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New Venture LLC Agreement 06-29-2000
"Initial Term" means the
period of time from the date of this Agreement
until
five (5) years thereafter.
"Intellectual Property"
means all patents, copyrights, trademarks,
trade
names, service marks or logos, and all applications therefore or
registrations
thereof, as well as all trade secrets, industrial property rights,
technical
information, management information systems, drawings, designs,
processes
and quality control data and all similar materials recording or
evidencing
proprietary expertise or information owned by a Member in the
Approved
Fields or jointly owned by the Members in the Approved Fields, and all
licenses
or sublicenses of any of the foregoing granted to a Member or one or
more
of their Affiliates in the Approved Fields from any Third Party (to the
extent
such licenses permit the sublicense thereof to the Company on
commercially
reasonable terms), or all licenses or sublicenses of any of the
foregoing
granted to the Company in the Approved Fields.
"LLC License" means the
license agreement relating to Intellectual
Property
which is referenced in Schedule 3 and others that may exist in the
future.
"Majority in Interest" means
the Members holding more than fifty
percent
(50%) of the Percentage Interests of all Members entitled to vote on a
matter.
"Manufacturing Agreement"
means the Contract Manufacturing Agreement
entered
into between the Company and the Dow Member as of the date of this
Agreement
whereby the Dow Member provides manufacturing services to the Company
as
a Preferred Supplier, the form of which is attached hereto as Schedule 6.
"Member" has the meaning
provided for in Section 3.1.
"Membership Interest" means
the ownership interest of a Member in the
Company,
including a Member's right to share in the Company's items of income,
gain,
loss, deduction, credits and similar items, and the right to receive
distributions
from the Company, as well as a Member's rights to vote and
otherwise
participate in the operation or affairs of the Company as provided for
herein
and under the Act.
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<PAGE>
"Net Cash Flow" means the
excess, if any, of (i) Revenues and the
amount
of any decrease in Reserves over (ii) Expenses and the amount of any
increase
in Reserves.
"Percentage Interest" means,
for each Member, the percentage set forth
opposite
its name on Schedule 1 attached hereto.
"Person" means any general
partnership, limited partnership, joint
venture,
association, corporation, limited liability company, trust or other
entity
and, where the contexts so permits or requires, a natural person.
"Preferred Supplier" shall
mean the Member which is the Applicable
Preferred
Supplier for the relevant Preferred Supplier Area.
"Preferred Supplier Area"
shall mean each of the areas of [***].
"Revenues" means cash
receipts of any sort obtained by the Company
(other
than those attributable to Capital Contributions and the amount of any
indebtedness
of the Company).
"Reserve" means a reserve
established by the Board of Directors for
working
capital and for the reasonably anticipated fees, costs and Expenses of
the
Company, in an amount established from time to time by the Board of
Directors
as provided for herein. The amount of the initial Reserve shall be and
shall
be adjusted, if necessary, upon completion of the initial Budget.
"Third Party " means any
Person other than the Dow Member or the
Diversa
Member or their respective Affiliates.
ARTICLE 2
Offices and
Statutory Agent
2.1 Registered Office and Statutory
Agent. The registered office and
statutory
agent in Delaware required by the Act shall be as set forth in the
Certificate
until such time as the registered office or statutory agent is
changed
in accordance with the Act.
2.2 Principal Executive Office. The
principal executive office for the
transaction
of the business of the Company may be fixed by the Board of
Directors
at any place within the United States of America, whether within or
without
the State of Delaware. Unless and until changed by the Board of
Directors
as provided for herein, the principal executive office of the Company
shall
be located at 10665 Sorrento Valley Road, San Diego, California.
2.3 Business. The Company may carry on
any lawful business, purpose or
activity
relating to the Approved Business which is permitted to be carried on
by
a limited liability company under the Act.
*CONFIDENTIAL
TREATMENT REQUESTED
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<PAGE>
ARTICLE 3
Company Members; Classes; Voting
Rights; Meetings of Members
3.1 Members. Each party to this
Agreement shall be a member of the
Company,
within the meaning of the Act, until they cease to be a member in
accordance
with the provisions of the Act, the Certificate or this Agreement
(the
"Members"). The names and addresses of the initial Members
(individually an
"initial
Member" and collectively the "initial Members") are set forth on
Schedule
1 hereto. Additional Persons may be admitted as Members on the express
terms
and conditions expressly set forth herein.
3.2 Voting Rights
(a) Except as may otherwise be
provided by this Agreement or the Act or
the
Certificate, the affirmative vote of a Majority in Interest on a matter
shall
constitute the act of the Members.
(b) The Members shall have the right
to change the number of Directors
and
elect Directors in accordance with Sections 4.2, 4.3 and 4.4 of this
Agreement,
and shall have such other rights to vote and act on the matters and
affairs
of the Company as are expressly provided for herein or are required by
the
Act to be voted upon by the Members.
(c) Only Persons whose names are
listed as Members on the records of
the
Company at the close of business on the Business Day immediately preceding
the
day on which notice of the meeting is given or, if such notice is waived, at
the
close of business on the Business Day immediately preceding the day on which
the
meeting of Members is held (except that the record date for Members entitled
to
give consent to action without a meeting shall be determined in accordance
with
Section 3.7) shall be entitled to receive notice of and to vote at such
meeting,
and such day shall be the record date for such meeting. Any Member
entitled
to vote on any matter shall be entitled to cast that number of votes
equal
to such Member's Percentage Interest and, other than for elections of a
Director,
may cast part of the votes in favor of the matter and refrain from
exercising
the remaining votes or vote against the matter, but if the Member
fails
to specify the number of votes such Member is exercising affirmatively, it
will
be conclusively presumed that the Member's approving vote is with respect
to
all votes such Member is entitled to cast. Such vote may be viva voce or by
ballot;
provided, however, that all elections for Directors must be by ballot
upon
demand made by a Member at any election and before the voting begins.
3.3 Place of Meetings. All meetings of
the Members shall be held at any
place
within or without the State of Delaware which may be designated either by
the
Board of Directors or by the written consent of all Members entitled to vote
thereat
given either before or after the meeting and filed with the secretary.
In
the event of any inconsistency in the places designated by the Board of
Directors
or the Members as herein provided, or in the absence of any such
designation,
Members' meetings shall be held at the principal executive office
of
the Company.
3.4 Meetings of Members; Notice of
Meetings. Meetings of the Members
for
the purpose of taking any action permitted to be taken by the Members may be
called
by any Director, or
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<PAGE>
by
Members holding not less than twenty percent (20%) of the aggregate
Percentage
Interests entitled to vote at the meeting. Upon request in writing
that
a meeting of Members be called for any proper purpose, the secretary
forthwith
shall cause notice to be given to the Members entitled to vote that a
meeting
will be held at a time requested by the person or persons calling the
meeting,
not less than thirty (30) nor more than sixty (60) days after receipt
of
the request unless otherwise agreed to in writing by all Members. Except in
special
cases where other express provision is made by statute, notice of such
meetings
shall be given personally, in writing, via electronic means or via
facsimile
to each Member entitled to vote not less than thirty (30) nor more
than
sixty (60) days before the meeting. Such notices shall state:
(a) The place, date and hour
of the meeting;
(b) Those matters which the
Directors, at the time of the
mailing of the notice, intend to
present for action by the Members; and
(c) The names of the
Directors intended at the time of the
notice to be presented for election, if
any.
3.5 Quorum. The presence at any
meeting in person or by proxy of
Members
holding more than fifty percent (50%) of the aggregate Percentage
Interests
entitled to vote at such meeting shall constitute a quorum for the
transaction
of business. The Members present at a duly called or held meeting at
which
a quorum is present may continue to transact business until adjournment,
notwithstanding
the withdrawal of enough Members to leave less than a quorum, if
any
action taken (other than adjournment) is approved by at least a majority of
the
votes required to constitute a quorum.
3.6 Waiver of Notice. The actions of
any meeting of Members, however
called
and noticed, and wherever held, shall be as valid as if taken at a
meeting
duly held after regular call and notice, if a quorum be present either
in
person or by proxy, and if, either before or after the meeting, each person
entitled
to vote, not present in person or by proxy, signs a written waiver of
notice
or a consent to a holding of the meeting, or an approval of the minutes
thereof.
The waiver of notice, consent or approval need not specify either the
business
to be transacted or the purpose of any regular or special meeting of
Members,
except that if action is taken or proposed to be taken for approval of
any
of those matters specified in Section 3.2(b) of this Agreement, the waiver
of
notice, consent or approval shall state the general nature of such proposal.
All
such waivers, consents or approvals shall be filed with the Company records
and
made a part of the minutes of the meeting.
Attendance of a Member at a meeting
shall also constitute a waiver of
notice
of and presence at such meeting, except when the Member objects, at the
beginning
of the meeting, to the transaction of any business because the meeting
is
not lawfully called or convened, and except that attendance at a meeting is
not
a waiver of any right to object to the consideration of matters required to
be
included in the notice but not so included, if such objection is expressly
made
at the meeting.
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<PAGE>
3.7 Action by Members Without a
Meeting. Directors may be elected or
removed
without a meeting by a consent in writing, setting forth the action so
taken,
signed by Members entitled to elect or remove Directors in accordance
with
Section 4.3. In addition, a Director may be elected at any time to fill a
vacancy
by a written consent signed by Members entitled to elect or remove
Directors
in accordance with Section 4.3. Notice of any such election or removal
shall
be promptly given to all other Members.
Any other action which, under any
provision of the Act or the
Certificate
or this Agreement, may be taken at a meeting of the Members, may be
taken
without a meeting, and without notice except as hereinafter set forth, if
a
consent in writing, setting forth the action so taken, is signed by Members
having
not less than the minimum number of votes that would be necessary to
authorize
or take such action at a meeting at which all Members entitled to vote
thereon
were present and voted. All such consents shall be filed with the
secretary
of the Company and shall be maintained in the Company's records.
