouns; Construction and Definitions.

 

CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS
BEEN OMITTED AND FILES SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXHIBIT 10.21

DRUG DISCOVERY, DEVELOPMENT,
AND LICENSE AGREEMENT

             THIS DRUG DISCOVERY, DEVELOPMENT,
AND LICENSE AGREEMENT, dated and effective as
of January 6, 2001 (the “Effective Date”), is by and between DIVERSA CORPORATION, a Delaware corporation
(“Diversa”), having its principal place of business at 4955 Directors Place,
San Diego, California 92121, and INTRABIOTICS PHARMACEUTICALS,
INC., a Delaware corporation (“IBP”), having its principal place of
business at 2021 Stierlin Court, Mountain View, California 94043 (collectively,
the “Parties”).

RECITALS

             WHEREAS,
Diversa has developed proprietary technologies for the rapid discovery, development
and optimization of Compounds (as such term is defined below); and

             WHEREAS,
IBP is developing novel antibacterial and antifungal drugs for the prevention
or treatment of serious infectious diseases; and

             WHEREAS,
IBP and Diversa desire to collaborate to identify novel molecules derived from
Diversa Technology (as such term is defined below) that demonstrate efficacy
against assays that are designed to identify compounds having antibacterial or
antifungal properties; and

             WHEREAS,
as part of such collaboration, IBP and Diversa desire to use certain other of
their respective technologies to improve the discovery process for delivering
optimized lead drug candidates prior to pre-clinical testing; and

             WHEREAS,
the Parties desire to set forth herein the terms governing such collaboration.

             NOW, THEREFORE,
in consideration of the mutual covenants set forth in this Agreement, the
receipt and sufficiency of which the Parties hereby acknowledge, the Parties
hereby agree as follows:

1.          DEFINITIONS

             “Active Substructure”
shall mean the [ * ] structure that is [ * ] of a Compound or Compound
Derivative and which has been identified or confirmed against antibacterial or
antifungal screens under the Work Plan.

 

             “Affiliate”
shall mean any entity that directly or indirectly Owns, is Owned by or is under
common Ownership, with IBP, or Diversa, as the case may be, where “Owns,”
“Owned” or “Ownership” means direct or indirect possession of more than fifty
percent (50%) of the outstanding voting securities of a corporation or a
comparable equity interest in any other type of entity or such lesser amount as
constitutes control in the relevant jurisdiction.

             “Agreement”
shall mean this Drug Discovery, Development, and License Agreement.

             “Alternate”
shall have the meaning set forth in Section 3.5.

             “Annual Net Sales”
shall mean the Net Sales made within each calendar year.

             “Audited Party”
shall have the meaning set forth in Section 6.7.

             “Auditing Party”
shall have the meaning set forth in Section 6.7.

             “Committee Member”
shall have the meaning set forth in Section 3.1.1.

             “Compound” shall
mean a chemical compound that:  (1) is
initially [
* ]
during the Research Period, (2) has a [ * ] the Parties to allow [ * ] to determine whether such [
* ],
and (3) is not an Excluded Compound [ * ] with respect to such compound pursuant to
[ * ].

             “Compound Derivative”
shall mean any [ * ] of a particular Compound that has all of
the following properties:

             (1)         that [ * ]
 of such Compound; and

             (2)         the [ * ]
 of which has been [ * ] under the Work Plan as those used to identify such
Compound; and

             (3)         which was [ * ] such Compound or [ * ] of such Compound; and

             (4)         where the Active Substructure of such [ * 
] with respect to such Compound, if an Active
Substructure has [ * ] with respect to such Compound; and

             (5)         that was identified by either Party or
by both Parties together during the Research Period and [ * ]; and

             (6)         the [ * ]
 of which has been [ * ] and [ * ] in accordance with the terms of this Agreement; and

             (7)         which is not an Excluded Compound at
the [ * ] hereunder.

             “Compound Patent(s)” shall
have the meaning set forth in Section 5.2.2.

 

             “Compound Set”
shall mean, with respect to [ * ] with respect to such Compound.  A Compound Set shall not include [
* ].

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

             “CPI”
shall mean the Consumer Price Index for Urban Consumers, as published by the
United States Department of Labor from time to time, or, if such statistic is
no longer published, any similar inflation factor as may be mutually agreed to
by the Parties in writing.

             “Defaulting Party”
shall have the meaning set forth in Section 10.3.1.

             “Disclosing Party”
shall mean that Party disclosing Confidential Information under Section 7.1.

             “Dispute”
shall have the meaning set forth in Section 11.1.

             “Diversa Know-How”
shall mean all know-how, trade secrets, inventions, data, processes,
procedures, devices, methods, formulas, media and all lines, reagents,
protocols and marketing and other information, including improvements thereon,
whether or not patentable, but which are necessary or useful for the commercial
exploitation of the Diversa Patent Rights, the conduct of the research and
development activities hereunder, the development, use, or manufacture of
compounds [
* ],
the development, use, manufacture, offer for sale, sale, or import of Products,
in each case which are owned by or licensed to Diversa, with the right to
sublicense, as of the Effective Date or otherwise during the Research Period
(including the [ * ]). 
Diversa Know-How shall not include Diversa Patent Rights.

             “Diversa Patent Rights”
shall mean all patent applications and issued and subsisting patents,
including, without limitation, all provisionals, converted provisionals,
continued prosecution applications, substitutions, divisionals, continuations,
continuations-in-part, reissues, reexaminations, extensions and supplementary
protection certificates thereof, including foreign counterparts of the
foregoing owned by or licensed to Diversa, with the right to sublicense, as of
the Effective Date or otherwise during the Research Period (including the [ * ]),
which are necessary or useful to conduct research and development activities
hereunder, to develop, use, or manufacture compounds within Compound Sets, or
to develop, use, manufacture, offer for sale, sale, or import Products.

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

             “EMEA”
means the European Medicines Evaluation Agency, or any successor agency thereto
which coordinates the scientific review of human pharmaceutical products under
the centralized licensing procedure in the European Union.

             “Excluded Compound”
shall mean any chemical compound with respect to which Diversa has granted
rights or an option to obtain rights to a Third Party prior to the date upon
which IBP notifies Diversa that IBP desires to obtain a license or other right
pursuant to this Agreement such that Diversa could not grant to IBP a License
under Section 4.1 to such compound without breaching its obligations to such
Third Party.

 

             “FDA”
means the United States Food and Drug Administration, or any successor agency
thereto having the administrative authority to regulate the marketing of human
pharmaceutical products or biological therapeutic products, delivery systems
and devices in the United States.

             “Field”
shall mean use in the treatment, prevention or diagnosis of a fungal or
bacterial infection in humans.

             “FTE”
shall mean the equivalent of one full year of work on a full time basis by a
scientist or other professional (whether an employee or independent contractor
of Diversa) possessing skills and experience necessary to carry out the
research activities by Diversa contemplated by this Agreement, determined in
accordance with the Diversa’s normal policies and procedures.

             “IBP Know-How”
shall mean all know-how, trade secrets, inventions, data, processes,
procedures, devices, methods, formulas, media and all lines, reagents,
protocols and marketing and other information, including improvements thereon,
whether or not patentable, but which are necessary or useful for the commercial
exploitation of the IBP Patent Rights, the conduct of the research and
development activities hereunder, the development, use, or manufacture of compounds
within Compound Sets, the development, use, manufacture, offer for sale, sale,
or import of Products, in each case which are owned by or licensed to IBP, with
the right to sublicense, as of the Effective Date or otherwise during the
Research Period (including the six-month period of Section 4.8).  IBP Know-How shall not include IBP Patent
Rights.

             “IBP Patent Rights”
shall mean all patent applications and issued and subsisting patents,
including, without limitation, all provisionals, converted provisionals,
continued prosecution applications, substitutions, divisionals, continuations,
continuations-in-part, reissues, reexaminations, extensions and supplementary
protection certificates thereof, including foreign counterparts of the
foregoing owned by or licensed to IBP, with the right to sublicense, as of the
Effective Date or otherwise during the Research Period (including the six-month
period of Section 4.8), which are necessary or useful to conduct research and
development activities hereunder, or the development, use, or manufacture
compounds within Compound Sets, or to develop, use, manufacture, offer for
sale, sale, or import Products.

             “IBP Technology”
shall mean the IBP Know-How and the IBP Patent Rights.

             “IND”
shall mean an investigational new drug application (or equivalent application
outside of the United States).

             “IND-Enabling Toxicology Studies”
shall mean toxicology studies as required or suggested by the FDA (or
equivalent agency outside of the United States) for filing of an IND.

             “Indemnitee”
shall have the meaning set forth in Section 9.2.

             “Indemnitor”
shall have the meaning set forth in Section 9.2.

             “Independent Expert”
shall have the meaning set forth in Section 4.6.1.

             “Industry Expert” shall
have the meaning set forth in Section 3.2.4.

             “JAMS”
shall have the meaning set forth in Section 11.2.

 

             “Lead Compound”
shall mean a particular compound in a particular Compound Set that is selected
by IBP pursuant to the terms of this Agreement for commencement of preclinical
and clinical development activities. 
Such activities include, but are not limited to, [ * ].

             “License”
shall have the meaning set forth in Section 4.1.

             “License Period”
shall have the meaning set forth in Section 4.3.

             “Major Market”
shall mean any one of the following countries: 
the [ * ].

             “Mediation Rules”
shall have the meaning set forth in Section 11.2.

             “MHW”
the Ministry of Health and Welfare agency of Japan or any successor agency
thereto which coordinates the scientific review of human pharmaceutical products
under the licensing procedures in Japan.

             “Net Sales”
shall mean, with respect to each given country, the gross amount invoiced for
sales of Products by or on behalf of a Party, its Affiliates or Sublicensees to
any Third Party (whether an end-user, a distributor or otherwise), exclusive of
inter-company transfers or sales to or from Affiliates or Sublicensees, less
the following deductions from such gross amounts only to the extent reasonable
and customary, and which are actually incurred and included in gross amounts
invoiced:

                           (a)         credits or
allowances actually granted
for damaged products, returns or rejections of product and retroactive price
reductions;

                           (b)        freight, postage,
shipping, customs,
duties and insurance charges;

                           (c)         sales, value added
or similar taxes
measured by the billing amount, when included in billing;

                           (d)        charge back payments and
rebates granted
to managed health care organizations or to federal, state and local
governments, their agencies, and purchasers and reimbursers or to trade
customers;

                           (e)         commissions paid
to Third Parties other
than sales personnel and sales representatives or sales agents by such Party,
its Affiliates or Sublicensees; and

                           (f)         rebates (or
equivalents thereof)
granted to or charged by national, state or local government authorities in
countries other than the United States and actually paid by such Party, its
Affiliates or Sublicensees in accordance with the applicable laws, regulations
or rules of such countries.

             If a Product is sold in the form of
a combination product, Net Sales for such combination product shall be
calculated by multiplying actual Net Sales of such combination product by the
fraction A/(A+B) where: A is the invoice price of the Product contained in the
combination product if sold separately by a Party, its Affiliate, or
Sublicensee; and B is the invoice price of any other active component or
components in the combination product if sold separately by such Party, its
Affiliate, or Sublicensee.  If the
Product is sold in the form of a combination product for which the Net Sales
cannot reasonably be calculated using such formula, then the Net Sales for
purposes of determining royalty payments shall be negotiated in good faith and
agreed upon in writing by the Parties based on the relative value contributed
by each component.

 

             “Non-Defaulting Party”
shall have the meaning set forth in Section 10.3.1.

             “Notice of Default”
shall have the meaning set forth in Section 10.3.1.

             “Notification”
shall have the meaning set forth in Section 3.2.3.

             “Party”
shall mean Diversa or IBP, as applicable.

             “Patent Rights”
shall mean Diversa Patent Rights or IBP Patent Rights, as applicable.

             “Performance Default”
shall have the meaning set forth in Section 10.3.1.

             “Product”
shall mean a commercial product containing, consisting of, based on, or
incorporating any compound in a Compound Set for use in the Field.

             “Program Inventions” shall
mean all inventions, discoveries, developments and improvements, whether or not
patentable, conceived of by employees or consultants of either Party, or
jointly by employees and consultants of both Parties, in the course of the
activities conducted under the Work Plan during the Research Period and if
applicable, [ * ].

             “Progress Report”
shall have the meaning set forth in Section 3.7.

             “Project Leader”
shall have the meaning set forth in Section 3.1.3.

             “R&D Data”
means all data, including, but not limited to, all in vitro and in vivo data,
structure elucidation data, the medicinal chemistry efforts, and any other information
obtained or developed in the course of performance of the R&D Program.

             “R&D Program”
shall mean the research and development program to be conducted by Diversa and
IBP pursuant to Section 2, as more fully described in the Work Plan.  The R&D Program with respect to a given
compound in a Compound Set shall end upon the earliest of (i) the date that an
investigational new drug application (or equivalent application outside of the
United States) is filed for a Product containing such compound or (ii) the date
that any License with respect to such compound terminates.

