Item 1.02. Termination of Material Definitive Agreement.

Pursuant to a letter dated March 7, 2007, Diversa Corporation, a Delaware corporation ("Diversa"), terminated that certain Distribution Agreement, dated January 1, 2005, and the Amendment thereto dated August 1, 2005 (the "Agreement"), between Diversa and Valley Research inc. ("VRI") covering the enzyme Diversa currently markets under the Fuelzyme-LF label (which VRI has marketed and sold under the Valley "Ultra-Thin"™ label). Diversa filed a redacted version of the Agreement as an exhibit to Diversa's Annual Report on Form 10-K for the year ended December 31, 2005.

Under the Agreement, VRI was previously Diversa's exclusive distributor in the United States for the Valley "Ultra-Thin" enzyme for ethanol and high fructose corn sweetener applications, subject to certain limitations, and subject to certain conditions required to be met for such exclusivity to be maintained. On September 22, 2006, Diversa terminated VRI's exclusivity on the basis of certain minimum sales requirements not having been met as of August 24, 2006, as provided by the Agreement. The term of the Agreement was set to expire on February 24, 2011. Diversa's termination of the Agreement was based on, among other things, VRI's failure to meet certain minimum purchase requirements for the Valley "Ultra-Thin" enzyme. Specifically, VRI failed to purchase a contractually-provided minimum amount of the Valley "Ultra-Thin" enzyme from Diversa within one year of the U.S. Food and Drug Administration's Center for Veterinary Medicine's approval of the Valley "Ultra-Thin" enzyme. Pursuant to the Agreement, the termination was effective immediately upon VRI's receipt of notice from Diversa of its intention to terminate the Agreement.

On December 7, 2006, VRI filed a civil complaint in San Diego Superior Court against Diversa, alleging breach of contract. In the complaint, VRI alleges that the Valley "Ultra-Thin"™ product failed to meet certain "industry-standard" specifications, which caused VRI to be unable to satisfy certain contractual requirements in the Agreement. In the complaint, VRI seeks money damages for Diversa's alleged breach of contract, and potentially for additional damages for termination of VRI's exclusivity. Diversa believes that the claims made by VRI have no merit, and Diversa intends to defend itself vigorously. On January 8, 2007, Diversa filed a response to VRI's complaint as well as a cross-complaint in which Diversa alleges that VRI breached the Agreement by failing to meet its minimum sales requirements and by failing to pay for certain product provided to VRI pursuant to the Agreement. The cross-complaint also alleges that VRI wrongfully seeks a monopoly on the distribution of the Valley "Ultra-Thin" enzyme in violation of California law and seeks indemnification and declaratory relief.

---