Unless the consents of all Members entitled to
vote have been solicited
in
writing:
(a) Notice of any proposed Member
approval of any of the matters set
forth
in Section 3.2(b) without a meeting by less than unanimous written consent
shall
be given to those Members entitled to vote who have not consented in
writing
at least ten (10) days before the consummation of the action authorized
by
such approval; and
(b) Prompt notice shall be given of
the taking of any other action
approved
by Members without a meeting by less than unanimous written consent to
those
Members entitled to vote who have not consented in writing.
Unless, a record date has been fixed
for the determination of Members
entitled
to notice of and to give such written consent, the record date for such
determination
shall be the day on which the first written consent is given.
Any Member giving a written consent,
or the Member's proxy holders, or
a
personal representative of the Member or their respective proxyholders,
may
revoke
the consent by a writing received by the secretary prior to the time that
written
consents of the number of votes required to authorize the proposed
action
have been filed with the secretary, but may not do so thereafter. Such
revocation
is effective upon its receipt by the secretary or, if there shall be
no
person then holding such office, upon its receipt by any other officer or
Director
of the Company.
3.8 Members May Participate in Other
Activities; Limitations
(a) [***]
*CONFIDENTIAL
TREATMENT REQUESTED
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<PAGE>
(b) [***]
(c) [***]
ARTICLE 4
Management
4.1 Board of Directors. Subject to the
provisions of the Act and any
limitations
in the Certificate and this Agreement as to action required to be
authorized
or approved by the Members, the business and affairs of the Company
shall
be managed and all its powers shall be exercised by the Members, who have
in
turn delegated their authority to manage the business and affairs of the
Company
and to exercise all of the Company's powers to a committee of Persons
referred
to herein as the board of directors of the Company (the "Board of
Directors").
Without prejudice to such general powers, but subject to the same
limitations,
it is hereby expressly declared that the Board of Directors shall
have
the following powers:
(a) To conduct, manage and control the
business and affairs of the
Company
and to make such rules and regulations therefor not
inconsistent with
law
or with the Certificate or with this Agreement, as the Board of Directors
shall
deem to be in the best interests of the Company;
*CONFIDENTIAL
TREATMENT REQUESTED
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<PAGE>
(b) To appoint and remove at pleasure
the officers, agents and
employees
of the Company, prescribe their duties and fix their compensation;
(c) To borrow money and incur
indebtedness for the purposes of the
Company
and to cause to be executed and delivered therefor,
in the Company's
name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations
or other evidences of debt and securities therefor;
(d) To designate an executive and
other committees, each consisting of
two
or more Directors, to serve at the pleasure of the Board of Directors, and
to
prescribe the manner in which proceedings of such committees shall be
conducted;
(e) To acquire real and personal
property, arrange financing, enter
into
contracts and complete all other arrangements needed to effectuate the
business
of the Company; and
(f) To take such other actions, and to
exercise such other authority,
as
the board of directors of a corporation organized under the laws of the State
of
Delaware would take and exercise.
4.2 Number, Classes and Qualifications
of Directors.
(a) The number of Directors which
shall constitute the Board of
Directors
shall be not less than four (4) nor more than eight (8). The number of
Directors
may be varied from time to time by a vote of the Members, as provided
for
in Section 3.2(b) hereof. The initial number of Directors which shall
constitute
the Board of Directors shall be six (6). The President of the Company
will
be elected to the Board of Directors as a non-voting member.
(b) A Director need not be a Member of
the Company but must be a
natural
person who is at least eighteen (18) years of age.
4.3 Election and Removal of Directors.
The Directors shall be elected
as
follows:
(a) At each election of Directors,
each Member shall be entitled to
appoint
a number of Directors to the Board of Directors equal to one-half (1/2)
of
the then-current size of the Board of Directors. The Directors in office
immediately
prior to any such election shall be automatically removed, effective
upon
the appointment of the new Board of Directors. Upon any reduction in the
size
of the Board of Directors, as provided for herein, the Members shall agree
(at
the time of such reduction) upon the members of the Board to be removed upon
such
reduction in the size of the Board of Directors becoming effective;
provided
however, that in the event the Members do not so agree, then a number
of
directors equal to one-half (1/2) of each of the Member's previously
appointed
Directors (rounded down to the nearest whole number, if applicable)
shall
be automatically removed from the Board. Unless otherwise specified by the
Member
whose Directors are so removed, such Directors removed shall be so
removed
in alphabetical order by reference to their last names.
(b) Each Member may remove the Director
or Directors appointed by such
Member,
at any time and from time to time, with or without cause, and without
prior
notice; provided
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<PAGE>
however,
that notice shall be provided to the other Members of any such removal
as
expeditiously as possible after any such removal and, in all events, within
five
(5) days thereof.
4.4 Vacancies, Resignations,
Replacements.
(a) A vacancy shall be deemed to exist
in case of the death,
resignation
or removal, occurrence of a Bankruptcy Event, mental incompetence
adjudged
by a court of competent jurisdiction in any state or country
(including,
without limitation, any territory, dependency or possession of the
United
States of America), or conviction (or plea of nolo contendere or similar
plea)
by any court in any state or country (including, without limitation, any
territory,
dependency or possession of the United States of America) of any
felony
or any misdemeanor involving moral turpitude of any Director. A vacancy
shall
also be deemed to exist if the authorized number of Directors be
increased.
(b) Any Director may resign effective
upon giving thirty (30) days
prior
written notice to each Member of the Company, unless the notice specifies
a
later time for the effectiveness of such resignation.
(c) The Member that nominated the
Director who is resigning, who is
removed,
who died or who is otherwise deemed to have left the Board pursuant to
the
provisions of paragraph (a) above is authorized to fill the vacancy and
shall
have power to elect a successor to take office when the resignation,
removal
or deemed vacancy becomes effective.
4.5 Initial Directors. Schedule 2 to
this Agreement shall be amended as
soon
as practicable following the execution of this Agreement to set forth the
names
and addresses of the initial Directors. The Initial Directors, listed on
such
Schedule 2 shall hold office from and after the date Schedule 2 is so
amended
until their removal pursuant to this Agreement or until their respective
successors
are elected and qualified pursuant to this Agreement.
4.6 Proprietary Invention and
Non-Disclosure Agreements; Directors May
Otherwise
Engage in Activities Which Compete With the Company. Each Director of
the
Company must sign a proprietary invention and non-disclosure agreement with
the
Company. Except as otherwise expressly provided for in such agreement and
except
as expressly provided for in Article 3 hereof, each such Director shall,
either
individually or with others, have the right to participate in other
business
activities and ventures of every kind, whether or not such other
business
activities and ventures compete with the Company. No Director shall be
obligated
to offer to the Company any opportunity to participate in any such
other
business activity or venture. The Company shall not have any right to any
income
or profit derived from any such other business activity or venture of a
Director.
ARTICLE 5
Meetings of Board of
Directors
5.1 Place of Meetings. Meetings of the
Board of Directors shall be held
at
any place within or without the State of Delaware that has been designated
from
time to time by the Board
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<PAGE>
of
Directors. In the absence of such designation, meetings of the Board of
Directors
shall be held at the principal executive office of the Company, except
as
provided in Section 5.2.
5.2 Meetings of Directors. The Board
of Directors shall meet quarterly
on
the dates determined by the Board of Directors. Meetings of the Board of
Directors
for any purpose or purposes may be called at any time by any Director.
Notice
of the time and place of meetings shall be delivered personally or by
telephone
to each Director, or sent by first-class mail or by electronic mail or
facsimile
transmission addressed to him or her at his or her address as it
appears
upon the records of the Company. Notice of a meeting of the Board of
Directors
shall be given at least thirty (30) days prior to the time of the
holding
of the meeting. Any notice given personally or by telephone may be
communicated
to either the Director or to a person at the office of the Director
whom
the person giving the notice has reason to believe will promptly
communicate
it to the Director. Such deposit in the mail, delivery to a common
carrier,
transmission by electronic means or delivery, personally or by
telephone,
as above provided, shall be due, legal and personal notice to such
Directors.
The notice need not specify the purpose of the meeting.
5.3 Quorum; Alternates; Participation
in Meetings By Conference
Telephone
Permitted; Vote Required for Action; Confidentiality.
(a) Except as hereinafter provided,
presence of two (2) of the
authorized
number of Directors appointed by each of the Dow Member and the
Diversa
Member at a meeting of the Board of Directors constitutes a quorum for
the
transaction of business. A meeting at which a quorum is initially present
may
continue to transact business notwithstanding the withdrawal of one or more
Directors;
provided however, that if the total number of Directors is thereby
reduced
to a number less than four (4), then in such event the sole business
which
may thereafter be taken by the Board of Directors at such meeting shall be
to
adjourn such meeting. If the meeting is adjourned for more than twenty-four
(24)
hours, notice of any adjournment to another time or place (other than
adjournments
until the time fixed for the next regular meeting of the Board of
Directors,
as to which no notice is required) shall be given prior to the time
of
the adjourned meeting to the Directors who were not present at the time of
the
adjournment.
(b) Each Director may, by written
notice given to the chairman, appoint
an
alternate to attend and vote at meetings, or at any particular meeting, if
the
Director is unable to attend. The presence of an alternate at any meeting
shall
be deemed to be presence of the Director at such meeting for all purposes,
and
the vote of such alternate shall be deemed to be the vote of the relevant
Director.
No Director may retract the vote of any duly appointed alternate on
behalf
of such Director after the close of the meeting at which such vote is
made.
In the event that the Director who appointed an alternate attends a
meeting,
the appointment of such alternate shall be ineffective for such
meeting,
and the alternate shall have no right to be present or to participate
in
that meeting.