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

 

             “Regulatory Approval”
shall mean any approvals (including supplements, amendments, pre- and
post-approvals and price approvals), licenses, registrations or authorizations
of any national, supra-national (e.g., the European Commission or the Council
of the European Union), regional, state or local regulatory agency, department,
bureau, commission, council or other governmental entity, necessary for the
manufacture, distribution, use or sale of Products in a regulatory
jurisdiction.

             “Representation Default”
shall have the meaning set forth in Section 10.3.1.

             “Research Period”
shall mean the period beginning on the Effective Date and ending upon the third
anniversary of the Effective Date, unless extended by mutual written agreement
of the Parties in accordance with the terms of this Agreement.

             “Reserved Set”
shall have the meaning set forth in Section 4.4.

             “Reversion License”
shall have the meaning set forth in Section 4.6.1.

             “Royalty Period”
shall mean, with respect to each Product in any country, every calendar
quarter, or partial calendar quarter, commencing with the first arms-length,
commercial sale of such Product in such country and ending upon the later to
occur of (a) the date all Valid Claims included in patents covering Program
Inventions under the license of Section 4.1.1 covering a Product (or any
associated Lead Compound contained therein) in that country have expired, or
(b) the date all Valid Claims included in the Diversa Patent Rights covering a
Product (or any associated Lead Compound contained therein) in that country
have expired, or (c) twelve (12) years from the date of the first arms-length
commercial sale in that country of the applicable Product.

             “RMC”
shall have the meaning set forth in Section 3.1.1.

             “Senior Executives”
shall have the meaning set forth in Section 11.1.

             “Staffing Level”
shall have the meaning set forth in Section 2.2.1.

             “Steering Committee”
shall have the meaning set forth in Section 3.1.2.

             “Sublicensee”
shall mean any Third Party licensed by IBP or its Affiliates to make, use
(except where the implied right to use accompanies the sale to the Third Party
of any Product by IBP or its Affiliates or Sublicensees), sell, import, export,
advertise, promote and otherwise commercialize any Product.

             “Territory”
shall mean the world.

             “Third Party”
shall mean any individual, partnership, joint venture, corporation, trust,
estate, unincorporated organization, government or any department or agency
thereof, or any other entity other than Diversa or IBP or an Affiliate of
Diversa or IBP.

 

             “Valid Claim”
shall mean a claim included in (a) any issued patent, which, with respect to
any pending claim, has not been irrevocably abandoned or held to be
unpatentable by a court or other authority of competent jurisdiction in a
proceeding which is not reversed, not appealable and not appealed, or, with
respect to any issued claim, has not been held invalid by a decision of a court
or other authority of competent jurisdiction which is not reversed, not
appealable and not appealed or (b) any patent application within the Patent
Rights of either Party, so long as such application is being prosecuted and the
claim in question has not been abandoned by the owner Party of the application
(and provided that such patent application has not been pending for more than
seven (7) years in the country in question).

             “Work Plan”
shall mean the work plan that outlines the research and development activities
to be performed by Diversa and IBP hereunder, including identification of
deliverables from IBP and Diversa, which is set forth in a letter agreement
between the Parties of even date herewith. 
In case of any discrepancies between the terms of the Work Plan and the
terms of this Agreement, the terms of this Agreement shall prevail.

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

2.          R&D PROGRAM

             2.1        R&D Program. The scope of the collaboration between
IBP and Diversa during the
Research Period will be the areas of discovery, optimization, and development
of Compound Sets in the Field, as well as all other aspects of the R&D
Program, being defined in more detail in the Work Plan, which is hereby
incorporated by reference into this Agreement. 
The Parties shall work together to identify compounds having potential
use in the Field, and intend that IBP may obtain exclusive rights to such
Compound Sets, subject to certain diligence and payment obligations as provided
in this Agreement.

             2.2        Research and Development Activities.

                           2.2.1    Staffing
Level.  In carrying out the R&D
Program, Diversa shall devote [ * ] FTEs per year during the Research Period (the
“Staffing Level”), and IBP shall pay Diversa for the services of such FTEs as
set forth herein.  Diversa shall not be
obligated to utilize more than [ * ] FTEs per year during the Research Period in
carrying out the R&D Program unless the Parties otherwise mutually
agree.  If IBP chooses to exercise its
option under [ * ], the Parties shall mutually agree to the number of FTEs dedicated to the
development of Compound Derivatives during the specified [ * ].  The FTE
rate applicable at the time of IBP’s exercise shall be the FTE rate for such
mutually agreed FTEs.  Notwithstanding
the foregoing or anything contained herein to the contrary, the Staffing Level
shall remain at [ * ] FTEs per year during the Research Period, unless the Parties mutually
agree in writing to a change in the Staffing Level.  Following the Research Period, if IBP requests that Diversa
perform research services hereunder with respect to a compound within a
Compound Set subject to a License (e.g.,
for supply of a Compound following the Research Period where such Compound is a
member of a formerly Reserved Set), Diversa hereby agrees to discuss such
request in good faith with IBP; provided, however, that Diversa shall not be
obligated to agree to perform such services, and IBP shall be required to pay
Diversa for any such services performed by Diversa FTEs at Diversa’s then
applicable FTE rate.

                           2.2.2    Commercially
Reasonable Efforts. Diversa and IBP shall use commercially reasonable efforts to perform the
tasks for which each Party is responsible as set forth in the Work Plan, and to
provide the facilities, materials, and equipment necessary to perform the
R&D Program under the Work Plan.

 

                           2.2.3    Allocation
of Responsibility. While the Parties intend to work collaboratively under the auspices of
the RMC to specify the Party or Parties with responsibility for performing the
specific research and development activities under the R&D Program, IBP
shall be responsible for performing (or, subject to the limitations herein,
arranging for Third Party subcontractors to perform) all research and
development activities under the R&D Program that are not specified to be
performed by Diversa. IBP shall be responsible for funding all research and
development activities conducted hereunder, including those by Diversa or by
IBP and by permitted Third Parties, if any, designated to conduct research
and/or development activities in support of the R&D Program.

             2.3        Limited Use of Materials
Provided by Diversa. IBP agrees that it will use materials provided from Diversa’s
environmental libraries pursuant to the Work Plan only for (i) screening such
materials in connection with the R&D Program against assays selected by the
RMC and/or (ii) conducting a medicinal chemistry program with respect to any
particular Compound within such materials, and IBP agrees that it will not use
such materials for any other purpose. 
IBP may not transfer such materials to any Affiliate, Sublicensee or
Third Party subcontractor unless: (i) IBP notifies Diversa, through the RMC, of
such transfer and (ii) IBP executes a agreement that governs the transfer of
such materials that provides ownership of all inventions made or discovered
using such materials to be allocated in a manner substantially consistent with
the provisions of Article 5, as well as an obligation of confidentiality
substantially similar to those set forth in Article 7, and a limitation on use
of such materials to the performance of work under this Agreement.  IBP and Diversa will separately inform the
RMC in writing of the assays to be used in its screening of such materials
prior to commencing such screening.  IBP
will provide Diversa with regular written reports identifying the extracts and
assays used in such screening and the results of such screening.  Diversa will provide IBP with regular
written reports identifying the materials and assays used in such screening and
the results of such screening.  IBP will
employ a system to track the identity and use of such materials and to ensure
that such materials are maintained separately from any other materials used by
IBP (or any Affiliate of IBP, its Sublicensee or Third Party subcontractor) and
will provide Diversa with a detailed description of such system prior to the
delivery of any materials by Diversa to IBP under the Work Plan.

             2.4        Records  During the
Research Period and if applicable, the six-month period of Section 4.8, and
continuing for a period of [ * ] thereafter, and/or as required by regulatory bodies, Diversa and IBP
shall maintain records of the R&D Program (or cause such records to be
maintained), both in notebooks and electronic forms that are generated for the
R&D Program that are separate from any Third Party information, in sufficient
detail and good scientific manner as will properly reflect all work done in the
R&D Program and results achieved in the performance of the R&D
Program.  During the Research Period and
continuing for a period of    [ * ] thereafter, each Party shall allow the other Party
to have reasonable access to all pertinent R&D Data generated by or on
behalf of such Party with respect to any Lead Compound and Product.  This retention of records may be extended if
there is a legal proceeding pending (i.e.,
court action, or United States interference or opposition in any country
involving Diversa’s or IBP’s intellectual property applicable to information
within such records) where those records are reasonably required and a written
request with the reason is provided to the other Party.  Nothing herein shall require, or be
construed to require, that either Party disclose to the other Party any of its
Know-How, except to the extent necessary for the development and/or
commercialization of Lead Compounds and Products.

 

             2.5        Permitted Affiliates, its Sublicensees and
Third Party Subcontractors. The Parties contemplate that either Party may have certain of the work
to be performed by such Party in support of the R&D Program be performed by
an Affiliate of such Party, or its Sublicensees, or any Third Party
subcontractor hired for the sole purpose of performing such work, in accordance
with the terms set forth herein so long as any inventions or discoveries made
or discovered by an Affiliate of such Party, or its Sublicensees, or any Third
Party subcontractor during the course of performing such work shall be owned by
the appropriate Party as set forth in Article 5.  Such Affiliate, Sublicensee or Third Party subcontractor may be
involved in the following research and development activities: developing and
performing assays, manufacturing Compound Derivatives and the Lead Compound,
and running toxicology and stability studies. 
Each Party shall remain primarily responsible for the work to be
performed by such Party, even if such work is performed by an Affiliate,
Sublicensee, or Third Party subcontractor in support of the R&D Program
under this Agreement.  Either Party
shall be permitted to involve Third Party subcontractors, its Sublicensees
and/or its Affiliates with specific aspects of the R&D Program.  In all events, however, the Party delegating
any aspects of the R&D Program to Affiliates, Sublicensees or Third Party
Subcontractor shall remain responsible hereunder for the activities of such
Affiliates, Sublicensees, or Third Party subcontractors.

3.          COMMITTEES; SELECTION OF COMPOUNDS AND COMPOUND DERIVATIVES

             3.1        Organization.

                           3.1.1    Research
Management Committee. IBP and Diversa shall establish a research management committee (the
“RMC”) comprised of [ * ] persons (each, a “Committee Member”), [ * ]
 of whom shall be appointed by IBP and [ * ] of whom shall be appointed by Diversa.  The RMC may invite other persons, including
representatives of the Parties, to participate in meetings of the RMC, as
appropriate, subject to appropriate obligations of confidentiality and non-use
and provided that such persons shall not have the right to vote as Committee
Members.  The Parties may mutually agree
to increase the number of Committee Members on the RMC if they determine that
such increase would allow individuals with appropriate expertise to participate
in the RMC, provided that after implementation of any increase in the number of
Committee Members, each Party shall have an equal number of representatives on
the RMC.

                           3.1.2    Steering
Committee. In addition, IBP and Diversa shall establish a steering committee (the
“Steering Committee”), consisting of the Chief Executive Officer of Diversa and
the Chief Executive Officer of IBP, whose role shall be to oversee the
functioning of the RMC and to resolve disputes within the RMC as described in
Section 3.8.

 

                           3.1.3    Project
Leaders. Diversa and IBP shall each name one of its RMC members to serve as a
co-director of the R&D Program (each, a “Project Leader”). The Project
Leaders shall oversee the implementation of the decisions and conclusions of
the RMC with respect to the execution of the Work Plan, and address the
day-to-day issues arising under the R&D Program.

             3.2        Responsibilities.
 The purpose of the RMC shall be to plan,
coordinate, and direct the research efforts related to the R&D Program and
to ensure the execution of the Work Plan. 
Responsibilities to effect this purpose include, but are not limited to,
the following:

                           3.2.1    Proposing
Amendments to Work Plan. Either Party’s representatives on the RMC shall be permitted to propose
amendments to the Work Plan.  All such
proposals to amend the Work Plan shall be in writing and delivered to each
Committee Member prior to the RMC’s approval of such proposed
amendment(s).  Any material amendment(s)
to the Work Plan shall be approved in writing by all Committee Members at a
meeting of the RMC (or by written consent of all Committee Members) and,
following approval of such amendment(s) by the RMC, shall be included in the
minutes of such meeting.  Specifically,
any proposed change to the Staffing Level shall first be unanimously approved
by the Committee Members and submitted to both Parties for written approval; however,
if the RMC cannot agree to such a change to the Staffing Level, such issue
shall be presented to the members of the Steering Committee as set forth in
Section 3.8.  Notwithstanding anything
contained herein to the contrary, the Staffing Level shall not be changed
during the Research Period absent the written approval of both Parties.

                           3.2.2    Review
of Reports. At least quarterly, or at such other more frequent intervals as
determined by the RMC, the RMC shall deliver to Diversa and IBP reports
disclosing a complete compilation of all R&D Data and revisions to the Work
Plan, as appropriate.  The Parties will
review such R&D Data to determine progress made on the R&D
Program.  Reports prepared by the RMC and
delivered to each Party shall be subject to the confidentiality provisions
contained herein.