(c) Directors may participate in a
meeting through use of conference
telephone
or similar communications equipment, so long as all Directors
participating
in such meeting can communicate with and hear one another.
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<PAGE>
(d) Except as provided in paragraph
(e) below, every act or decision
done
or made by a majority of the Directors present at a meeting duly held at
which
a quorum is present shall be regarded as the act of the Board of
Directors.
(e) The affirmative vote of a simple
majority of the Directors of the
Company
entitled to vote on a matter, in which simple majority at least one
Director
appointed by the Diversa Member and one Director
appointed by the Dow
Member
voted in favor of such action, shall be required to take any of the
following
actions:
(i)
approve a voluntary dissolution of the Company;
(ii) agree to continue the
business of the Company after an
event of dissolution specified in
Section 10.3;
(iii) approve a merger,
consolidation or other reorganization
of the Company;
(iv) change the authorized
number of Directors within the
range specified in Section 4.2(a);
(v) approve any contract or
other transaction with a Director
or officer, including compensation of
Directors and officers;
(vi) authorize or approve a
sale or lease of all or any
material portion (for purposes hereof,
the term "material" shall mean
having a value of not less than [***])
of the assets of the Company;
(vii) admit any additional
Members to the Company;
(viii) approve
indemnification of any Director, Member or
officer of the Company as authorized
by Article 11 of this Agreement;
(ix) approve any transactions
or agreements with Members or
their Affiliates;
(x) enter into, terminate or
amend any transaction or
agreement entered into pursuant to the
Preferred Supplier provisions of
Section 14.3 hereof;
(xi) enter into, amend or
terminate any material contract (or
series of related contracts, which, in
the aggregate, are material)
between the Company and any other
Person (unless and until changed by
the Board of Directors, the term
"material" shall mean a contract
which: (i)
has a term in excess of two (2) years and is not terminable
by the Company, without more than thirty
(30) days prior written notice
and without fee or penalty; (ii)
requires payments in excess of [***];
or (iii) requires or purports to
require the Company or any Member to
indemnify any Person);
*CONFIDENTIAL
TREATMENT REQUESTED
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<PAGE>
(xii) incur any indebtedness
for borrowed money or grant a
lien or other encumbrance on any asset
of the Company to a third party
except in the case of leases entered
into in the ordinary course of
business;
(xiii) lend funds to any
Person, or enter into any option,
short sale, forward, swap, collar,
derivative or other, similar,
financial transaction with any other
Person;
(xiv) guarantee any
obligation of any other Person, or
indemnify any Person (except as
otherwise expressly set forth herein);
(xv) create or modify any
employee benefit plan (including any
stock appreciation right, phantom
stock or other, similar, plan);
(xvi) change the amount of
the Company's Reserves;
(xvii) approve a Budget or
Forecast as provided for in Section
14.1 hereof, and any amendments or
other modifications thereto;
(xviii) approve any Project
and the material terms and
conditions of such Project, and any
amendment or other modification
thereto, and any decision to terminate
consideration of a proposed
project as provided for in Section
14.2 hereof;
(xix) adopt any field as an
Approved Field (other than the
Exclusive Fields and the Limited
Exclusive Fields);
(xx) except for matters
expressly provided for in the Budget
or in an approved Project, approve any
capital expenditures or other
expenditures which are material (or
any series of related capital or
other expenditures, which, in the
aggregate, are material); provided,
that for purposes of this clause, the
term "material" shall mean [***];
(xxi) acquire or approve the
acquisition of stock or any other
equity interest (including via options
and convertible debt) in any
Person;
(xxii) approve additional
capital contributions and the amount
thereof other than any capital
contribution which is set forth in an
approved Budget or approved Project;
(xxiii) permit the Company to
undertake any Business
Activities other than the Approved
Business;
(xxiv) change the principal
executive offices of the Company;
(xxv) change the Company's
auditors or accountants;
*CONFIDENTIAL
TREATMENT REQUESTED
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<PAGE>
(xxvi) implement or change
any accounting or tax policy of the
Company or the Company's tax status as
a partnership for income tax
purposes or make any election relating
thereto (except as otherwise
required by law);
(xxvii) implement or modify
any policies or procedures of the
Company relating to Environmental
Matters;
(xxviii) respond to any
judicial or administrative action by
or against the Company relating to
Environmental Matters;
(xxix) remove or appoint the
president or the secretary of the
Company;
(xxx) enter into or amend any
employment, consulting or other,
similar agreement between the Company
and any Person on terms which do
not permit the Company to terminate
such employment, consulting, or
other similar relationship without
notice, without cause and without
fee, penalty or payment of any kind;
(xxxi) sell, exchange,
transfer, assign, license or sublicense
any Intellectual Property other than
as expressly provided for in an
approved Project;
(xxxii) extend the Research
Term (as defined in the IE R&D
Agreement) for any period beyond the
extended Research Term under the
IE R&D Agreement described in
Section 5.3(f); and
(xxxiii) enter into any
agreement to do any of the foregoing.
(f) The affirmative vote of [***]
shall be required to extend the
Research
Term for the first [***] period after the initial five (5) year
Research
Term under the IE R&D Agreement.
(g) At the end of any extended
Research Term under the IE R&D Agreement
described
in Section 5.3(f), the Board of Directors will meet to discuss whether
(i) the activities of the Company, the Diversa
Member and the Dow Member will
continue
under the existing agreements among the parties, (ii) all or a portion
of
the activities of the Company, the Diversa Member and
the Dow Member will
continue
on terms to be agreed by the respective parties, (iii) the Diversa
Member
and the Dow Member will negotiate a new agreement, or (iv) the Diversa
Member
or the Dow Member will exercise rights under Section 10.2(b).
5.4 Waiver of Notice; Consent to
Meeting. Notice of a meeting need not
be
given to any Director who signs a waiver of notice or a consent to holding
the
meeting or an approval of the minutes thereof, whether before or after the
meeting,
or who attends the meeting without protesting, prior thereto or at its
commencement,
the lack of notice to such Director. All such waivers, consents
and
approvals shall be filed with the Company's records and made a part of the
minutes
of the meeting.
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 18 of 48-
<PAGE>
5.5 Action by Board of Directors
Without a Meeting. Any action required
or
permitted to be taken by the Board of Directors may be taken without a
meeting
if all the Directors (or their alternates who have been appointed
pursuant
to Section 5.3(b) above) authorized to vote shall individually or
collectively
consent in writing to such action. Such written consent or consents
shall
be filed with the minutes of the proceedings of the Board of Directors.
Such
action by written consent shall have the same force and effect as a
unanimous
vote of the Board of Directors.
5.6 Committees and Subcommittees. The
provisions of this Article 5
shall
also apply, with necessary changes in points of detail, to committees and
subcommittees
of the Board of Directors, if any, and to actions by such
committees
or subcommittees (except for the first sentence of Section 5.2 and
Section
5.3(e) in its entirety, which shall not apply, and except that special
meetings
of a committee or subcommittee may also be called at any time by any
two
members of the committee or subcommittee), unless otherwise provided by this
Agreement
or by the resolution of the Board of Directors designating such
committee
or subcommittee. For such purpose, references to the Directors
collectively
shall be deemed to refer to each such committee or subcommittee,
and
references to "Directors" shall be deemed to refer to members of the
committee
or subcommittee. Initially, the board shall have one committee: the
Research
Management Committee. The respective scope of the duties and
obligations
of such committee is set forth on Schedule 4.
5.7 Chairman. There shall be a
chairman of the Board of Directors who
shall
preside at each meeting of the Board of Directors. The chairman shall have
the
duties and responsibilities of a non-executive chairman of the board of
directors
of a corporation; provided, that the chairman shall be entitled only
to
the same number of votes as any other Director and shall not be entitled to
cast
a tie-breaking vote. The chairman must be a Director and shall serve for a
two-year
term. The first chairman shall be appointed by the Dow Member and the
Diversa
Member shall appoint the succeeding chairman. Thereafter, the
chairmanship
shall alternate each succeeding two-year period between the
appointee
of the Dow Member and of the Diversa Member. If a
chairman resigns or
is
removed before the expiration of such chairman's term, the Member who
appointed
such chairman shall have the right to appoint a successor chairman for
the
remainder of the original chairman's term. A chairman may be removed or
replaced
at any time, without prior notice by the Member who appointed such
chairman;
provided however, that such Member shall, as expeditiously as
possible,
and in all events within five (5) days, provide written notice to the
other
Members of such removal or replacement. Removal or replacement as a
chairman
shall not affect a Director's position as a Director; provided however,
that
a chairman shall be automatically removed at such time, if any, as they
cease
to be a Director. A chairman may resign at any time upon thirty (30) days
prior
written notice to all Members. The Dow Member hereby appoints Fernand
Kaufmann
as the first chairman of the Board of Directors, and Fernand
Kaufmann
is
hereby authorized to execute this Agreement, and any ancillary agreements to
which
the Company is a party, on behalf of the Company.
5.8 Minutes of Meetings of the Board
of Directors.The Secretary of the
Company
will keep the minutes of the meetings of the Board of Directors. The
Secretary
will circulate draft minutes to the members of the Board of Directors
within
thirty (30) days after the applicable meeting of the Board of Directors.
-Page 19 of 48-
<PAGE>
5.9 Confidentiality. The Members agree
that the Board of Directors and
any
approved participants shall maintain the confidentiality of all Confidential
Information
discussed or provided at the meetings.
ARTICLE 6
Officers
6.1 General. Subject to the provisions
of the Act and the Certificate,
the
Board of Directors may determine from time to time to appoint one or more
individuals
who shall be termed officers of the Company. Each officer shall hold
his
or her respective office at the pleasure of the Board of Directors. Except
as
otherwise specifically provided for below, an officer need not be a Member or
Director
of the Company, and any number of offices may be held by the same
person.