                           3.2.3    Designation
of Compound. If, as part of the research activities hereunder in accordance with the
Work Plan during the Research Period, either Party invents or discovers a
compound (i) that has not been derived from an existing Compound or from
knowledge of the structure of an existing Compound and (ii) the structure of
which has been elucidated as part of the Work Plan, as soon as practicable
following the elucidation of the chemical structure of such compound sufficient
to allow Diversa to determine whether such structure corresponds to an Excluded
Compound (but in no event later than [ * ] after such event), such Party shall notify the RMC
(as well as Diversa, if IBP is such Party) in writing of such compound’s
structure to enable Diversa to determine whether such compound is an Excluded
Compound.  Within [ * ] following Diversa’s receipt of the structure
information with respect to such compound, Diversa shall notify the RMC as well
as IBP in writing as to whether or not such compound is an Excluded Compound
(the “Notification”).  If such compound
is an Excluded Compound, then such compound shall not be deemed to be a
Compound hereunder.  If such compound is
not an Excluded Compound, then such compound shall be designated as a Compound
hereunder and shall comprise the first compound within the Compound Set
associated with such Compound.

 

                           3.2.4    Designation
of Compound Derivatives.

                                     
   (a)         If, as part of the research activities hereunder in accordance with the
Work Plan, either Party invents or discovers a compound (i) that has been
derived from an existing Compound or from knowledge of the structure of an
existing Compound, either by [ * ], or by other means in the course of performing research pursuant to the
Work Plan, including without limitation Compound Derivatives and (ii) the
structure of which has been elucidated as part of the Work Plan, as soon as
practicable following the elucidation of the chemical structure of such
compound sufficient to allow Diversa to determine whether such structure
corresponds to an Excluded Compound (but in no event later than [ * ] after such event), such Party shall notify the RMC
(as well as Diversa, if IBP is such Party) in writing of such compound’s
structure to enable Diversa to determine whether such compound is an Excluded
Compound.  Within [ * ] business days following Diversa’s receipt of the
structure information with respect to such compound, Diversa shall notify the
RMC (as well as IBP) in writing as to whether such compound is an Excluded
Compound.  If such compound is not an
Excluded Compound and the RMC agrees that such compound otherwise satisfies the
definition of a “Compound Derivative” with respect to the Compound from which
such compound was originally derived, then such compound shall be deemed to be
a Compound Derivative of such Compound and shall comprise an additional
compound within the Compound Set associated with such Compound.  If the RMC cannot agree whether such
compound satisfies the definition of a “Compound Derivative,” or more
specifically, if the RMC cannot determine the structure of the Active
Substructure of the Compound that is associated with the Compound Set, and
therefore cannot determine whether a compound is a Compound Derivative in such
Compound Set within [ * ] days after Diversa has notified the RMC that the compound is not an
Excluded Compound, then the Parties shall engage a mutually acceptable
independent expert having a Ph.D. or equivalent degree in organic chemistry,
with at least ten (10) years of experience in performing medicinal chemistry
within the pharmaceutical industry, to determine whether the compound should be
deemed to be a Compound Derivative of such Compound (an “Industry
Expert”).  The Parties shall select such
Industry Expert within [ * ] after the expiration of the foregoing [ * ] period. Within [ * ] of its selection, the Industry Expert shall confer
with the Parties for no longer than [ * ] after he or she receives information from each
Party supporting its position on the structure of the Active Substructure or
whether the compound should be deemed a “Compound Derivative” and make his or
her determination.  Each Party shall
thereafter be bound by the decision of the Industry Expert as to whether the
compound is deemed a Compound Derivative. 
The RMC shall maintain a document identifying the Compound Sets of this
Agreement and amend such document from time to time with the addition of any
new Compound Sets as identified during the Research Period (including, if
applicable, any Compound Derivatives identified during the [ * ] period of Section 4.8), with a copy of such
document, as amended from time to time being distributed to each Party within [ * ] following the end of the Research Period or if
applicable, the six-month period of Section 4.8.

                                     
   (b)         However, if such compound is not an Excluded Compound and the RMC or the
Industry Expert (whichever is applicable) determines that the compound does not
otherwise satisfy the definition of a “Compound Derivative” with respect to the
Compound from which such compound was originally derived, then such compound
shall be deemed to be a new Compound with respect to which IBP shall be
entitled to exercise its rights under Section 3.2.3 and shall comprise the
first compound within a new Compound Set associated with such new Compound.

 

                           3.2.5    Compound
Supply.  As soon as a Compound has been
designated under the procedures of Section 3.2.3 above, the RMC shall convene
to decide the most efficient route to produce sufficient quantities of such
Compound, not to exceed [ * ] of such Compound, to give IBP the opportunity to perform the minimum
studies required to determine IBP’s interest in obtaining a License to a
Compound Set associated with such Compound. 
If the RMC determines that the most efficient route to make such
Compound is via [ * ], the RMC shall so notify IBP in writing, and IBP shall be responsible
for producing sufficient quantities of the Compound as reasonably specified by
the RMC.  However, if the RMC determines
that the most efficient route to make such Compound is via [ * ], the RMC shall so notify Diversa in writing, and
Diversa shall be responsible for producing and delivering to IBP sufficient
quantities of the Compound via [ * ] as reasonably specified by the RMC.  IBP shall have a maximum of [ *
] from manufacture or receipt (as applicable) of such
applicable quantities of the Compound to carry out such studies.  If, within such [ * ] period, IBP determines that such Compound is of
interest to IBP, IBP shall promptly notify Diversa in writing as to IBP’s
desire to obtain a License to such Compound Set associated with such
Compound.  Subject to the terms and
conditions of this Agreement, upon such written notification, if such Compound
is not an Excluded Compound at such time, Diversa shall be deemed to grant a
License to the Compound Set with respect to such Compound and Products based
thereon as provided in Section 4.1.  If
Diversa is not so notified within such [ * ] period, however, IBP shall thereafter have no right
to License such Compound or the Compound Set with respect to such Compound.

             3.3        Meetings of the RMC and
Steering Committee. The RMC shall meet in person at least once every calendar quarter during
the Research Period and thereafter during the performance of the R&D
Program, alternating the sites of such in-person meetings between Diversa’s
facilities in San Diego, California and IBP’s facilities in Mountain View,
California, or at such other times and locations as the RMC determines.  Draft minutes for each meeting of the RMC
shall be circulated within [ * ] following each meeting of the RMC. 
Such minutes shall include a summary of the matters discussed, decisions
made, conclusions, and actions agreed upon by the RMC.  The responsibility for preparing such
meeting minutes shall alternate between the Project Leaders of IBP and Diversa,
and such minutes will not be finalized until the Project Leader that did not
prepare such minutes reviews and confirms the accuracy of such minutes, which
shall take place within [ * ] of receipt of the minutes.  The
Steering Committee shall meet at such times, with such frequency, and at such
locations as its members may agree from time to time.

             3.4        Requirements for Action. At each RMC meeting, at least two Committee Members
appointed by each Party shall constitute a quorum of the RMC, and decisions
shall be made by unanimous vote.  The
Committee Members or Alternates of IBP shall collectively have one (1) vote on
the RMC, and the Committee Members or Alternates of Diversa shall collectively
have one (1) vote on the RMC.

             3.5        Members. 
 The initial
Committee Members of the RMC shall be as follows:

                           Diversa
Representatives             IBP Representatives

                           [ * ]          
                                     [
* ]

 

             A Party may change one or more of
its Committee Members, provided, however, that such person is technically
qualified for the position as reasonably demonstrated by that Party.  All appointments and withdrawals of
appointment shall be made by written notice to the other Party.  Each Party may designate in writing an
alternate Committee Member (“Alternate”) with at least three (3) days prior
notice to the other Party if the designated Committee Member cannot attend a
meeting, provided, however, that such Alternate is technically qualified for
the position as reasonably demonstrated by that Party.  Any action taken with approval of an
Alternate shall be as valid as if taken with the approval of the designated
Committee Member.

             3.6        Visits to Facilities.  Committee
Members and their designated representatives shall have reasonable opportunity
to visit the facilities of each Party (and such Party’s Affiliates, its
Sublicensees and permitted Third Party subcontractors hereunder) where
activities under this Agreement are in progress, as reasonably required to
execute the Work Plan, during normal business hours on a mutually agreeable
date.  Each Party shall bear its own
expenses in connection with such site visits. 
Committee Members and their designated representatives shall be obligated
to keep any and all information that such Committee Member or their designated
representatives receives or reviews during such visits confidential, whether or
not such information relates to the research and development activities
overseen by the RMC under this Agreement. 
Each Party shall exert reasonable efforts to limit access by any
permitted visitor to its facility to information that is unrelated to the
Parties’ performance under this Agreement. 
Committee Members and their designated representatives shall have the
right at any time during the visit to ask questions of and receive answers from
personnel regarding their activities and findings under this Agreement.

             3.7        Information Sharing.  Each Party
shall provide to the RMC information that is relevant and necessary to make
decisions regarding the R&D Program and demonstrate efforts in furthering
the research and development activities under the Work Plan in the form of a
report (a “Progress Report”) no fewer than [ * ] prior to a scheduled RMC meeting.  Each Progress Report shall, at a minimum,
provide the status of any research, preclinical, and clinical development
activities for compounds within a Compound Set and summarize any outstanding
material issues associated with such development efforts and the likelihood of
and timetable for commercialization of a Product based on any such compounds.

             3.8        Dispute Resolution.  If the RMC
and Program Directors fail to reach agreement upon any matter, the dispute will
be referred to the Steering Committee, which shall attempt to resolve such
disputes informally.  If such disputes
cannot be resolved informally by the Steering Committee, the dispute will be
resolved in accordance with the procedures set forth in Article 11.

             3.9        Expenses.  Diversa and IBP shall each bear
all expenses of their respective RMC and Steering Committee members related to
their participation on the RMC, attendance at RMC meetings, participation on
the Steering Committee, and attendance at Steering Committee meetings.

4.          GRANT
OF RIGHTS AND REVERSION OF RIGHTS

             4.1        License.

                           4.1.1    Subject to the
terms and conditions of this
Agreement, including, without limitation, [ * ], with respect to each Compound Set for which IBP
elects to take a license pursuant to Section 3.2.5, Diversa hereby grants to
IBP an exclusive, worldwide, milestone-bearing, royalty-bearing license (the
“License”) under the Diversa Technology to the Compound Set to the extent
necessary or useful to develop, make, have made, use, sell, offer for sale and
import Products in the Territory and within the Field. This License also
includes the right to identify and develop new compounds that are Compound
Derivatives of members of such a Compound Set by medicinal chemistry; provided,
however, that the license to identify and develop new compounds that are
Compound Derivatives of members of such a Compound Set [ * ]. Subject to Section 4.3, the duration of the
License under this Section 4.1.1 shall be perpetual.

                           4.1.2    Subject to the
terms and conditions of this
Agreement, including, without limitation, [ * ], Diversa hereby grants to IBP a nonexclusive,
fully-paid, worldwide license to use a [ * ] and an exclusive, fully-paid, worldwide license to [ * 
], in each case, solely to manufacture or have
manufactured a Compound or Product in the Territory and within the Field,
provided [ * ] (i) direct the synthesis of a compound included within a Compound Set or
a Product and (ii) (A) were identified or otherwise known or available as part
of the R&D Program [ * ], or, (B) with respect to those Compound Sets opted to be carried into
the [ * ], were identified or otherwise known or available as part of the R&D
Program [ * ]; and provided further that such licenses shall not include any rights to
genetically modify any [ * ].  For clarity, the period of
identifying [ * ] for all compounds within a Compound Set that are not opted to be carried
into the [ * ] expires at the end of the Research Period; the period for identifying [ * ]
 for all compounds within a Compound Set that is
opted for further development during the [ * ] expires at the end of such period.  If a License under Section 4.1.1 terminates,
then the licenses under this Section 4.1.2 shall also terminate.

                           4.1.3    Diversa hereby
grants to IBP (i) a nonexclusive,
fully-paid, perpetual license to practice any and all Program Inventions that
are not covered by [ * ] (or applications related thereto, so long as such applications are being
prosecuted) made by IBP employees or consultants, either alone or jointly with
Diversa employees or consultants, and [ * ], and (ii) a nonexclusive, fully-paid, perpetual
license to practice any and all Program Inventions made by IBP employees or
consultants either alone or jointly with Diversa employees or consultants, for
IBP to carry out its responsibilities in accordance with this Agreement;
provided however, that the license granted in this Section 4.1.3 shall not
include a license to practice any Diversa Patent Rights.  For the sake of clarity, [ * ].

             4.2        Rights to Sublicense.  Under each
License, IBP shall have the right to grant sublicenses, through multiple tiers
of sublicenses, provided that any such sublicense shall expressly provide for
the Sublicensee to be bound by obligations consistent with those provided in
this Agreement.  If the Sublicensee
receives materials provided by Diversa under Section 2.3 or if the Sublicensee
performs work under the Work Plan as set forth in Sections 2.1 and 2.5, such
sublicense shall provide for rights necessary for the Sublicensee to conduct
and complete such activities on behalf of IBP in a manner consistent with the
terms provided in this Agreement.  IBP
shall provide Diversa with prompt written notice of each sublicense agreement,
as well as a copy of such sublicense agreement, after it is granted, provided
that IBP may redact from such copy any terms not  necessary to confirm compliance with this Section 4.2.

 

             4.3        License Period.  The term of
the License with respect to each Compound Set, other than a Reserved Set, shall
continue in force for the period (the “License Period”) ending on the earliest
to occur of:

                                     
   (a)         the
date IBP notifies Diversa that IBP does not intend to proceed with further
development of [ * ] in accordance with the Work Plan, such notice to be made promptly after
IBP makes such determination; or

                                     
   (b)         the
date IBP notifies Diversa that IBP does not intend to continue to commercialize
Product(s) based upon [ * ], such notice to be made promptly after IBP makes such determination; or

                                     
   (c)         expiration
of [ * ] following IBP’s election to obtain a License pursuant to Section 3.2.5
to such Compound Set if IBP has not previously initiated [ * ] in the Compound Set, provided that such [ * 
] time frame shall be extended (1) if [ * ], based on available data, to conduct additional lead
optimization studies to select the [ * ], (2) if unexpected problems arise during
exploratory toxicology studies prior to [ * ] that necessitate the replacement of the [ * ]
 with another compound in the Compound Set, (3) if [ * ] has not [ * ]
 under the Work Plan during the [ * ] or (4) if situations arise where [ * ]
 time frame shall be extended; or

                                     
   (d)         expiration
of [ * ] following IBP’s election to obtain a License pursuant to Section 3.2.5
to such Compound Set if IBP has not previously filed an investigational new
drug application with the FDA (or equivalent application with an equivalent
agency outside of the United States), or sought approval from an Institutional
Review Board for initiation of human testing with respect to [ * ], provided that such thirty-six (36) month time
frame shall be extended if such event has not occurred for reasons outside of
IBP’s reasonable control, for example, but not limited to, (1) if [ * ] during development, (2) if [ * 
], or (3) if [ * ]; or

                                     
   (e)         any
date prior to Regulatory Approval of a Product based upon a compound in such
Compound Set upon which IBP, its Affiliate(s), and/or Sublicensee(s) (as
applicable) cease(s) to use commercially reasonable efforts to develop a
Product associated with any compound within such Compound Set; or

 

                                     
   (f)         any
date prior to commercialization of a Product containing or based upon a
compound within such Compound Set, (i) if [ * ], its Affiliate(s), and/or Sublicensee(s) (as
applicable) [ * ] with respect to such Compound Set as set forth in the Work Plan or (ii)
upon which [ * ], its Affiliate(s), and/or Sublicensee(s) (as applicable) [ * ]
 such Product unless, in the case of clause (ii),
after such date [ * ] continues to spend at least [ * ] basis to
[ * ] of such a Product and [ * ] as set forth in the Work Plan
demonstrating that [ * ] is continuing, at this level of funding, to [ * ], 
[ * ] with respect to a compound within such Compound Set and [ * ] with respect to a
compound within such Compound
Set; or

                                     
   (g)        the
date that IBP notifies Diversa in writing that it waives its rights under the
License as to the Compound Set; or

                                     
   (h)       
expiration of the applicable Royalty Period(s) with respect to the Product(s)
associated with such Compound Set; or

                                     
   (i)         the
date that a Party terminates the License for such Compound Set pursuant to
Section 10.3 due to a Default by the other Party.

             4.4        Reserved Sets.  During the
Research Period, IBP shall have the right to obtain a License with respect to
as many Compound Sets as it identifies as being of interest to it pursuant to
Section 3.2.4, subject to the provisions of Section 4.3 which provide for
termination of the License Period for a given Compound Set if IBP [ * ] of compounds within the associated Compound
Set.  The Parties recognize that IBP [ * ] with respect to other Compound Sets.  Accordingly, IBP may elect to [
 * ] such Compound Set, by notifying Diversa in writing
at the time [ * ] (each, a “Reserved Set”).  IBP
may not have a License to more than [ * ].  For each
compound within a Reserved Set, IBP may continue to [ * ] at the following times following its election to
take a License for such Reserved Set:  

	[ * ]	[ * ]
	[ * ]	[ * ]
	[ * ]	[ * ]

IBP
shall not be obligated to [ * ] with respect to a Reserved Set pursuant
to this Section 4.4 [ * ] at any time after IBP [ * ]
with a [
* ] below, as certified by IBP in a written notice to Diversa that
IBP has [
* ].  After such written
notice is received by Diversa, such Compound Set shall no longer be deemed to
be a Reserved Set and the obligations under [ * ] with respect to such
Compound Set shall [ * ] as if the [ * ], provided that Diversa
shall be permitted to promptly request a reasonable amount of information from
IBP to [
* ],
which information IBP shall use its commercially reasonably efforts to supply
to Diversa promptly on written request. 
However, after such notice is provided to Diversa, the [
* ]
for such Compound Set shall [ * ] if any of the events described therein
occurs.  If IBP does not (a) [
* ]
within [
* ]
with respect thereto and (b) [ * ], then [ * ] with respect to such
Reserved Set [ * ]. 
IBP shall not be entitled to re-designate a Compound Set as a Reserved
Set (i) after [ * ] thereto pursuant to the foregoing
sentence or (ii) following [ * ] of such Reserved Set as specified in this
Section 4.4.

 

             4.5        IBP Diligence Obligations. IBP shall have the sole and absolute discretion to
make all decisions relating to marketing and other commercialization activities
with respect to any Compound, compound within a Compound Set or any Product,
provided that IBP may delegate the conduct and completion of such activities to
its Affiliates, its Sublicensees, or any Third Party subcontractors, subject to
the terms of this Agreement.  However,
notwithstanding the foregoing or anything to the contrary contained herein,
each License to a Compound Set that is not a Reserved Set is expressly subject
to (i) IBP’s continuing to use commercially reasonable efforts consistent with
standards typically made by a [ * ] to proceed with the development of a Lead Compound
in accordance with the Work Plan and (ii) following commercialization of a
Product associated with such Lead Compound, IBP’s continuing to use
commercially reasonable efforts consistent with standards typically made by a [ * ] to market and sell the Product.  In the event that IBP no longer wishes t
o
use such efforts, IBP shall promptly notify Diversa in writing of the same, and
the License with respect to such Compound Set shall immediately terminate in
accordance with the terms of this Agreement. 
In the event that Diversa believes that IBP is no longer using such
efforts with respect to a Compound Set, then Diversa shall promptly notify IBP
in writing of the same, and the Parties shall discuss such failure during the
following [ * ].  If Diversa, after such [ * ] day period,
believes that IBP has not remedied its
failure to use such efforts, Diversa shall so notify IBP in writing, and IBP
may then exercise its rights under Section 10.3 as a Defaulting Party
thereunder to cure such default prior to Diversa’s terminating the License to
such Compound Set.  If, within the
period specified in such notice, IBP has not cured such default with respect to
such Compound Set, the License to such Compound Set shall immediately
terminate.

             4.6        Reversion of Rights to Diversa.

                           4.6.1    If the
License Period with respect to the License to a Compound Set expires pursuant
to the terms of this Agreement, including, without limitation, pursuant to the
reasons set forth in Section 4.4 above, IBP shall have [ * ] and, at Diversa’s written request, shall transfer
to Diversa or destroy all Confidential Information relating to the Compound Set
(regardless of which Party generated such Confidential Information) within [ * ] after such expiration; provided, however, that IBP
may retain one copy of such Confidential Information for the sole purposes of
use in any litigation resulting from this Agreement or the activities
undertaken pursuant to this Agreement. 
Upon the expiration of the License to a Compound Set, the Parties shall
promptly initiate and continue negotiations, in good faith, for [ * ] to establish the terms of an [ * 
] (the “Reversion License”).  Specifically, the Parties shall negotiate
the [ * ] for such Reversion License based on, among other things, the [ * ]
 created (in whole or in part) by [ * ], the [ * ] of compounds
within such reverted Compound Set or
Product based on such Compound Set, and [ * ] such Compound Set or Product based therein.  If the Parties cannot agree to the terms of
the Reversion License within the [ * ] period, then the Parties shall engage a mutually
acceptable independent expert with experience in valuing pharmaceutical
compounds (the “Independent Expert”) to determine such [ * ] for the Reversion License, the costs of which shall
be shared equally by the Parties.  The
Parties shall select such Independent Expert within [ * ] after the expiration of the foregoing [ * 
] period. 
Within [ * ] of selection of such Independent Expert, each Party shall provide the
Independent Expert with a reasonable amount of information such Party wishes
the Independent Expert to consider as part of his or her decision.  The Independent Expert shall confer with the
Parties for [ * ] after he or she receives such information from each Party and make his
or her determination at the end of such [ * ] period. 
Each Party shall thereafter be bound by the decision of the Independent
Expert as to the amount that represents [ * ] to IBP for such Reversion License, and such matter
shall not be subject to the dispute resolution procedure set forth in Article
11 hereof. [ * ] to be [ * ] hereunder for such Reversion License
shall be subject to the accrual of [ * ]; provided however, that in no event shall [ * ]
applicable. 
Such rate shall be determined as soon as practicable following the
determination of the [ * ] hereunder for such Reversion License, and [ * ] shall begin to [ * ] after the date of such determination.

 

                           4.6.2    Notwithstanding
anything contained herein to the contrary, [ * ] with respect to any reverted Compound Set until and
unless [ * ] attributable to one or more compounds within such reverted Compound
Set.  With respect to each reverted
Compound Set, [ * ] associated with the compound(s) within such reverted Compound Set that [ * ] receives, as well as [ * ], if any, of Products [ * ]
 that incorporate such compound(s), until [ * ] set pursuant to Section 4.6.1 above, together with
all [ * ] thereon.

             4.7        Manufacturing Rights.

                           4.7.1    As
development progresses under the Work Plan for each compound within a Compound
Set or Product such that IBP requires larger quantities of such compounds or
Products manufactured in compliance with GMP, or other manufacturing standards,
IBP shall notify Diversa of its need for preclinical, clinical or commercial
supply, as applicable.  If Diversa
desires to be considered as a potential manufacturer, Diversa shall provide IBP
with the requisite information to enable IBP to evaluate whether Diversa can
manufacture compounds within a Compound Set or Products, as applicable, in
accordance with regulatory requirements, IBP’s own standards for manufacture
and other standards typically applicable in the pharmaceutical industry for the
manufacture of pharmaceuticals. 
Selection of the manufacturer will be at IBP’s sole discretion.  However, provided (i) IBP desires that the
compound or Product in question be manufactured via a [ * ] route and (ii) Diversa possesses the ability to
manufacture such compound or Product via [ * ], at a comparable price and in compliance with the
relevant GMP, or other manufacturing and laboratory standards reasonably
required by IBP, and (iii) Diversa is able to meet all other commercially
reasonable requirements of IBP (e.g.,
regarding quality control, total cost, and capacity requirements)) IBP shall
negotiate [ * ] with Diversa in good faith for [ * ] regarding the
terms of a manufacturing agreement
regarding such compound or Product (as applicable) [ * ], unless [ * ].

                           4.7.2    Subject to
Sections 4.1.2 and 4.7.1 above, if IBP desires that the compound or Product in
question be manufactured via a [ * ] but (a) IBP desires to manufacture such compound or
Product internally or through a Third Party manufacturer, (b) Diversa notifies
IBP that it is not interested in manufacturing such compound or Product (as
applicable), (c) Diversa does not possess the ability to manufacture such
compound or Product via [ * ] and in compliance with the relevant GMP, or other manufacturing
standards, and other commercially reasonable standards required by IBP, or (d)
Diversa is not a reasonably competitive prospective manufacturer of such
compound or Product, then, subject to the Parties agreeing in good faith to
reasonable compensation for all reasonable technology transfer costs and other
reasonable Diversa costs as mutually agreed by the Parties.  Subject to Section 4.1.2, IBP may engage a
Third Party manufacturer for such compound or Product and may [ * ] to such Third Party solely to manufacture such
compound or Product in accordance with this Agreement and the terms of such
license; provided, however, that such [ * ] to such Third Party manufacturer under a [ * ] with the provisions of this Agreement.  However, IBP shall [ * ] in good faith for [
 * ] regarding the terms of any manufacturing agreement
of such compound or Product (as applicable) via [ * ] prior to [ * ]
, unless Diversa notifies IBP in writing that it is
not interested in manufacturing such compound or Product (as applicable).  Prior to execution of any sublicense
agreement with a Third Party manufacturer, IBP shall provide Diversa with a
copy of such sublicense agreement, provided that IBP may redact from such copy
any terms not necessary to confirm compliance with the provisions of Section
4.2 and this Section 4.7.2.  Within [ * ] of receipt of such copy, Diversa shall have the
right to approve such sublicense agreement, such approval not to be
unreasonably withheld.  Diversa’s
failure to respond within [ * ] of receipt of the copy of the sublicense agreement shall constitute
approval of the sublicense agreement.