The officers of the Company shall include a president. The Company may
also
have, at the discretion of the Board of Directors, such other officers as
may
be designated from time to time by the Board of Directors.
6.2 Appointment and Removal. The
officers shall be appointed by the
Board
of Directors. Each officer, including an officer elected to fill a
vacancy,
shall hold office until his or her successor is elected, except as
otherwise
provided by the Act or the Certificate, unless earlier removed
pursuant
to this Section 6.2. Any officer may be removed, with or without cause,
and
at any time, upon the appropriate vote of the Board of Directors, as
provided
for in Article 5.
6.3 President. The president shall,
subject to the oversight and
control
of the Board of Directors, be responsible for the direction, performance
and
supervision of the Company in accordance with the policies and procedures
established
by the Board of Directors, including, without limitation, preparing
budgets
and reports relating to the Company's activities, hiring and terminating
employees
and consultants of the Company, and negotiating and entering into
agreements
with other Persons within the parameters established by the Board of
Directors.
The president shall have such further powers and shall perform such
further
duties, as may be prescribed for the president by the Board of
Directors.
6.4 Secretary. The duties of the
secretary of the Company shall be
established
by the Board of Directors of the Company. The role of secretary will
be
filled by an employee of the Diversa Member pursuant
to a Services Agreement
between
the Company and such Member.
6.5 Treasurer. The duties of the
treasurer of the Company shall be
established
by the Board of Directors of the Company. The role of treasurer will
be
filled by an employee of the Dow Member pursuant to a Services Agreement
between
the Company and such Member.
ARTICLE 7
Capital
Contributions
7.1 Initial Capital Contributions.
Each Member shall make an initial
Capital
-Page 20 of 48-
<PAGE>
Contribution
to the Company. The Diversa Member and the Dow Member
shall
transfer
or otherwise make available to the Company certain intangibles. [***]
7.2 Additional Capital Contributions.
(a) The Members anticipate that cash
Capital Contributions (in addition
to
those provided for in Sections 7.1 and 7.3 hereof) will be required for the
ordinary
operating needs of the Company, including, without limitation,
management
expenses of the Company and [***]. When such operating needs exist,
the
Board of Directors may require the Members to make additional Capital
Contributions
in such amounts as the Board of Directors may determine. If the
Board
of Directors elects to require additional Capital Contributions (in
addition
to those provided for in Sections 7.1 and 7.3 hereof) by existing
Members,
it shall offer the right to make such Capital Contributions to the then
existing
Members pro rata in accordance with their respective Percentage
Interests.
If a Member refuses to make such Capital Contribution because of lack
of
corporate authority or otherwise, the provisions of Section 7.2(b) will
apply.
[***]
When such Capital Contributions are to
be made in property, rather than
cash,
a value for such property shall be established by the Board of Directors.
Upon
such a Capital Contribution by any new or existing Members such Member
shall
receive a Capital Account credit for each such additional Capital
Contribution
at the time and in the amount that such contribution is made. In no
event
will any Capital Contribution made or required under this Section 7.2
change
the Members' respective Percentage Interests.
(b) If a Member (the
"Noncontributing Member") fails to make any
additional
Capital Contribution (in addition to those provided for in Sections
7.1
and 7.3 hereof) under Section 7.2(a), the other Member(s) (the
"Contributing
Member")
may give the Noncontributing Member notice of such failure. If such
failure
continues for thirty (30) days after such notice has been given, the
Contributing
Member may elect to take any of the following alternative actions
if
it has made all of the Capital Contributions due from it to the Company:
(i)
The Contributing Member may pursue remedies for such
failure to contribute pursuant to
Article 15; or
(ii) The Contributing Member
may contribute to the Company the
cash then due to the Company from the
Noncontributing Member, and the
amount of such cash shall be deemed to
be a loan from the Contributing
Member to the Noncontributing Member
(a "Default Loan") and a Capital
Contribution to the Company, in which
case the Noncontributing Member's
obligation to make such Capital
Contribution shall be
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 21 of 48-
<PAGE>
deemed satisfied. Any Default Loan
shall bear interest at the lesser of
(A) the maximum rate permitted by
applicable law, or (B) the prime rate
as quoted by Bank of America N.A. plus
two percent (2%), and shall be
due and payable in full (including all
accrued interest) within ninety
(90) days after the Contributing
Member contributes the cash then due
to the Company from the
Noncontributing Member. If not sooner repaid,
the Contributing Member shall have the right
to pursue collection of
the amount owed through litigation or
other means consistent with its
collection practices of past due
amounts.
7.3 Dow Member Required Capital
Contributions. The following required
Capital
Contributions shall not impact the respective Percentage Interests of
the
Members for purposes of the provisions of this Agreement.
[***]
[***]
[***]
[***]
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 22 of 48-
<PAGE>
[***]
[***]
7.4 Withdrawal or Reduction of Capital
Contributions.
(a) Except as expressly provided in
this Agreement, no Member shall
have
the right to withdraw from the Company all or any part of its Capital
Contribution.
(b) A Member, irrespective of the
nature of its Capital Contribution,
shall
only have the right to demand and receive cash in return for its Capital
Contribution,
unless the Members shall have unanimously agreed that such Member
may
receive a distribution in kind.
7.5 No Interest on Capital
Contributions. No interest shall be payable
on
or with respect to the Capital Contributions or Capital Accounts of Members.
7.6 Capital Accounts.
(a) A single Capital Account shall be
maintained for each Member
(regardless
of the class of interests owned by such Member and regardless of the
time
or manner in which such interests were acquired) in accordance with the
capital
accounting rules of section 704(b) of the Code, and the regulations
thereunder
(including without limitation section 1.704-1(b)(2)(iv) of the Income
Tax
Regulations). In general, under such rules, a Member's Capital Account shall
be:
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 23 of 48-
<PAGE>
(i)
increased by (A) the amount of money contributed by the
Member to the Company (including the
amount of any Company liabilities
that are assumed by such Member other
than in connection with
distribution of Company property), (B)
the fair market value of
property contributed by the Member to
the Company (net of liabilities
secured by such contributed property
that under section 752 of the Code
the Company is considered to assume or
take subject to), and (C)
allocations to the Member of Company
income and gain (or item thereof),
including income and gain exempt from
tax; and
(ii) decreased by (A) the
amount of money distributed to the
Member by the Company (including the
amount of such Member's individual
liabilities that are assumed by the
Company other than in connection
with contribution of property to the
Company), (B) the fair market
value of property distributed to the
Member by the Company (net of
liabilities secured by such
distributed property that under section 752
of the Code such Member is considered
to assume or take subject to),
(C) allocations to the Member of
expenditures of the Company not
deductible in computing its taxable
income and not properly chargeable
to capital account, and (D)
allocations to the Member of Company loss
and deduction (or item thereof).
(a) Where section 704(c) of the Code
applies to Company property or
where
Company property is revalued pursuant to paragraph (b)(2)(iv)(f) of
section
1.704-1 of the Income Tax Regulations, each Member's Capital Account
shall
be adjusted in accordance with paragraph (b)(2)(iv)(g) of section 1.704-1
and
paragraph (d)(2) of section 1.704-3 (in the case of remedial allocations) of
the
Income Tax Regulations as to allocations to the Members of depreciation,
depletion,
amortization and gain or loss, as computed for book purposes with
respect
to such property.
(b) When Company property is revalued
pursuant to paragraph
(b)(2)(iv)(f)
of section 1.704-1 of the Income Tax Regulations, or is
distributed
in kind (whether in connection with a liquidation and dissolution or
otherwise),
the Capital Accounts of the Members shall first be adjusted to
reflect
the manner in which the unrealized income, gain, loss and deduction
inherent
in such property (that has not been reflected in the Capital Account
previously)
would be allocated among the Members if there were a taxable
disposition
of such property for the fair market value of such property (taking
into
account section 7701(g) of the Code) on the date of distribution.
(c) The treasurer shall make or cause
to be made all necessary
adjustments
in each Member's Capital Account as required by the capital
accounting
rules of section 704(b) of the Code and the regulations thereunder.
7.7 Loans by Members to the Company.
No Member shall be obligated to
lend
money to the Company. No Member may lend money to the Company without the
consent
of the Board of Directors. Any loan by a Member to the Company with the
required
consent of the Board of Directors shall be separately entered on the
books
of the Company as a loan to the Company and not as a Capital Contribution,
shall
bear interest at such rate as may be agreed
-Page 24 of 48-
<PAGE>
upon
by the lending Member and the Board of Directors, and shall be evidenced by
a
promissory note duly executed by at least two (2) Directors on behalf of the
Company
and delivered to the lending Member.
ARTICLE 8
Allocation of Profits and Losses;
Distributions; Tax and Accounting Matters
8.1 Allocations. Each Member's
distributive share of the Company's
total
income, gain, loss, deduction or credit (or items thereof), which total
shall
be as shown on the annual federal income tax return prepared by or at the
direction
of the treasurer or as finally determined by the United States
Internal
Revenue Service or the courts, and as modified by the capital
accounting
rules of section 704(b) of the Code and the Income Tax Regulations
thereunder,
as implemented by Section 7.6 hereof, as applicable, shall be
determined
as follows:
(a) General Allocation. Except as
otherwise provided in this Section
8.1,
items of income, gain, loss, deduction and credit shall be allocated among
the
Members proportionately in accordance with their Percentage Interests.