 

             4.8        Extension of
Research Period. 
Notwithstanding the [ * ] period to extend the Research Period set forth in Section 10.1, IBP shall
have the option to continue developing Compound Derivatives of the compounds
within the Compound Sets existing at the end of the originally scheduled
Research Period for up to [ * ] as an extension of the Research Period for such Compound Sets.  Specifically, at least thirty (30) days
before the end of the initial [ * ] Research Period, IBP shall identify to Diversa the
Compound Sets for which IBP wishes to continue developing Compound Derivatives,
and the Parties can conduct such work for up to [ * ] thereafter. 
During such extended Research Period, IBP shall not have the right to
designate Compounds as set forth in Section 3.2.3 or Compound Derivatives as
set forth in Section 3.2.4 that are not Compound Derivatives within the
Compound Sets identified by IBP.  Any
Compound Derivatives made, discovered or invented during the extended Research
Period shall be subject to all applicable terms of this Agreement regarding
Compound Derivatives, including without limitation the provisions regarding the
payment to Diversa of milestones and royalties.

             4.9        Compound
Exclusivity; Non-Compete.  With
respect to each Compound Set for which IBP has a License that has not
terminated, Diversa shall not itself develop or commercialize products based
upon or containing any compounds within such Compound Set, or grant to any
Third Party a license under the Diversa Technology or collaborate with any
Third Party, to develop or commercialize products based upon or containing
compounds within such Compound Set.  In
addition, for a period of [ * ] following the Effective Date, Diversa shall not outlicense any Diversa
Technology to a Third Party company (i) whose primary business is the research,
development and commercialization of novel drugs in the Field and (ii) who
owns, either directly or through one or more wholly-owned subsidiaries, patents
related to all of the following:  [ * ]

5.          INTELLECTUAL PROPERTY RIGHTS

             5.1        Intellectual Property Ownership.
  All Program
Inventions shall be owned by Diversa, except that IBP shall own all Program
Inventions that relate solely to (a) [ * ] and (b) [ * ] and that
are designated by the RMC as proprietary [ * ].  Each Party
shall notify promptly the other Party, in writing, of any Program
Invention.  Such written notification
shall provide the [ * ], to the extent known, of any compounds made, discovered or invented, and
all other data relevant to determining the patentability and inventorship of
such Program Invention.

                           5.1.1    Each Party
shall continue to own all intellectual property owned by such Party prior to
the Effective Date.

                           5.1.2    Each Party
shall have the right to secure patent protection for the Program Inventions
owned by it, in accordance with this Section 5.  Each Party shall (and shall cause its applicable Affiliates to)
make such assignments and take such other actions as may be necessary or
appropriate to effect the ownership of intellectual property rights in
accordance with this Section 5.1.

 

             5.2        Filing, Prosecution and Maintenance of Patents.

                           5.2.1    Except as
provided in this Section 5.2 or Section 5.5, each Party shall have the sole
right, at its own expense, to control the filing, prosecution, maintenance,
defense and enforcement of its own patents and patent applications.

                           5.2.2    Diversa
shall confer with IBP regarding its plans to secure patent protection for any
Program Inventions owned by Diversa which cover the composition, manufacture or
use of Compounds, Compound Derivatives, Active Substructures and/or Products
(“Compound Patents”).  The Parties shall
seek to agree on the patent strategy to be followed in securing such
protection.

                                     
   (a)         Diversa
shall select outside counsel to prepare, prosecute, and maintain each patent
application and resulting patent within the Compound Patents, and IBP shall
reimburse Diversa for [ * ] incurred in connection with such work. 
The Parties shall have equal access to such outside counsel.  The Parties shall seek to agree on the
prosecution of patent applications within the Compound Patents, but in the
event of disagreement, Diversa shall control the prosecution.  If IBP is dissatisfied with the prosecution
of patent applications within the Compound Patents by the outside counsel
selected by Diversa, IBP shall so inform Diversa in writing, and such patent
applications shall be transferred to a different, mutually-acceptable outside
counsel.  Diversa shall provide IBP a
list identifying at least three (3) alternative outside counsel, identify its
first preferred choice within such list and request approval of its first
preferred choice from IBP.  IBP’s
approval shall not be unreasonably withheld. 
If IBP has a reasonable basis to disagree with the selection of such
outside counsel, the Parties shall negotiate, in good faith, the selection of
an alternative outside counsel from the remaining outside counsel identified in
the list.  The Parties shall confer with
respect to the list of countries outside the United States in which patent
applications within the Compound Patents will be filed and maintained, and with
prior notice, IBP may decline to pay any fees or expenses with respect to
individual countries.  In such case,
Diversa shall make the sole decision about whether to pursue such patent
applications in such countries, at its sole expense.

                                     
   (b)         Diversa
shall furnish IBP with copies of draft patent applications and correspondence
relating thereto to and from governmental patent agencies and other authorities
which relate to Compound Patents. 
Diversa shall permit IBP to offer its comments thereon before Diversa
makes a submission to a governmental patent agency or other authority which
could materially affect the scope or validity of the patent coverage with
respect to such Compound Patent, and IBP shall offer its comments promptly;
provided IBP’s failure to respond within [ * ] of receipt of the draft patent application or
correspondence relating thereto shall be deemed approval of such patent
application or correspondence.  Diversa
shall seek to incorporate IBP’s comments in its patent prosecution activities,
and to the extent that it declines to incorporate such comments, shall explain
to IBP its reasons for such decision. 
Diversa shall also keep IBP informed of its patent prosecution for all
Compound Patents that are subject to the License of Section 4.1, and shall
confer reasonably with IBP and provide IBP with copies of any patent
applications and correspondence related thereto to and from governmental patent
agencies or other authorities to the extent reasonably requested by IBP to
monitor the scope and nature of the rights to which IBP holds a license under
this Agreement.

 

                                     
   (c)         If
Diversa decides not to file any Compound Patent, or to abandon any patent
application, patent or other intellectual property right covering such matter,
either on a worldwide basis or in particular countries, it shall provide IBP
reasonable written notice of such intention, and shall permit IBP, at the sole
option and expense of IBP, to file, prosecute and maintain such patent
application, patent, or other intellectual property right in the name of
IBP.  In such event, Diversa shall
cooperate fully with IBP and shall provide to IBP whatever assignments and
other documents that may be needed in connection therewith.

                                     
   (d)         IBP
may, at its election and from time to time, disclaim any special rights under
paragraph (a) above with respect to particular patent application(s) included
within Compound Patents, in which case Diversa shall assume exclusive control
over the prosecution of such application(s) at its sole expense.  In such case, IBP shall retain the rights
set forth elsewhere in this Section 5.2 with respect to patent prosecution
covering other Program Inventions.

             5.3        Cooperation of the Parties.  Each
Party
agrees (and will cause any of its Affiliates) to cooperate fully in the
preparation, filing, prosecution and maintenance of any patent rights with
respect to Program Inventions.  Such
cooperation shall include but not be limited to:

                                     
   (a)         executing
all papers and instruments, or using reasonable efforts to cause its employees
or agents to execute such papers and instruments, so as to effectuate the
ownership of intellectual property rights set forth in Section 5.1 and to
enable the other Party to file and to prosecute patent applications and to
maintain patents in any country;

                                     
   (b)         promptly
informing the other Party of any matters coming to such Party’s attention that
may affect the preparation, filing or prosecution of any such patent
applications or the maintenance of any such patents; and

                                     
   (c)         undertaking
no actions that are potentially deleterious to the preparation, filing or
prosecution of such patent applications or to the maintenance of such patents.

             5.4        Potential Assignments To IBP. 
Diversa
recognizes that IBP has a commercial interest in determining the patent
protection for Compounds, Compound Derivatives, Active Substructures and
Products, and enforcing any patents which cover the composition, manufacture or
uses thereof.  In the event IBP makes a
determination to commence human clinical trials of any particular Product or
Product(s), the Parties will discuss whether it is practical to assign to IBP
any of the patent applications or patents arising from Program Inventions that
are specific to the Product in question, or the Compound or Compound Derivative
contained therein, or related compounds within the same Active
Substructure.  In the alternative, the
Parties shall consider whether it is practical to create and assign to IBP
divisional patent properties which are specific to such matters.  Any such assignments shall occur only by
mutual agreement of the Parties in the future, but Diversa agrees to review
opportunities for such assignment in good faith, and without further
consideration to be paid by IBP (except that IBP would become responsible for
any costs of assignment and the future prosecution and maintenance of any
patent applications and patents which are assigned).

 

             5.5        Infringement by Third Parties.

                           5.5.1    Notice.  Each
Party
shall promptly notify the other Party in writing of any competitive products
sold by Third Parties or other activities by Third Parties of which they become
aware that appear to infringe any patent or patent application included within
the Patent Rights of the other Party.

                           5.5.2    IBP
Actions.  IBP shall have the first right
to bring and control, by counsel of its own choice and at its own expense, any
action or proceeding with respect to infringement of any IBP Patent Rights, as
well as any Compound Patents subject to a License at the time of commencement
of any such action or proceeding or which issue during the pendency of any such
action or proceeding.  If IBP requests
Diversa to enforce or to authorize IBP to enforce other Diversa Patent Rights
that may be infringed by the activities of a Third Party, then Diversa will
consider in good faith bringing such action or authorizing IBP to bring such
action.  Diversa shall have the right,
using counsel of its own choice and at its own expense, to participate in any
such action regarding the Diversa Patent Rights.  Upon written notice to Diversa, IBP may require Diversa to
participate in such action as a necessary party, at IBP’s expense.  If IBP fails to bring an action or
proceeding with respect to any such Diversa Patent Rights within (a) [ * ] following the notice of alleged infringement or (b)
[ * ] before the time limit, if any, set forth in the appropriate laws and
regulations for the filing of such actions, whichever comes first, Diversa
shall have the right to bring and control any such action, at its own expense
and by counsel of its own choice, and IBP shall have the right, using counsel
of its own choice and at its own expense, to be represented in any such action.

                           5.5.3    Diversa
Actions.  Diversa shall have the right to
bring and control, by counsel of its own choice, any action or proceeding with
respect to infringement of any Diversa Patent Rights which are not subject to a
License at the time of commencement of such action or proceeding.

                           5.5.4    Cooperation;
Awards.  In the event a Party bring an
infringement action which relates to Program Inventions, the other Party shall
(and shall endeavor to cause its Affiliates, Sublicensees and Third Party
subcontractors, if appropriate, to) cooperate fully, including if required to
bring such action, the furnishing of a power of attorney.  Neither Party shall have the right to settle
any patent infringement litigation under this Section 5.5 in a manner that
diminishes the rights of the other Party without the prior written consent of
the other Party.  Except as otherwise
agreed to by the Parties as part of a cost sharing agreement, any recovery
realized as a result of such litigation, after reimbursement of any litigation
costs of Diversa and IBP, shall be shared between the Parties so that the Party
bringing such action retains [ * ] of such amount and the other Party retains [ * ]
 of such amount.

             5.6        Third Party Claims of Infringement.
  Diversa and
IBP shall promptly notify the other in writing of any allegation by a Third
Party that the exercise of the rights granted to IBP under this Agreement or
the activities of either Party under this Agreement infringes or may infringe
the intellectual property rights of such Third Party.  Each Party will use commercially reasonable efforts (and will
endeavor to cause its Affiliates to use commercially reasonable efforts) to
cooperate with the other Party to resolve or defend against any such
claims.  Neither Party shall have the
right to settle any patent infringement litigation under this Section 5.6 in a
manner that diminishes the rights of the other Party without the prior written
consent of such other Party.

 

             5.7        Hold Harmless.   During the
term of this Agreement, (a) Diversa shall hold IBP harmless from and against
claims by Diversa of infringement of Diversa Technology with respect to IBP’s
activities in accordance with this Agreement except for claims covered by
Section 9.2 and (b) IBP shall hold Diversa harmless from and against claims by
IBP of infringement of IBP Technology with respect to Diversa’s activities in
accordance with this Agreement except for claims covered by Section 9.1 solely
for the purposes of carrying out the R&D Program as set forth in the Work
Plan.  The provisions of this Section
5.7 are intended to permit both Parties to have freedom to carry out their
respective responsibilities and perform their respective obligations under this
Agreement and the Work Plan without fear of being made a party to any legal
action concerning infringing any intellectual property of the other Party that
is used to carry out such responsibilities or perform such obligations.  Notwithstanding the foregoing, the
provisions of this Section 5.7 shall not be construed to grant to the other
Party any license to use a Party’s Technology to perform any activities beyond the
scope of the roles and responsibilities assigned to the Parties under this
Agreement and the Work Plan outside the scope of the licenses provided herein,
or to limit a Party’s obligations under Article 9.

6.          PAYMENTS, REPORTS, AND RECORDS

             6.1        Technology Access Fee Payments. 
 In exchange
for utilizing Diversa’s research and development services during the Research
Period as part of the Work Plan, IBP shall pay to Diversa a technology access
fee of [ * ], payable as follows:  [ * ] due on 
[ * ], [ * ] due on or before [ * 
], and [ * ] due on or before [ * ]. 
Such technology access fee
payments set forth in this Section 6.1 shall be non-refundable and shall not be
credited against any research funding, milestones, or royalties, or any other
amounts payable to Diversa under this Agreement.

             6.2        Research Funding

                           6.2.1    Subject to Section
6.2.2 below, within [ * ] following the end of each calendar quarter, Diversa
shall invoice IBP, [ * ], for the research and development services provided by Diversa in the
previous quarter, at the initial rate per FTE of [ * ].  For the
second year of the term of this Agreement and through the end of the Research
Period, such FTE rate shall be adjusted annually beginning on January 1, 2002
by a percentage equal to the change in the CPI from the month prior to the beginning
of the annual period to the month prior to the date of the adjustment;
provided, however, that in no event shall such FTE rate be reduced for a
subsequent year.  All amounts listed on
each invoice delivered to IBP pursuant to this Section 6.2.1 shall be paid to
Diversa within [ * ] after the end of such quarter, except to the extent that IBP disputes,
in good faith, the proper amount of such invoice and so notifies Diversa in
writing before the end of such thirty-day period (in which case IBP shall
promptly pay all undisputed amounts in accordance with this Section 6.2.1).

                           6.2.2    Within 
[ * ] following the end of each calendar quarter for
which Diversa shall invoice IBP [ * ] under Section 6.2.1 above, IBP shall provide
Diversa with a written certification that IBP has, at the time of the
certification, at least an adequate amount in cash to meet the demands of its
operations for the next [ * ].  If IBP does not make such a
certification, Diversa shall be entitled to immediately invoice IBP for the
estimated payments associated with the research and development activities of
the Diversa FTEs for the then-current calendar quarter, and all amounts listed
on each invoice delivered to IBP pursuant to this Section 6.2.2 shall be paid
to Diversa within [ * ] after the end of such quarter, except to the extent that IBP disputes,
in good faith, the proper amount of such invoice and so notifies Diversa in
writing before the end of such thirty-day period (in which case IBP shall
promptly pay all undisputed amounts in accordance with this Section
6.2.2).  In addition, in such event,
Diversa thereafter be entitled to invoice IBP in advance of each succeeding
calendar quarter for the research and development services estimated in good
faith by Diversa to be performed by Diversa FTEs in such quarter, which amounts
shall be paid to Diversa within [ * ] of receipt of such invoice.  If IBP subsequently provides Diversa with a
written certification that the total of IBP’s cash and cash equivalents as of
the end of a subsequent calendar quarter exceeds IBP’s projected cash burn rate
for the subsequent [ * ], advance invoicing and payment procedure set forth this Section 6.2.2
shall be suspended, and the corresponding procedure set forth in Section 6.2.1
shall thereafter apply (subject to IBP’s continuing obligation to supply the
monthly certifications as set forth herein).

 

             6.3        Milestone Payments; Diligence
Payment With respect to each Compound Set developed
pursuant to this Agreement, IBP shall pay to Diversa the following amounts
within [ * ] after (a) achievement of each of the following milestones, in the case
of the payments specified in the following table, and (b) the expiration of the
[ * ] period, in the case of the payment specified in Section 6.3.1:

	Milestone	Payment
  to Diversa
	Notification
  by IBP to Diversa that [ * ]	US
  $[ * ]
	Commencement
  of [ * ]	US
  $[ * ]
	Submission
  of an IND to the FDA (or equivalent application to an equivalent agency
  outside of the United States) or institutional review board [ * ]*	US
  $[ * ]
	The
  first enrollment in any country of the first patient in a Phase II clinical
  trial study (or equivalent clinical program outside of the United States)
  involving [ * ]	US$[ * ]
	The
  first enrollment in any country of the first patient in a Phase III clinical
  trial study (or equivalent clinical program outside of the United States)
  involving [ * ]	US$[ * ]
	Receipt
  of Regulatory Approval by the FDA for a Product [ * ]	US$[ * ]
	Receipt
  of Regulatory Approval by the EMEA or receipt of marketing approval in one of
  the Major Markets for a [ * ]	US$[ * ]
	Receipt
  of Regulatory Approval by the MHW or receipt of marketing approval in Japan
  for a Product [ * ]	US$[ * ]

* 
Such milestone shall be reduced to [ * ] if such event occurs on or before the
date that is [ * ]
after IBP obtains a License to the relevant Compound Set, except as provided
for in Section 4.3(d).

 

                           6.3.1    The
milestone and other payments set forth in this Section 6.3 shall be
non-refundable and shall not be credited against any research funding, other
milestones, or royalties payable to Diversa under this Agreement.  All of the milestones and other amounts
provided for in this Section 6.3 shall be payable to Diversa once for each Lead
Compound within a Compound Set; provided, however, that, notwithstanding the
foregoing, (i) the [ * ] milestone shall be payable to Diversa [ * ]
 for each Compound Set to which IBP has notified
Diversa it is interested in obtaining a License, and (ii) with respect to any
particular Lead Compound, IBP shall not be required to pay Diversa development
milestones (i.e., milestones other than ones attributable to the receipt of
regulatory or marketing approval) for which IBP has previously paid Diversa if
(a) IBP has replaced a Lead Compound that has achieved such milestones with a
different Lead Compound from the same Compound Set from which the first Lead
Compound was derived and (b) IBP has discontinued development of such replaced
Lead Compound.  IBP shall promptly notify
Diversa in writing of each occurrence of any of the foregoing milestone events,
but in no event less than [ * ] thereafter.

             6.4        Royalties.  In
consideration of the Licenses granted to IBP by Diversa hereunder, for all
sales by IBP, its Affiliates and Sublicensees of Products, IBP shall pay to
Diversa incremental royalties on Annual Net Sales of a Product pursuant to the
corresponding percentages set forth under the column heading “Applicable
Maximum Royalty to Diversa” of the following table, subject to offsets as
provided below:

	

  Portion of Annual Net Sales	Applicable
  Minimum

  Royalty to Diversa	Applicable
  Maximum

  Royalty to Diversa
	US$0
  to $250,000,000	[ * ]	[ * ]
	US$250,000,001
  to $500,000,000	[ * ]	[ * ]
	US$500,000,001
  to $750,000,000	[ * ]	[ * ]
	US$750,000,001
  to $1,000,000,000	[ * ]	[ * ]
	Over
  US$1,000,000,000	[ * ]	[ * ]

             No
royalty shall accrue under this Section 6.4 on sales among IBP, its Affiliates
and Sublicensees, unless IBP or such Affiliate or Sublicensee is the end user
of a Product.  Royalties shall be
payable only once for any given unit of Product sold.

 

             IBP shall not be permitted to
engage the services of any Third Parties to whom royalties on Products would be
payable with an offset pursuant to this Section 6.4, unless (i) such services
represented proprietary, enabling technologies of the type that IBP was not
reasonably capable of providing itself (e.g., such services would not include
medicinal chemistry services), (ii) IBP provided Diversa with prior written
notice at least [ * ] in advance of entering into any such
arrangement with a Third Party, and (iii) such notice specified the name(s) of
the Third Party/Parties, the services to be rendered, and the royalty
compensation requested by such Third Party/Parties.  In the event IBP is obligated to pay to Third Parties royalties
with respect to sales of Products for such enabling technologies, IBP may
offset against the royalties due to Diversa under this Section 6.4, on a
country-by-country basis and Product-by-Product basis, up to [ * ]
of all royalties due to such Third Parties for such technologies; provided,
however, that in no event shall the incremental royalties due to Diversa
hereunder on Annual Net Sales of a Product be reduced as a result to less than
the corresponding minimum percentages set forth under the column heading
“Applicable Minimum Royalty to Diversa” of the table above.

             6.5        Reports and Payments. 

                           6.5.1    All royalty
payments under this Agreement shall be made to Diversa or its designee
quarterly within [ * ] after the end of the calendar quarter for which royalties are due from
IBP; provided that, for royalties due to Diversa with respect to Net Sales of
Products by IBP’s Sublicensees, such payment shall be due within [ * ] after IBP receives such royalties from such Third
Party, but in no event later than [ * ] after the end of such calendar quarter.  IBP shall, at the time of payment of such
royalties deliver to Diversa a report containing the following information:

                                     
   (a)         Estimated
gross sales and returns of Products by IBP, its Affiliates and Sublicensees
during the applicable Royalty Period in each country of sale;

                                     
   (b)         Adjustments
and calculation of Net Sales for the applicable Royalty Period in each country
of sale; and

                                     
   (c)         Calculation
of royalty.

                           6.5.2    All amounts
payable under this Section will first be calculated in the currency of sale and
then converted into United States dollars. 
The buying rates involved for the currency of the United States into
which the currencies involved are being exchanged shall be the arithmetic
averages of the ones quoted by the Western Edition of The Wall Street Journal
at the close of business on the last business day of each calendar month of the
applicable Royalty Period.  In the event
that such publication no longer publishes such rates, another financial
publication mutually agreed on by the Parties shall be substituted or one shall
be chosen by an investment banker/analyst mutually agreed on by the Parties.

 

                           6.5.3    Diversa
shall pay any and all taxes levied on account of royalties and other payments
it receives under this Agreement.  If
laws or regulations require that taxes be withheld, IBP will deduct such taxes
from the amount due to Diversa, pay such taxes to the proper tax authority, and
send evidence of the obligation together with proof of payment to Diversa
promptly after making such payment.

             6.6        Payments by IBP to Diversa. All payments
due under this Agreement shall be
payable in United States dollars. IBP shall make all payments to Diversa by
bank wire transfer in immediately available funds as follows, or as otherwise
specified by Diversa in writing:

[ * ]

             6.7        Records.
  IBP and its Affiliates shall
maintain complete and accurate records of Products made, used or sold by them
or their Sublicensees under this Agreement, and any amounts payable to Diversa
in relation to Products, which records shall contain sufficient information to
Diversa to confirm the accuracy of any reports delivered to them in accordance
with Section 6.5.  IBP and its Affiliates
shall retain such records relating to a given Royalty Period for at least [ * ] after the conclusion of that Royalty Period.  Diversa (acting as the “
Auditing Party”)
shall have the right, at its own expense, to cause an independent certified
public accountant reasonably acceptable to IBP, to inspect such records of IBP
or its Affiliates (the “Audited Party”) during normal business hours for the
sole purpose of verifying any reports and payments delivered under this
Agreement.  Such accountant shall not disclose
to the Auditing Party any information other than information relating to
accuracy of reports and payments delivered under this Agreement and shall
provide the Audited Party with a copy of any report given to the Auditing
Party.  The Parties shall reconcile any
underpayment or overpayment within [ * ] after the accountant delivers the results of the
audit.  The Auditing Party shall bear
the full cost of the audit unless the audit performed under this Section
reveals an underpayment in excess of [ * ] in any Royalty Period, in which case the Audited
Party shall bear the full cost of such audit. 
Diversa may exercise its rights under this Section [ * ] and only with reasonable prior notice to IBP.  IBP shall require that its Affiliates and
its Sublicensees shall have to obligation to account and provide records to IBP
for all their sales of Products as annual Net Sales by IBP.

             6.8        Late Payments.  In the
event that any payment, including royalty payments, due hereunder is not made
within [ * ] of the date due, the payment shall accrue interest from that date due at
the rate of [ * ] per month; provided however, that in no event shall such rate exceed the
maximum legal annual interest rate.  The
payment of such interest shall not limit Diversa from exercising any other
rights it may have as a consequence of the lateness of any payment as set forth
in Section 10.3, provided such exercise shall follow the procedures set forth
in such section.

7.          CONFIDENTIAL INFORMATION

7.1           
Definition of Confidential Information. “Confidential Information” shall mean any technical
or business information furnished by the Disclosing Party to the Receiving
Party in connection with this Agreement, whether orally or in writing.  Such Confidential Information shall include,
without limitation, the existence and terms of this Agreement, information
disclosed by one Party to the other Party relating to the structure of a
Compound, any gene encoding such Compound, the use and manufacture of the
Compound, any Compound Derivatives, any Lead Compound, and any other compound
in the Compound Set, Diversa Technology, IBP Technology, trade secrets,
know-how, inventions, technical data or specifications, testing methods,
business or financial information, research and development activities, product
and marketing plans, and customer and supplier information, including, but not
limited to, such information that become known to a Party during visits to the
facilities of the other Party. 
Notwithstanding the foregoing, IBP shall solely own all data resulting
from the clinical development of Products, and all such data shall be deemed
Confidential Information of IBP.

             7.2        Obligations. The Receiving Party agrees that it shall:

                           7.2.1    Maintain
all Confidential Information in strict confidence, except that the Receiving
Party may disclose or permit the disclosure of any Confidential Information to
its, and 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 Information for
the purposes set forth in this Agreement;

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

                           7.2.3    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 7.2. by any of its Affiliates, directors,
officers, employees, consultants and advisors.

             7.3        Exceptions. The obligations of the Receiving Party under
Section 7.2. above shall not apply to any specific Confidential Information to
the extent that the Receiving Party can demonstrate by competent proof that
such Confidential Information:

                           7.3.1    Was
generally known to the public or otherwise part of the public domain prior to
the time of its disclosure under this Agreement;

                           7.3.2    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;

                           7.3.3    Was already
known to the Receiving Party, other than under an obligation of
confidentiality, at the time of disclosure by the Disclosing Party; or

                           7.3.4    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

 

                           7.3.5    Is required
to be disclosed to comply with applicable laws or regulations (such as
disclosure to the United States Securities and Exchange Commission, the United
States Environmental Protection Agency, 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 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.