(b) Limitation. Notwithstanding
anything in Section 8.1(a) to the
contrary,
items of loss and deduction allocated to any Member pursuant to this
Section
8.1 with respect to any taxable year shall not exceed the maximum amount
of
such items that can be so allocated to such Member without causing such
Member
to have a deficit balance in its Capital Account in excess of the amount
of
such Member's obligation, if any, to restore such deficit Capital Account,
computed
in accordance with the rules of section 1.704-1(b)(2)(ii)(d) of the
Income
Tax Regulations (including such Member's share of "minimum gain" and
"partner
nonrecourse debt minimum gain" as provided in sections 1.704-2(g) and
2(i)(5) of the Income Tax Regulations). Any such items of
loss or deduction in
excess
of the limitation set forth in the preceding sentence shall be allocated
to
those Members who would not be subject to such limitation, proportionately in
accordance
with their Percentage Interests.
(c) Allocations With Respect to
Property. Solely for tax purposes, in
determining
each Member's allocable share of the taxable income or loss of the
Company,
depreciation, depletion, amortization and gain or loss with respect to
any
contributed property, or with respect to revalued property where the
Company's
property is revalued pursuant to paragraph (b)(2)(iv)(f) of section
1.704-1
of the Income Tax Regulations, shall be allocated to the Members under
the
traditional with curative method as provided under Section 1.704-3(c) of the
Income
Tax Regulations.
(d) Minimum Gain Chargeback. Notwithstanding
anything to the contrary
in
this Section 8.1, if there is a net decrease in "Minimum Gain" or
"Partner
Nonrecourse
Debt Minimum Gain" (as such terms are defined in sections 1.704-2(b)
and
1.704-2(i)(2) of the Income Tax Regulations) during a
taxable period of the
Company,
then each Member shall be allocated items of income and gain for such
year
(and, if necessary, for subsequent years) in the manner provided in section
1.704-2
of the Income Tax Regulations.
-Page 25 of 48-
<PAGE>
(e) Qualified Income Offset. Subject
to the provisions of Section
8.1(d),
but otherwise notwithstanding anything to the contrary in this Section
8.1,
if any Member's Capital Account has a deficit balance in excess of such
Member's
obligation to restore its Capital Account balance, computed in
accordance
with the rules of paragraph (b)(2)(ii)(d) of section 1.704-1 of the
Income
Tax Regulations, then sufficient amounts of income and gain (consisting
of
a pro rata portion of each item of Company income, including gross income,
and
gain for such year) shall be allocated to such Member in an amount and
manner
sufficient to eliminate such deficit as quickly as possible.
(f) Depreciation Recapture. Solely for
tax purposes, a Member's share
of
the Company's depreciation recapture recognized for tax purposes upon the
disposition
of Company property shall be computed in the manner provided for in
sections
1.704-3(a)(11), 1.1245-1(e) and 1.1250-1(f) of the Income Tax
Regulations.
The provisions of this Section 8.1(f) are intended to affect only
the
character of the items of gain allocated by the Company to the Members. This
Section
8.1(f) shall not affect the aggregate amount of gain (including gain
characterized
under this Section 8.1(f) as depreciation recapture) otherwise
allocable
to a Member pursuant to this Section 8.1.
(g) Change in Percentage Interests.
Except as otherwise required by
law,
if the Percentage Interests of the Members of the Company are changed
during
any taxable year, all items to be allocated to the Members for such
entire
taxable year shall be prorated on the basis of the portion of such
taxable
year which precedes each such change and the portion of such taxable
year
on and after each such change according to the number of days in each such
portion,
and the items so allocated for each such portion shall be allocated to
the
Members in the manner in which such items are allocated as provided in
Section
8.1(a) during each such portion of the taxable year in question.
(h) Effect of Special Allocations on
Subsequent Allocations. Any
special
allocation pursuant to Sections 8.1(b) and (e) hereof shall be taken
into
account in computing subsequent allocations of income and gain pursuant to
this
Section 8.1 so that the net amount of all such allocations to each Member
shall,
to the extent possible, be equal to the net amount that would have been
allocated
to each such Member pursuant to the provisions of this Section 8.1 if
such
special allocations had not occurred.
(i)
Nonrecourse Debt. Items of deduction and loss attributable to
"partner
nonrecourse debt" within the meaning of section 1.704-2(b)(4) of the
Income
Tax Regulations shall be allocated to the Members bearing the economic
risk
of loss with respect to such debt in accordance with section 1.704-2(i)(1)
of
the Income Tax Regulations. Items of deduction and loss attributable to
"nonrecourse
debt" of the Company within the meaning of section 1.752-2 of the
Income
Tax Regulations shall be allocated to the Members in proportion to their
respective
Percentage Interests.
(j) State and Local Items. Items of
income, gain, loss, deduction,
credit
and tax preference for state and local income tax purposes shall be
allocated
to and among the Members in a manner consistent with the allocation of
such
items for federal income tax purposes in accordance with the foregoing
provisions
of this Section 8.1.
-Page 26 of 48-
<PAGE>
(k) Special Loss Allocation. All items
of loss and deduction relating
to
the payments by the Company of the amounts described in Section 7.3(a)(i) and
(ii)
shall be allocated to the Dow Member.
8.2 Distributions.
(a) Prior to liquidation, and subject
to any restrictions under
applicable
law (including, without limitation, any obligation to withhold and
remit
any amounts to any governmental authority), all Net Cash Flow of the
Company
shall be distributed to the Members within ninety (90) days of the end
of
the fiscal year of the Company, unless the Board of Directors unanimously
votes
to withhold such distribution. In addition, prior to liquidation, and
subject
to any restrictions under applicable law, additional amounts (including
the
proceeds of any indebtedness, to the extent not inconsistent with law and
any
applicable documents relating to such indebtedness) may also be distributed,
with
the unanimous approval of the Board of Directors. All such distributions
shall
be made in the order and priority set forth in Section 8.2(c) hereof.
(b) To the extent the Company is
required by law to withhold or to make
tax
payments on behalf of or with respect to any Member, the Company 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
distribution
to the Member on behalf of whom the withholding or payment was
made.
(c) The Company shall make all
distributions to the Members in
proportion
to the Members' relative Percentage Interests.
8.3 Accounting Matters. The Board of
Directors shall cause to be
maintained
complete books and records accurately reflecting the accounts,
business
and transactions of the Company on a calendar-year basis and using
GAAP,
consistently applied, and such cash, accrual, or hybrid method of
accounting
as in the judgment of the Board of Directors is most appropriate;
provided,
however, that books and records with respect to the Company's Capital
Accounts
and allocations of income, gain, loss, deduction or credit (or item
thereof)
shall be kept under United States federal income tax accounting
principles
as applied to partnerships.
8.4 Tax Status and Returns.
(a) Any provision hereof to the
contrary notwithstanding, solely for
United
States federal income tax purposes, each of the Members hereby recognizes
that
the Company will be subject to all provisions of Subchapter K of Chapter 1
of
Subtitle A of the Code; provided, however, the filing of U.S. Partnership
Returns
of Income shall not be construed to extend the purposes of the Company
or
expand the obligations or liabilities of the Members.
(b) The treasurer shall prepare or
cause to be prepared all tax returns
and
statements, if any, that must be filed on behalf of the Company with any
taxing
authority, and shall make timely filing thereof. Within ninety (90) days
after
the end of each calendar year, the treasurer shall prepare or cause to be
prepared
and delivered to each Member a report setting forth in
-Page 27 of 48-
<PAGE>
reasonable
detail the information with respect to the Company during such
calendar
year reasonably required to enable each Member to prepare its federal,
state
and local income tax returns in accordance with applicable law then
prevailing.
In addition, the treasurer will keep the Members informed on a
regular
basis of the potential tax liability of the Company as it affects the
Company's
financial statements.
8.5 754 Election. In the event of a
distribution of property to a
Member,
the death of an individual Member or a transfer of any interest in the
Company
permitted under the Act or this Agreement, the Company, upon the written
request
of the transferor or transferee, shall file a timely election under
section
754 of the Code and the Income Tax Regulations thereunder
to adjust the
basis
of the Company's assets under section 734(b) or 743(b) of the Code and a
corresponding
election under the applicable provisions of state and local law,
and
the person making such request shall pay all costs incurred by the Company
in
connection therewith, including reasonable attorneys' and accountants' fees.
8.6 Tax Matters Partner. The Dow
Member shall be the Company's "tax
matters
partner" for purposes of subchapter C of chapter 63 of subtitle F of the
Code
(dealing with the tax treatment of partnership items), for so long as it is
not
the subject of a Bankruptcy Event and is otherwise entitled to act as the
tax
matters partner under the Code. The tax matters partner may file a
designation
of itself as such with the Internal Revenue Service. The tax matters
partner
shall: (i) furnish to each Member affected by an
audit of the Company
income
tax returns a copy of each such notice or other communication received
from
the Internal Revenue Service or applicable state authority; (ii) keep such
Member
informed of any administrative or judicial proceeding, as required by
Section
6223(g) of the Code, and (iii) allow such Member an opportunity to
participate
in all such administrative and judicial proceedings. The tax matters
partner
shall take such action as may be reasonably necessary to constitute such
Member
a "notice partner" within the meaning of Section 6231(a)(8) of the
Code,
provided
that such Member provides the tax matters partner with the information
necessary
to take such action.
ARTICLE 9
Restrictions on
Transfer
9.1 Transfer of Interests. No Member
may sell, assign, transfer or
hypothecate
("Transfer") all of any part of its Membership Interest in the
Company,
or any interest therein, except in accordance with the terms and
conditions
set forth in this Article 9 or in Article 10.
9.2 Consent Necessary to Transfer.
Except as provided in Section 9.7
below
or in Article 10, no Member may Transfer all or any part of such Member's
Membership
Interest, or any interest therein, without the prior written approval
of
all of the other Members of the Company ("Approval"). In addition, no
Member
may
Transfer all or any part of such Member's Membership Interest, or any
interest
therein, unless such Transfer will not (and, upon request of the Board
of
Directors, the transferring Member provides an opinion of counsel in form and
substance
reasonably satisfactory to the Board of Directors that such Transfer
will
not): (A) violate any applicable federal or state securities laws or
regulations;
(B) subject the Company to registration as an investment company or
election
as a "business development company" under
-Page 28 of 48-
<PAGE>
the
Investment Company Act of 1940; (C) require any Member or any affiliate of a
Member
to register as an investment adviser under the Investment Advisers Act of
1940;
(D) violate any other federal, state or local laws; (E) effect a
termination
of the Company under section 708 of the Code; (F) cause the Company
to
be treated as an association taxable as a corporation for federal income tax
purposes;
(G) cause the Company or any Member to be treated as an ERISA
fiduciary;
or (H) otherwise violate this Agreement.
9.3 Conditions of Transfer. In the
event that the other Members have
granted
their Approval to the proposed Transfer and the other requirements of
Section
9.2 are met, then one of the members of the Board of Directors shall
execute
a written consent to such Transfer. Upon receipt of such written
consent,
the transferring Member has a right to Transfer to the proposed
transferee
the Membership Interest as to which the Approval has been obtained,
subject
to Section 9.4 and the following conditions:
(a) That such Transfer is consummated
within sixty (60) days from the
date
of such approval; and
(b) That such Transfer is made
strictly in accordance with the terms of
the
proposed Transfer Approved by the other Members and the Board of Directors.
9.4 Admission of Substitute Member. In
the event that Approval of the
Transfer
is obtained and the other requirements of Sections 9.2, 9.3 and this
Section
9.4 are met, then the transferee of the Member's Membership Interest
shall
be entitled to be admitted to the Company as a substitute Member, and this
Agreement
(and all exhibits hereto) shall be amended to reflect such admission,
provided
that the following conditions are complied with:
(a) The transferor and transferee
shall have executed and acknowledged
such
instruments as the Board of Directors may deem necessary or desirable to
effect
the substitution;
(b) The transferee acknowledges all of
the terms and provisions of this
Agreement
as the same may have been amended and agrees in writing to be bound by
the
same;
(c) The transferee reimburses the
Company for all reasonable expenses
connected
with such admission including, but not limited to, legal fees and
costs;
(d) The filing with the Company, if
required by the Board of Directors,
of
such proof of the investment intent and financial status of the transferee as
the
Board of Directors may request; and
(e) The transfer complies with all
applicable federal and state
securities
laws.
9.5 Effect of Transfer without
Approval. Any purported Transfer of all
or
any part of a Member's Membership Interest, or any interest therein, which is
not
in compliance with this Article 9 shall be void and, except as provided for
in
Section 9.6, below, shall be of no effect.
9.6 Liability for Breach.
Notwithstanding anything to the contrary in
this
Article 9, any Member purporting to Transfer its Membership Interest, or
any
part thereof, in violation of
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<PAGE>
this
Article 9 shall be liable to the Company and the other Members for all
liabilities,
obligations, damages, losses, costs and expenses (including
reasonable
attorneys' fees and court costs) arising as a direct or consequential
result
of such noncomplying transfer, attempted transfer or
purported transfer,
including
specifically, any additional cost or taxes created by non-compliance
with
any of the requirements and conditions provided for in Section 9.2.
9.7 Transfer Permitted Without
Consent. Notwithstanding anything to the
contrary
provided for herein, a Member may Transfer all but not less than all of
a
Member's Membership Interest without Approval to the surviving entity in an
acquisition,
merger, reorganization or sale of substantially all the assets of
the
Member.
ARTICLE 10
Term, Termination and
Dissolution
10.1 Term. The research and
development program contemplated by the IE
R&D
Agreement shall extend for the duration of the Research Term (as defined in
the
IE R&D Agreement). The term of this Agreement shall commence on the date of
this
Agreement and shall continue until this Agreement is terminated in
accordance
with Section 10.2 or the Company is dissolved and liquidated in
accordance
with Sections 10.3 and 10.4.
10.2 Termination. Notwithstanding
Section 10.1, the Company may be
terminated
in accordance with this Section 10.2.
(a) During the term of this Agreement
(and as the sole method of
termination
during the Initial Term and the [***] period thereafter if the
Research
Term is extended under the IE R&D Agreement pursuant to Section
5.3(f)),
this Agreement may be terminated or a Member's interest transferred to
a
Third Party (as provided below) upon:
(i) A
material breach of this Agreement by a Member (the
"Breaching Member") which
breach has not, after notice by the other
Member ("Non-Breaching Member)
and a reasonable opportunity for cure
(the scope of such cure to be
conclusively established by the binding
arbitration provisions of this
Agreement), been cured by such Member
within the time provided for by the
Arbitrator. If it is determined by
the Arbitrator that a material breach did
occur and a satisfactory
remedy cannot be instituted in the
opinion of the Non-Breaching Member,
the Non-Breaching Member has the right
to request dissolution of the
Company pursuant to Section 10.3; or
(ii) The occurrence of a
Bankruptcy Event with respect to a
Member ("Bankrupt Member").
In this event, the other Member ("Solvent
Member") shall have the right to
purchase the interest of the Bankrupt
Member at a negotiated price. If the
parties cannot agree to a
negotiated price, an independent Third
Party appraiser selected by the
Solvent Member, and reasonably
acceptable to the Bankrupt Member, can
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 30 of 48-
<PAGE>
determine the fair market value
purchase price to be paid to the
Bankrupt Member. The Solvent Member
shall also have the option to find
a Third Party to purchase the entire
Company or the Bankrupt Member's
interest at a negotiated price or a
fair market value price determined
by an independent Third Party
appraiser selected by the Solvent Member,
and reasonably acceptable to the
Bankrupt Member, or to dissolve the
Company pursuant to Section 10.3; and
(iii) The occurrence of a
Change of Control with respect to a
Member ("Change of Control
Member"). The Change of Control Member will
provide written notice to the other
Member ("Nonaffected Member") of a
proposed Change of Control. The Nonaffected Member will have sixty (60)
days after the date of such notice to
provide the Change of Control
Member written notice that it wishes
to purchase the interest of the
Change of Control Member at a negotiated price or at a fair market
value price as determined by an
independent third party appraiser
selected by the Nonaffected
Member, and reasonably acceptable to the
Change of Control Member or dissolve
the Company pursuant to Section
10.3. If the Nonaffected
Member does not provide such written notice to
the Change of Control Member within
such sixty (60) day period, then
the Nonaffected
Member will have no further right under this Section
10.2(a)(iii), and this Agreement will
remain binding upon the
Nonaffected
Member and the Change of Control Member and any
successor-in-interest to such Change
of Control Member in such Change
of Control.
(b) During the term of this Agreement,
but only after the Initial Term
and
the [***] period thereafter if the Research Term is extended under the IE
R&D
Agreement pursuant to Section 5.3(f), each Member shall have the right to
initiate
the following procedures. This procedure is only available so long as
there
are only two (2) Members. The Member initiating these procedures (the
"Selling
Member") shall give the other Member (the "Other Member")
written
notice
that it plans to sell its Membership Interest in the Company, including
the
proposed price for such Membership Interest and how such price was
determined.
For the sixty (60) day period following such written notice, the
Other
Member shall have the first right to purchase the Selling Member's
Membership
Interest at the price and on such other principal terms specified in
the
notice or at such price and on such other principal terms as are negotiated
in
good faith by the Members during such sixty (60) day period. If the Members
reach
agreement on price and such other principal terms during such sixty (60)
day
period, then they shall proceed to enter into an agreement providing for the
sale
of the Selling Member's Membership Interest to the Other Member at the
agreed
upon price and principal terms within sixty (60) days after reaching such
agreement.
If the Members do not reach agreement on price and such other
principal
terms during such sixty (60) day period or the Other Member provides
written
notice to the Selling Member that it is not interested in purchasing the
Selling
Member's Membership Interest during such period, then the Selling Member
will
thereafter be free to sell its Membership Interest to any Third Party at a
price
that is no less than the price last offered to the Other Member, and the
Other
Member will be deemed to have approved of the Transfer of the Selling
Member's
Membership Interest.
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 31 of 48-
<PAGE>
10.3 Dissolution. Upon a decision to
dissolve the Company by i) a
written
consent of the Members holding at least [***] of all the Percentage
Interests
of the Company or ii) a decision by one Member to dissolve pursuant to
Section
10.2(a), the Company shall be liquidated pursuant to Section 10.4
through
10.8.
10.4 Liquidation.
(a) Upon the occurrence of an event of
dissolution as defined in the
Act or
in Section 10.3 of this Agreement, the Company shall cease to engage in
any
further business, except to the extent necessary to perform existing
obligations,
and shall wind up its affairs and liquidate its assets. The Board
of
Directors, or if there be no Directors then in office, the Members, shall
appoint
a liquidator (who may, but need not, be a Member) who shall have sole
authority
and control over the winding up and liquidation of the Company's
business
and affairs and shall diligently pursue the winding up and liquidation
of
the Company. As soon as practicable after his appointment, the liquidator
shall
cause to be filed a statement of intent to dissolve as required by section
18-203
of the Act.
(b) During the course of liquidation,
the Members shall continue to
share
profits and losses as provided in Section 8.1 of this Agreement, but there
shall
be no cash distributions to the Members until the Distribution Date (as
defined
in Section 10.5).
10.5 Liabilities. Liquidation shall
continue until the Company's
affairs
are in such condition that there can be a final accounting, showing that
all
fixed or liquidated obligations and liabilities of the Company are satisfied
or
can be adequately provided for under this Agreement. The assumption or
guarantee
in good faith by one or more financially responsible persons shall be
deemed
to be an adequate means of providing for such obligations and
liabilities.