             7.4        Survival of Obligations. The obligations
set forth in Sections 7.1, 7.2 and
7.3 shall remain in effect after termination or expiration of this Agreement
for a period of [ * ].

             7.5        Public Announcement.  Upon the
execution of this Agreement, the Parties shall issue a joint press release that
is mutually acceptable to both Parties. 
Except for the information disclosed in such press release, neither
Party shall use the name of the other Party or reveal the existence of or terms
of this Agreement in 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.

             7.6        Publication.

                           7.6.1    In the
event a Party desires to publish or verbally disclose the results of any of the
research and development work performed hereunder, the Parties shall cooperate
in appropriate publication of the such results, but subject to the
predominating interest to obtain patent protection for any patentable subject
matter.  To this end, prior to any
public disclosure of such results, the Party proposing disclosure shall send
the other Party a copy of the information to be disclosed, and shall allow the
other Party [ * ] from the date of receipt in which to determine whether the information
to be disclosed contains subject matter for which patent protection should be
sought prior to disclosure, or otherwise contains Confidential Information of
the reviewing Party.  The Party
proposing disclosure shall be free to proceed with the disclosure unless prior
to the expiration of such [ * ] period the reviewing Party notifies the Party proposing disclosure that
the disclosure contains subject matter for which patent protection should be
sought or Confidential Information of the reviewing Party, and the Party proposing
publication shall then delay public disclosure of the information for an
additional period to be mutually agreed not to exceed [ * ] from the time that such information was available
to the other Party to permit the preparation and filing of a patent application
on the subject matter to be disclosed or for the Parties to determine a
mutually acceptable modification to such publication to protect the
Confidential Information of the reviewing Party adequately.  Notwithstanding the foregoing, either Party
may publish any Confidential Information owned by the other Party without the
express written permission of such other Party.  The Party proposing disclosure shall thereafter be free to
publish or disclose the information. 
The determination of authorship for any paper shall be in accordance
with accepted scientific practice.

                           7.6.2    Notwithstanding
Section 7.6.1, IBP shall have the right to publish any data, results, or other
information originating from any clinical trials related to any compound within
a Compound Set or Product after the Research 
Period.

8.          REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS

             8.1        Organization; Good Standing. Each Party
hereby represents to the other Party on
the Effective Date and thereafter throughout the Term that, to the best of its
knowledge, it (a) is a corporation duly organized, validly existing, (b) is in
good standing under the laws of the jurisdiction of its incorporation, (c) is
qualified to do business and in good standing in each jurisdiction in which the
performance of its obligations hereunder requires such qualification and (d)
has all requisite power and authority, corporate or otherwise, and the legal
right to conduct its business as now being conducted, to own, lease and operate
its properties and to execute, deliver and perform under this Agreement.

             8.2        Binding Obligation; Due
Authorization; No Conflict. Each Party hereby represents to the other Party on
the Effective Date and thereafter throughout the Term that, to the best of its
knowledge, this Agreement is a legal and valid obligation binding upon its
execution and enforceable in accordance with its terms and conditions.  The execution, delivery and performance of
this Agreement by such Party have been duly authorized by all necessary
corporate action, and the person executing this Agreement on behalf of such
Party has been duly authorized to do so by all requisite corporate actions and
do not and will not (a) require any consent or approval of its stockholders or
any Third Party or (b) conflict with, or constitute a material breach or
violation of, any agreement, instrument, understanding, oral or written, to
which it is a party or by which it may be bound, and any judgment of any court
or governmental body applicable to such a Party or (c) violate any law, decree,
order, rule or regulation of any court, governmental body or administrative or
other agency having authority over it.

             8.3        No Suit.  Each Party hereby represents to
the other Party on the Effective Date and thereafter throughout the Term, that
it is aware of no action, suit or inquiry or investigation contemplated or
instituted by any Third Party that questions or threatens the validity of this
Agreement.

             8.4        Title to Intellectual Property
Rights.  Each Party hereby represents to
the other Party that it has sufficient legal and beneficial title under its
intellectual property rights necessary for the purposes contemplated under this
Agreement and to grant the licenses contained in this Agreement.

             8.5        No Violations of Third Party
Intellectual Property Rights.  Each Party
hereby represents to the other Party, it is not aware of any material
communications alleging that it has violated or, by conducting its obligations
or the Work Plan as currently proposed under this Agreement, it would violate any
of the intellectual property rights of any Third Party.

             8.6        No Unauthorized Use Necessary. 
Each Party
hereby represents to the other Party, there is no material unauthorized use,
infringement or misappropriation of any of its Patent Rights, copyrights,
trademarks, trade secret rights and know-how rights necessary or useful to
perform the R&D Program as provided in the Work Plan.

 

             8.7        Proper Assignment of Inventions.
  Each Party
hereby represents to the other Party that all of its employees, officers and
consultants have executed agreements requiring assignment to the Party of all
inventions made during the course of and as a result of their association with
such Party and obligating the individual to maintain as confidential the
Confidential Information of such Party.

             8.8        Disclaimers. Each Party hereby acknowledges that the data
and
any materials to be provided to such Party by the other Party under this
Agreement will be of an experimental nature, provided without warranties, and
neither Party shall accept any liability in connection with their use, storage
and disposal by the other Party.  EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF NON-INFRINGEMENT,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EACH PARTY ACKNOWLEDGES THAT THIS AGREEMENT PROVIDES FOR AN
INNOVATIVE PROGRAM USING NEW TECHNOLOGIES AND THAT NO WARRANTY IS MADE
REGARDING THE SUCCESS OF ANY RESEARCH DONE PURSUANT TO THIS AGREEMENT OR THE
UTILITY OF ANY INFORMATION, MATERIALS OR TECHNOLOGY PROVIDED HEREUNDER.  EACH PARTY EXPRESSLY DISCLAIMS ALL
WARRANTIES AS TO THE VALIDITY OR SCOPE OF PATENTS AND PATENT CLAIMS, ISSUED AND
PENDING, PROTECTING ITS TECHNOLOGY OR THAT ANY TECHNOLOGY WILL BE FREE FROM
INFRINGEMENT OF PATENTS OR PROPRIETARY RIGHTS OF THIRD PARTIES, OR THAT NO
THIRD PARTIES ARE IN ANY WAY INFRINGING PATENT RIGHTS.

             8.9        Limitation of Liability. IN NO EVENT WILL
EITHER PARTY, ITS DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE TO THE OTHER PARTY FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES, WHETHER
BASED UPON A CLAIM OR ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT
LIABILITY OR OTHER TORT, OR OTHERWISE, ARISING OUT OF THIS AGREEMENT.

9.          INDEMNIFICATION

             9.1        Indemnification.

                           9.1.1    IBP shall
indemnify, defend, and hold harmless Diversa and its Affiliates and their
directors, officers, employees, and agents and their respective successors,
heirs and assigns, against any liability, damage, loss, or expense incurred by
or imposed upon such persons or any one of them in connection with any claims,
settlements, suits, actions, demands, or judgments arising out of any theory of
product liability (including, but not limited to, actions in the form of tort,
warranty, or strict liability) concerning any Compound, Compound Set, Compound
Derivative or Product (or any process or service) that is made, used, marketed,
or sold by IBP or its Affiliates or Sublicensees pursuant to any right or
license granted under this Agreement; provided, however, that such
indemnification right shall not apply to any liability, damage, loss, or
expense to the extent directly attributable to the negligence, reckless
misconduct, or intentional misconduct of a party seeking indemnification under
this Section 9.1.1.  None of Diversa and
its Affiliates and their directors, officers, employees, and agents and their
respective successors, heirs and assigns shall be entitled to indemnification
for the settlement of any claim pursuant to this Agreement unless it obtains
the prior written consent of IBP to such settlement.

                           9.1.2    Diversa
shall indemnify, defend, and hold harmless IBP and its Affiliates and their
directors, officers, employees, and agents and their respective successors,
heirs and assigns, against any liability, damage, loss, or expense incurred by
or imposed upon such persons or any one of them in connection with any claims,
settlements, suits, actions, demands, or judgments arising out of any theory of
product liability (including, but not limited to, actions in the form of tort,
warranty, or strict liability) concerning any Compound, Compound Set, Compound
Derivative or Product (or any process or service) that is made, used, marketed,
or sold by Diversa or its Affiliates or Sublicensees pursuant to any right or
license granted under this Agreement; provided, however, that such indemnification
right shall not apply to any liability, damage, loss, or expense to the extent
directly attributable to the negligence, reckless misconduct, or intentional
misconduct of a party seeking indemnification under this Section 9.1.2.  None of Diversa and its Affiliates and their
directors, officers, employees, and agents and their respective successors,
heirs and assigns shall be entitled to indemnification for the settlement of
any claim pursuant to this Agreement unless it obtains the prior written consent
of IBP to such settlement.

             9.2        Procedures.
 Any party (an “Indemnitee”) that intends to claim
indemnification under Section 9.1 shall promptly notify either Diversa or IBP,
as applicable (the “Indemnitor”), of any claim in respect of which the intends
to claim such indemnification, and the Indemnitor shall assume the defense
thereof with counsel mutually satisfactory to the Parties; provided, however,
that an Indemnitee shall have the right to retain its own counsel, with the
fees and expenses of no more than the law firm representing all Indemnitees in
the proceeding or related proceeding, to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other Party represented by such counsel in such
proceedings.  The indemnity agreement in
Section 9.1 shall not apply to amounts paid in settlement of any loss, claim,
liability or action if such settlement is effected without the consent of the
Indemnitor.  The failure to deliver
notice to the Indemnitor within a reasonable time after the commencement of any
such action, shall not relieve the Indemnitor of any liability to the Indemnitee
under Section 9.1, except to the extent the Indemnitor has been prejudiced by
such failure to give notice.  Each Party
and its Affiliates and their employees and agents shall cooperate fully with
the other Party and its legal representatives in the investigation of any
action, claim or liability covered by this indemnification.

10.        TERM AND TERMINATION

             10.1     Term. The term of this Agreement will commence as of the
Effective Date of this Agreement and, unless sooner terminated as provided
hereunder, will expire on the later of (i) the last day of the Research Period
(which is three years from the Effective Date, unless extended by mutual
agreement by the Parties in accordance with this Agreement) or (ii) the
expiration of the last License granted hereunder with respect to a Compound
Set; provided, however, that by mutual written agreement of the Parties, the
Research Period may be extended for successive one-year periods on each
anniversary of the Effective Date, beginning with the third anniversary of the
Effective Date.  Any extension of the
Research Period shall be exercised at least [ * ] before the term of the Research Period would
otherwise expire.

             10.2     Mutual Consent. This Agreement may be terminated at any time by
mutual written agreement of the Parties.

             10.3     Default.

                           10.3.1  Notice of
Default. In the event any material representation or warranty made hereunder by
either Party shall be untrue (“Representation Default”) or upon any breach or
default of a material obligation of this Agreement by a Party (“Performance
Default”), the Party not in Default (“Non-Defaulting Party”) must first give
the other Party (“Defaulting Party”) written notice thereof (“Notice of
Default”), which notice must state the nature of the untruthfulness, breach or
default in reasonable detail and request the Defaulting Party cure such Default
within [ * ].

                           10.3.2  
Termination
for Default. Subject to Section 4.5, the Non-Defaulting Party may, in addition to
any other remedies which may be available to such Non-Defaulting Party at law
or equity, terminate this Agreement in the event of (a) a Representation
Default by the Defaulting Party or (b) a Performance Default by the Defaulting
Party; that has not been cured within [ * ] after receipt of a Notice of Default; or, if such
Performance Default cannot be cured within such [ * ] period, and the Defaulting Party shall have failed
to commence substantial remedial actions within such [ * ] period and to diligently pursue the same.  Notwithstanding the foregoing, if a
Representation or Performance Default is not curable by its nature, the
Non-Defaulting Party may immediately terminate this Agreement with a Notice of
Default to the Defaulting Party.

                           10.3.3  Breach
of Payment Obligations. Notwithstanding the foregoing, in the event that IBP fails to make
timely payment of any amounts due under this Agreement within [ * ] after demand therefor, Diversa may terminate this
Agreement upon [ * ] prior written notice, unless IBP cures such breach by paying all
past-due amounts that are not the subject of a good-faith dispute between the
Parties within such [ * ] notice period, provided that IBP shall be entitled to
use such cure provision no more than once in any twelve (12) month period.

             10.4     Bankruptcy.

                           10.4.1  A Party may
terminate this Agreement if, during the Term, the other Party shall file in
court or agency pursuant to any statute or regulation of any state or country,
a petition in bankruptcy or insolvency or for reorganization or for an
arrangement or for the appointment of a receiver or trustee of the Party or of
its assets, or if the other Party proposes a written agreement of composition
or extension of its debts, or if the other Party shall be served with an
involuntary petition in bankruptcy or seeking reorganization, liquidation,
dissolution, winding-up arrangement, composition or readjustment of its debts
or any other relief under any bankruptcy, insolvency, reorganization or other
similar act or law of any jurisdiction now or hereafter in effect, or there
shall have been issued a warrant of attachment, execution or similar process
against it, filed in any insolvency proceeding, and such petition shall not be
dismissed within ninety (90) days after the filing thereof, or if the other
Party shall propose or be a Party to any dissolution or liquidation, or if the
other Party shall make an assignment for the benefit of creditors.