When the liquidator has determined that there can be a final
accounting,
the liquidator shall establish a date (not to be later than the end
of
the taxable year of the liquidation, i.e., the time at which the Company
ceases
to be a going concern as provided in section 1.704-1(b)(2)(ii)(g) of the
Income
Tax Regulations, or, if later, ninety (90) days after the date of such
liquidation)
for the distribution of the proceeds of liquidation of the Company
(the
"Distribution Date"). The net proceeds of liquidation of the Company
shall
be
distributed to the Members as provided in Section 10.6 hereof not later than
the
Distribution Date.
10.6 Settling of Accounts. Subject to
section 18-804 of the Act, upon
the
dissolution and liquidation of the Company, the proceeds of liquidation
shall
be applied as follows: (a) first, to pay all expenses of liquidation and
winding
up; (b) second, to pay all debts, obligations and liabilities of the
Company,
in the order of priority as provided by law, other than debts owing to
the
Members or on account of Members' contributions; (c) third, to pay all debts
of
the Company owing to a Member; and (d) to establish reasonable reserves for
any
remaining contingent or unforeseen liabilities of the Company not otherwise
provided
for, which reserves shall be maintained by the liquidator on behalf of
the
Company in a regular interest-bearing trust account for a reasonable period
of
time as determined by the liquidator. If any excess funds remain in such
reserves
at the end of such reasonable time, then such remaining funds shall be
distributed
by the Company to the Members pursuant to Section 10.7 hereof.
*CONFIDENTIAL
TREATMENT REQUESTED
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<PAGE>
10.7 Distribution of Proceeds. Subject
to section 18-804 of the Act,
upon
final liquidation of the Company but not later than the Distribution Date,
the
net proceeds of liquidation remaining following the settling of accounts in
accordance
with Section 10.6 hereof shall be distributed to the Members in
proportion
of their respective Percentage Interests.
10.8 Certificate of Cancellation. Upon
dissolution and liquidation of
the
Company, the liquidator shall cause to be executed and filed with the
Secretary
of State of the State of Delaware, a certificate of cancellation in
accordance
with section 18-203 of the Act.
ARTICLE 11
Limitation of
Liability/Indemnification
11.1 Limited Liability. Except as
expressly provided herein, neither
the
Diversa Member nor the Dow Member will be liable to
the other Member or to
the
Company with respect to any subject matter of this Agreement under any
contract,
negligence, strict liability or other legal or equitable theory for
(i) any special, indirect, incidental, consequential or
punitive damages or lost
profits
or (ii) cost of procurement of substitute goods, technology or services.
11.2 Indemnification between the
Members. Neither Member shall
indemnify
the other Member or its Affiliates, or respective officers, directors,
employees
and agents and its respective successors, heirs and assigns
("Indemnitees") for any loss, claim, damage, liability
or action except to the
extent
resulting from its respective gross negligence or willful wrongdoing.
This
paragraph does not limit either Member's other remedies available to it
under
the laws.
(a) Procedure. An Indemnitee
that intends to claim indemnification
under
this Article 11.2 shall promptly notify the other Member (the
"Indemnitor") in writing of any loss, claim, damage,
liability or action in
respect
of which the Indemnitee intends to claim such
indemnification, and the
Indemnitor
shall have the right to participate in, and, to the extent the
Indemnitor
so desires, to assume the defense thereof with counsel of its own
choice.
(b) Limitation of Indemnity. The
indemnity agreement in this Article
11.2
shall not apply to amounts paid in settlement of any loss, claim, damage,
liability
or action if such settlement is made without the consent of the
Indemnitor,
which consent shall not be withheld unreasonably. The failure to
deliver
written notice to the Indemnitor within a reasonable
time after the
commencement
of any such action, if prejudicial to its ability to defend such
action,
shall relieve such Indemnitor of any liability to the
Indemnitee under
this
Article 11.2.
(c) Cooperation. At the Indemnitor's request, the Indemnitee
under this
Article
11.2, and its employees and agents, shall cooperate fully with the
Indemnitor
and its legal representatives in the investigation and defense of any
action,
claim or liability covered by this indemnification and provide full
information
with respect thereto.
11.3 Indemnification: Proceeding Other
Than by Company. The Company
will
indemnify any person who was or is a party or is threatened to be made a
party
to any threatened, pending or completed action, suit or proceeding,
whether
civil, criminal, administrative or
-Page 33 of 48-
<PAGE>
investigative,
except an action by or in the right of the Company, by reason of
the
fact that he is or was a Director, Member, officer, employee or agent of the
Company,
or is or was serving at the request of the Company as a manager,
member,
director, officer, employee or agent of another limited liability
company,
corporation, partnership, joint venture, trust or other enterprise,
against
expenses, including attorneys' fees, judgments, fines and amounts paid
in
settlement actually and reasonably incurred by him in connection with the
action,
suit or proceeding if he acted in good faith and in a manner which he
reasonably
believed to be in or not opposed to the best interests of the
Company,
and, with respect to any criminal action or proceeding, had no
reasonable
cause to believe his conduct was unlawful. The termination of any
action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea
of nolo contendere or its
equivalent, does not, of itself, create a
presumption
that the person did not act in good faith and in a manner which he
reasonably
believed to be in or not opposed to the best interests of the
Company,
and that, with respect to any criminal action or proceeding, he had
reasonable
cause to believe that his conduct was unlawful.
11.4 Indemnification: Proceeding by
Company. The Company will indemnify
any
person who was or is a party or is threatened to be made a party to any
threatened,
pending or completed action or suit by or in the right of the
Company
to procure a judgment in its favor by reason of the fact that he is or
was
a Director, Member, officer, employee or agent of the Company, or is or was
serving
at the request of the Company as a manager, member, director, officer,
employee
or agent of another limited liability company, corporation,
partnership,
joint venture, trust or other enterprise against expenses,
including
amounts paid in settlement and attorneys' fees actually and reasonably
incurred
by him in connection with the defense or settlement of the action or
suit
if he acted in good faith and in a manner which he reasonably believed to
be
in or not opposed to the best interests of the Company. Indemnification may
not
be made for any claim, issue or matter as to which such a person has been
adjudged
by a court of competent jurisdiction, after exhaustion of all appeals
therefrom,
to be liable to the Company or for amounts paid in settlement to the
Company,
unless and only to the extent that the court in which the action or
suit
was brought or other court of competent jurisdiction determines upon
application
that in view of all the circumstances of the case, the person is
fairly
and reasonably entitled to indemnity for such expenses as the court deems
proper.
11.5 Mandatory Advancement of
Expenses. The expenses of Directors,
Members
and officers incurred in defending a civil or criminal action, suit or
proceeding
must be paid by the Company as they are incurred and in advance of
the
final disposition of the action, suit or proceeding, upon receipt of an
undertaking
by or on behalf of the Director, Member or officer to repay the
amount
if it is ultimately determined by a court of competent jurisdiction that
he
is not entitled to be indemnified by the Company. The provisions of this
Section
11.5 do not affect any rights to advancement of expenses to which
personnel
of the Company other than Directors, Members or officers may be
entitled
under any contract or otherwise.
11.6 Effect and Continuation. The
indemnification and advancement of
expenses
authorized in or ordered by a court pursuant to Section 11.3 to Section
11.5,
inclusive:
(a) Does not exclude any other rights
to which a person seeking
indemnification
or advancement of expenses may be entitled under the Certificate
or
any limited liability company
-Page 34 of 48-
<PAGE>
agreement,
vote of Members or disinterested Directors, if any, or otherwise, for
either
an action in his official capacity or an action in another capacity while
holding
his office, except that indemnification, unless ordered by a court
pursuant
to Section 11.4 or for the advancement of expenses made pursuant to
Section
11.5, may not be made to or on behalf of any Member, Director or officer
if
a final adjudication establishes that his acts or omissions involved
intentional
misconduct, fraud or a knowing violation of the law and was material
to
the cause of action.
(b) Continues for a person who has
ceased to be a Member, Director,
officer,
employee or agent and inures to the benefit of his heirs, executors and
administrators.
11.7 Insurance and Other Financial
Arrangements.
(a) The Company may purchase and
maintain insurance or make other
financial
arrangements on behalf of any person who is or was a Member, Director,
officer,
employee or agent of the Company, or is or was serving at the request
of
the Company as a manager, Member, director, officer, employee or agent of
another
limited liability company, corporation, partnership, joint venture,
trust
or other enterprise for any liability asserted against him or her and
liability
and expenses incurred by him or her in his or her capacity as a
Director,
member, director, officer, employee or agent, or arising out of his or
her
status as such, whether or not the Company has the authority to indemnify
him
or her against such liability and expenses.
(b) The other financial arrangements
made by the Company pursuant to
Section
11.7(a) may include:
(i)
The creation of a trust fund;
(ii) The establishment of a
program of self-insurance;
(iii) The securing of its
obligation of indemnification by
granting a security interest or other
lien on any assets of the
Company; or
(iv) The establishment of a
letter of credit, guaranty or
surety.
No financial arrangement made pursuant
to this Section 11.7(b) may
provide
protection for a person adjudged by a court of competent jurisdiction,
after
exhaustion of all appeals therefrom, to be liable for
intentional
misconduct,
fraud or a knowing violation of law, except with respect to the
advancement
of expenses or indemnification ordered by a court.
(c) In the absence of fraud:
(i)
The decision of the Company as to the propriety of the
terms and conditions of any insurance
or other financial arrangement
made pursuant to this Section 11.7 and
the choice of the person to
provide the insurance or other
financial arrangement is conclusive; and
(ii) The insurance or other
financial arrangement:
-Page 35 of 48-
<PAGE>
(A) Is not void or
voidable; and
(B) Does not subject
any Director or Member approving
it to
personal liability for his action,
even
if a Director or Member approving the insurance or other financial
arrangement
is a beneficiary of the insurance or other financial arrangement.
11.8 Notice of Indemnification and
Advancement. Any indemnification of,
or
advancement of expenses to, a Director, Member or officer in accordance with
this
Article 11, if arising out of a proceeding by or on behalf of the Company,
shall
be reported in writing to the Members with or before the notice of the
next
Members' meeting.