                           10.4.2  All rights
and licenses granted under or pursuant to this Agreement are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of rights to “intellectual property” as defined under
Section 101 of the U.S. Bankruptcy Code. 
The Parties agree that each Party that is a licensee of such rights
under this Agreement shall retain and may fully exercise its rights and
elections under the U.S. Bankruptcy Code. 
The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against either Party under the U.S. Bankruptcy
Code, the Party hereto which is not a Party to such proceeding shall be
entitled to a complete duplicate of (or complete access to, as appropriate) any
such intellectual property and all embodiments of such intellectual property,
and same, if not already in their possession, shall be, within [ * ] of the commencement of such proceeding, delivered
to them (i) upon any such commencement of a bankruptcy proceeding upon their
written request therefore, unless the Party subject to such proceeding (or a
trustee on behalf of the subject Party) elects to continue to perform all of
their obligations under this Agreement or (ii) if not delivered under (i)
above, upon the rejection of this Agreement by or on behalf of the Party
subject to such proceeding upon written request therefore by the non-subject
Party.

             10.5     Disposition of
Confidential Information In the event of termination or expiration of this
Agreement, the Parties shall return or destroy all forms of Confidential
Information provided to them under this Agreement, within [ * ] after such termination or expiration, provided,
however, that each Party may retain one copy of such Confidential Information
for the sole purpose of use in any litigation resulting from this Agreement or
the activities undertaken pursuant to this Agreement and further provided, that
if Diversa is the breaching Party, IBP may retain Compound Set, if any,
pursuant to the Licenses granted pursuant to Section 4.

             10.6     Effect of
Termination or Expiration. Termination or expiration of this Agreement shall
not relieve the Parties of any obligation accruing prior to such termination or
expiration and shall not terminate any License granted prior to such
termination or expiration.  Except as
otherwise provided herein, the provisions of Sections 5.1.1, 5.6, 7.1, 7.2,
7.3, 7.4, 7.6, 8.8, 8.9, 10.5 and Articles 1, 9, 11, and 12 shall survive the
expiration or termination of this Agreement, and the provisions of Sections
4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 6.3, 6.4, 6.5, 6.6, 6.7, and 6.8
shall survive the termination of this Agreement with respect to any License
granted prior to such termination. 
Termination of this Agreement pursuant to Section 10.3 shall not limit
any other rights and remedies of the terminating Party.

11.        DISPUTE RESOLUTION

             11.1     Informal Dispute
Resolution In the event that a controversy, claim or dispute
arises under this Agreement (each, a “Dispute”) between the Parties, either
Party may, by written notice to the other Party, have such Dispute referred to
the Chief Executive Officer of Diversa and the Chief Executive Officer of IBP,
or their successors or counterparts (the “Senior Executives”), for resolution
by good faith negotiations at a mutually convenient location and time within [ * ] after such notice is received.  If the Parties are unable to reach
agreement
with respect to a Dispute between the Parties pursuant to this Section 11.1,
then such Dispute shall be resolved as described in Section 11.2.

             11.2     Mediation. If the Dispute is not resolved within [
 * ] after referral under Section 11.1, or such other
time as mutually agreed upon in writing by the Parties, the Parties shall
submit the matter to non-binding mediation to be administered by the Judicial
Arbitration and Mediation Services, Inc. (the “JAMS”) under its rules governing
mediation in effect at such time (the “Mediation Rules”).  The Party desiring such mediation shall
initiate it in accordance with the Mediation Rules of JAMS.  Upon delivery of the mediation request, the
Parties shall endeavor in good faith to select a neutral mediator who is
acceptable to each Party.  If the
Parties have not selected a mutually acceptable neutral mediator within five
(5) business days after delivery of the mediation request, they shall notify
the JAMS and request JAMS to appoint a mediator in accordance with the Mediation
Rules.  Unless otherwise agreed upon by
the Parties, all mediation sessions shall be held at the JAMS regional office
within California.  The Parties shall
endeavor in good faith to resolve the Dispute through the mediation process
contemplated by this Section and neither Party shall be entitled unilaterally
to terminate the mediation prior to  [ * ] after the appointment of a mediator.  Upon any termination of such mediation
proceeding by either Party after such [ * ] period, the Parties may submit the Dispute to the
appropriate court of law pursuant to Section 11.3.

             11.3     Court of Law.  Any Dispute
under this Agreement that is not settled pursuant to Sections 11.1 or 11.2
shall be finally decided in the appropriate court of law or equity.  Except as otherwise expressly provided in
this Agreement, the costs of such legal action, including court fees, shall be
borne equally by the Parties and each Party shall bear its own costs and
attorneys’ and witness’ fees incurred in connection with the litigation.

             11.4     Confidentiality. The Parties hereby mutually agree that the
existence, terms, content and decision of any Dispute resolution pursuant to
Section 11.1 or 11.2, as well as all information or documents relating thereto,
shall be maintained in confidence and not be given, shown, disclosed to or
discussed with any Third Party, except (a) by prior written agreement of both
Parties; (b) during any legal proceeding to protect or secure a Party’s rights
under such Dispute resolution; (c) to counsel and accountants who shall agree
to maintain its confidentiality; (d) to the extent required by applicable
reporting requirements; and (e) upon compulsory legal process.

12.        MISCELLANEOUS

             12.1     Relationship of Parties. It is expressly agreed that Diversa
and IBP shall be
independent contractors and that nothing in this Agreement is intended or shall
be deemed to constitute a partnership, agency, distributorship,
employer-employee or joint venture relationship between the Parties.  No Party shall incur any debts or make any
commitments for the other, except to the extent, if at all, specifically
provided herein.

             12.2     Governing Law. This Agreement shall be governed by and construed in
accordance with
the laws of the State of California without regard to those provisions governing
conflicts of law.

             12.3     Binding Effect. This Agreement and all rights and obligations
hereunder shall inure to the benefit of and be binding upon the Parties, their
Affiliates, and their respective lawful successors and assigns (including,
without limitation, any successor to a Party upon a Change of Control).

             12.4     Assignment. Except as otherwise provided herein, neither this
Agreement nor any interest hereunder will be assignable in part or in whole by
any Party without the prior written consent of the other Party; provided,
however, that either Party may assign this Agreement to any of its Affiliates
or to any successor by merger or sale of substantially all of its business to
which this Agreement relates (provided that, in the event of such merger or
sale, no intellectual property of any acquiring corporation that is not a Party
on the Effective Date shall be included in the technology licensed
hereunder).  This Agreement will be
binding upon the successors and permitted assigns of the Parties.  Any assignment which is not in accordance
with this Section shall be void.

             12.5     Notices. All notices, requests, demands and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given upon the date
of receipt if delivered by hand, recognized international overnight courier or
confirmed facsimile transmission to the following addresses or facsimile
numbers: 

	If
  to IBP:	If
  to Diversa:
	[ * ]	[ * ]
	 	 
	 	 
	 	 
	 	 
	 	 
	With
  a copy to:	with
  a copy to:
	[ * ]	[ * ]
	 	 
	 	 
	 	 
	 	 
	 	 

             Either Party may change its
designated address and facsimile number by notice to the other Party in the
manner provided in this Section.

             12.6     Exports. The Parties acknowledge that the export of technical data, materials or

Products is subject to the exporting Party receiving any necessary export
licenses and that the Parties cannot be responsible for any delays attributable
to export controls which are beyond the reasonable control of either Party.  Diversa and IBP agree not to export or
re-export, directly or indirectly, any information, technical data, the direct
product of such data, samples, Products or equipment received or generated
under this Agreement in violation of any applicable export control laws or
governmental regulations.  Diversa and
IBP agree to obtain similar covenants from their licensees, Sublicensees and
contractors with respect to the subject matter of this paragraph.

             12.7     Amendment and Waiver. This Agreement may be amended,
supplemented, or
otherwise modified only by means of a written instrument signed by both
Parties.  Any waiver of any rights or
failure to act in a specific instance shall relate only to such instance and
shall not be construed as an agreement to waive any rights or fail to act in
any other instance, whether or not similar.

             12.8     Severability. In the event that any provision of this Agreement
shall, for any reason, be held to be invalid or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other provision
hereof, and the Parties shall negotiate in good faith to modify the Agreement
to preserve (to the extent possible) their original intent.

             12.9     Third Parties.  Nothing in
this Agreement, express or implied, is intended to confer upon any Party, other
than the Parties hereto and their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.

             12.10   Entire Agreement. Subject to any applicable provisions of the
Confidential Disclosure Agreement between the Parties executed on July 17,
2000, that do not contradict the terms of this Agreement, this Agreement and
the exhibits hereto constitute the entire agreement between the Parties with
respect to the subject matter hereof and supersede all prior and
contemporaneous agreements, representations, and understandings of the
Parties.  No Party hereto shall be
liable or bound to the other in any manner by any warranties, representations
or covenants with respect to the subject matter hereof except as specifically
set forth herein.

             12.11   Regulatory Filings. IBP shall have sole responsibility for making all
regulatory filings worldwide, including, without limitation, all filings
required by the Biodiversity Convention and other legislation related to the
ownership or use of biological resources, and obtaining the necessary approvals
to market Products.  Diversa will
cooperate to provide information required to make and maintain such filings, as
appropriate.

             12.12   Force Majeure.  Neither
Party shall be held liable or responsible to the other Party, nor be deemed to
be in breach of this Agreement, for failure or delay in fulfilling or
performing any provisions of this Agreement (other than payment obligations)
when such failure or delay is caused by or results from any cause whatsoever
outside the reasonable control of the Party concerned including, but not
limited to, fire, explosion, breakdown of plant, damage to plant material by
pests or otherwise, strike, lock-out, labor disputes, casualty or accident,
lack or failure of transportation facilities, flood, lack or failure of sources
of supply or of labor, raw materials or energy, civil commotion, embargo, any
law, regulation, decision, demand or requirement of any national or local
government or authority.  The Party
claiming relief shall, without delay, notify the other Party by registered
airmail or by telefax of the interruption and cessation thereof and shall use
its best efforts to remedy the effects of such hindrance with all reasonable
dispatch.  The onus of proving that any
such Force Majeure event exists shall rest upon the Party so asserting.  During the period that one Party is prevented
from performing its obligations under this Agreement due to a Force Majeure event,
the other Party may, in its sole discretion, suspend any obligations that
relate thereto.  Upon cessation of such
Force Majeure event the Parties hereto shall use their best efforts to make up
for any suspended obligations.  If such
Force Majeure event is anticipated to continue, or has existed for nine (9)
consecutive months or more, this Agreement may be forthwith terminated by
either Party by registered airmail or by telefax.  In case of such termination the terminating Party will not be
required to pay to the other Party any indemnity whatsoever.

             12.13   Withholding. To the extent any Party is required by law to
withhold or to make tax payments on behalf of or with respect to the other
Party, the first Party may withhold such amounts and make such tax payments as
so required.  For purposes of this
Agreement, any such payments or withholdings shall be treated as a payment to
Party on behalf of whom the withholding or payment was made.

             12.14   No Trademark Rights. Except as otherwise provided herein or agreed to in
advance in writing, no right, express or implied, is granted by this Agreement
to use in any manner the names “IntraBiotics” or “Diversa,” or any other trade
name or trademark of a Party or the names of any employees thereof, for any
purpose other than for the Parties’ own internal purposes.

             12.15   Counterparts.  This
Agreement may be executed via facsimile and in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument, and shall become effective when there
exist copies hereof which, when taken together, bear the authorized signatures
of each of the Parties hereto.  Only one
such counterpart signed by the Party against whom enforceability is sought
needs to be produced to evidence the existence of this Agreement.

             12.16   Titles and
Subtitles; Form of Pronouns; Construction and Definitions.  The titles
of the sections and paragraphs of this Agreement are for convenience only and
are not to be considered in construing this Agreement.  All pronouns used in this Agreement shall be
deemed to include masculine, feminine and neuter forms, the singular number
includes the plural and the plural number includes the singular.  Unless the context otherwise requires, the
term “including” shall mean “including, without limitation.”

             IN WITNESS WHEREOF,
the undersigned have duly executed and delivered this Agreement as a sealed
instrument effective as of the date first above written.

	 	DIVERSA CORPORATION	 
	 	By:  
  /s Jay M. Short

	 
	 	Name: 
  Jay M. Short, Ph.D.	 
	 	Title: 
  President and Chief Executive Officer	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	INTRABIOTICS PHARMACEUTICALS, INC	 
	 	By: 
  /s/ Kenneth J. Kelley

	 
	 	Name: 
  Kenneth J. Kelley	 
	 	Title: 
  Chairman and Chief Executive Officer

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