11.9 Repeal or Modification. Any
repeal or modification of this Article
11
by the Members of the Company shall not adversely affect any right of a
Director,
Member or officer of the Company existing hereunder at the time of
such
repeal or modification.
ARTICLE 12
Inspection of Company Records;
Annual and Other Reports
12.1 Records to be Kept. The Company
shall keep at its registered
office:
(a) A current list of the full name
and last known business, residence
or
mailing address of each Member and Director separately identifying the
Members
in alphabetical order and the Directors, if any, in alphabetical order;
(b) A copy of the filed Certificate
and all amendments thereto,
together
with executed copies of any powers of attorney pursuant to which any
document
has been executed;
(c) Copies of this Agreement, and all
amendments hereto;
(d) Copies of the Company's federal
income tax returns and reports, if
any,
for the three most recent years; and
(e) Copies of any financial statements
of the Company for the three
most
recent years.
12.2 Inspection of Company Records.
The accounting books and records,
the
record of Members, and minutes of proceedings of the Members of this Company
set
forth in Section 12.1, shall be open to inspection upon the reasonable
request
of any Member at any reasonable time during usual business hours, for a
purpose
reasonably related to such Member's interest as a Member. Such
inspection
by a Member may be made in person or by agent or attorney, and the
right
of inspection includes the right to copy and make extracts.
-Page 36 of 48-
<PAGE>
12.3 Annual, Quarterly and Monthly
Reports.
(a) The Board of Directors shall
promptly, and in any event within ten
(10)
working days after the end of each month, eight (8) working days after the
end
of the first three fiscal quarters and twelve (12) working days after each
fiscal
year end deliver or mail to the Members, the monthly, quarterly and
annual,
respectively, financial statements of the Company prepared in accordance
with
GAAP, consistently applied.
(b) The income statements and balance
sheets referred to in this
Section
12.3 shall be accompanied by the report thereon, if any, of any
independent
accountants engaged by the Company or the certificate of an
authorized
officer of the Company that such financial statements were prepared
without
audit from the books and records of the Company. In addition, the
independent
accountants of the Diversa Member shall be entitled
to review the
financial
statements of the Company and audit the books and records of the
Company
for so long as the Diversa Member has an obligation
to include the
Company's
financial statements with the Diversa Member's
financial statements.
ARTICLE 13
Defaults and
Remedies
13.1 Defaults. If a Member materially
defaults in the performance of
its
obligations under this Agreement, and such default is not cured within ten
(10)
days after notice of such default is given by a Director to the defaulting
Member
for a default that can be cured by the payment of money, or within thirty
(30)
days after notice of such default is given by a Director to the defaulting
Member
for any other default, then the non-defaulting Members shall have the
rights
and remedies described in Section 13.2 hereunder in respect of the
default.
13.2 Remedies. If a Member fails to
perform its obligations under this
Agreement,
any other Member shall have, in addition to any rights and remedies
provided
hereunder, all such rights and remedies as are provided at law or in
equity.
13.3 No Waiver. No consent or waiver,
express or implied, by a Member
to
or of any breach or default by another Member in the performance by such
other
Member of its obligations under this Agreement shall constitute a consent
to
or waiver of any similar breach or default by any other Member. Failure by a
Member
to complain of any act or omission to act by another Member, or to
declare
such other Member in default, irrespective of how long such failure
continues,
shall not constitute a waiver by such Member of its rights under this
Agreement.
-Page 37 of 48-
<PAGE>
ARTICLE 14
Certain Operating
Provisions
14.1 Budget and Forecast.
(a) At least sixty (60) days prior to
the beginning of each year during
the
term of the Agreement, the president shall cause to be prepared and
submitted
to the Board of Directors for their approval a proposed Budget for the
subsequent
year; provided however, that the Budget for the first year shall be
prepared
and submitted within sixty (60) days following the date of this
Agreement.
The president shall also provide the Board of Directors with a
comparison
of the mid-year results of the Company's operations versus the Budget
for
such six-month period. The president shall implement the approved Budget and
shall
be authorized, without the need for further approval by the Members, to
make
the expenditures and incur the obligations provided for in such approved
Budget.
The Board of Directors may either approve the Budget as provided for
herein,
or request that the president cause it to be revised for the Board of
Director's
subsequent review and approval. In the event that the Budget for any
year
is not approved by the Board of Directors, after subsequent revisions by
the
president, then the Budget for the preceding year (exclusive of any items
relating
to capital expenditures) shall apply during the subsequent fiscal year;
provided
however, that the Board of Directors may amend such Budget to either
increase,
reduce or eliminate any specific line item set forth in the preceding
year's
budget.
(b) At least sixty (60) days prior to
the beginning of the each year
during
the term of the Agreement, the president shall cause to be prepared and
submitted
to the Board of Directors for their approval a proposed 5-year
forecast
of the Approved Business, including estimates of revenues, expense,
areas
of potential research and development, marketing or other plans for
Company
products, and an assessment of competitive risks and opportunities for
the
Company, all in a format approved by the Board of Directors (the
"Forecast");
provided however, that with respect to the first year of this
Agreement,
such Forecast shall be prepared not later than ninety (90) days after
the
Effective Date. The Board of Directors may either approve the Forecast as
provided
for herein, or request that the president cause it to be revised for
the
Board of Director's subsequent review and approval. The Forecast shall have
no
binding or preclusive effect upon the Company or the Board of Directors, and
shall
not constitute a grant of authority to any Person, including, without
limitation,
any officer of the Company, to undertake any action described
therein
or expend any funds estimated therein.
14.2 Project Approval Process
(a) At any time during the year, the
president may propose or cause to
be
proposed to the Board of Directors that the Company undertake research and
development,
marketing or other activities that are within the scope of the
Approved
Business. Any such proposal may also be included in the proposed Budget
for
the Company's subsequent year. All such proposals shall be in the format
required
by the Board of Directors. An example of such format, approved by the
Board
of Directors, is attached hereto as Exhibit B. Any such proposal shall set
forth
the material terms and conditions of the proposed project, including,
without
limitation, the estimated capital expenditures and other estimated
expenses
of the project, capital contribution
-Page 38 of 48-
<PAGE>
requirements
for the project, income and cash flow projections, whether the
project
is anticipated to require any arrangements or agreements pursuant to the
Preferred
Supplier provisions of Section 14.3 hereof, a competitive market
analysis
of the results of the project, an evaluation of the technical
feasibility
of the proposed project, an evaluation of possible intellectual
property
bars, an evaluation of environmental, health and safety risks, a high
level
research plan, and the number of personnel anticipated to be required to
staff
the project (and, if any new personnel are required, the number and type
of
personnel so required).
(b) At the next regularly scheduled
meeting of the Board of Directors
which
is at least thirty (30) days after the date upon which such proposal has
been
provided to the Directors (and except if such proposal is contained within
a
proposed budget, in which event the procedures relating to Budget approvals
shall
apply), the Board of Directors shall determine whether to proceed with
such
project or shall either: (i) terminate further
consideration of such
project
by the Company; or (ii) request the president, or his or her designee,
to
modify the proposed project and submit it for reconsideration by the Board
within
thirty (30) days. If such proposed project has been approved by the Board
of
Directors (as so approved, an "Approved Project"), then the president
shall
thereupon
be given the authority to implement such Project on the terms and
conditions
specified in the proposal relating to such Project in accord with
respective
agreements in Schedules 5, 6 and 10; provided however, that at any
time
thereafter, the Board of Directors may, by appropriate vote, amend, modify
or
terminate all or any part of such Project not yet implemented by the Company
in
accord with respective agreements in Schedules 5, 6 and 10.
(c) The initial Approved Projects to
be undertaken by the Company are
attached
hereto as Schedule 5.
(d) All Approved Projects conducted
for research in the Approved Fields
by
the Preferred Supplier shall be performed in accordance with the IE R&D
Agreement,
attached as Schedule 5. All manufacturing Approved Projects in the
Approved
Fields by the Preferred Supplier shall be performed in accordance with
the
Contract Manufacturing Agreement, attached as Schedule 6. All development
Approved
Projects in the Approved Fields by the Preferred Supplier shall be
performed
in accordance with the Industrial Enzymes Development Agreement,
attached
as Schedule 10. All discussions and transfer of materials between the
Company
and Members shall be in accordance with the CDA, attached as Schedule 7.
14.3 Preferred Supplier. In the event
that the Company approves any
Approved
Project which anticipates the use of one or more Preferred Suppliers,
or
in any other situation in which the Company requires goods, services or other
capabilities
within a Preferred Supplier Area, then in such case the Company
will
notify the Applicable Preferred Supplier for such Preferred Supplier Area
of
the Company's desire for such goods, services or other capabilities, and
shall
request that the Preferred Supplier offer to provide such goods, services
or
other capabilities to the Company; provided however, that [***].
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 39 of 48-
<PAGE>
[***]
The Preferred Supplier shall thereupon prepare a proposal in accord with
Schedule
5, 6 or 10 to provide such goods, services or other capabilities, which
proposal
shall be on terms which are, in the aggregate, at least as favorable to
the
Company as those provided by the Preferred Supplier to unrelated Third
Parties
with whom such Preferred Supplier does business for such goods, services
and
capabilities; provided however, [***], the Preferred Supplier shall offer to
provide
such goods, services or other capabilities on the terms provided in
Schedule
5, 6 or 10, as applicable. [***]. The Company and the Preferred
Supplier
shall decide whether or not to move forward with the Approved Project
and
jointly determine the specific roles and activities of the Preferred
Supplier.
Upon agreement to move forward with the Approved Project, the parties
shall
amend Schedule 5, 6 or 10 to reflect the addition of that Approved
Project.
14.4 Services. The Dow Member and the Diversa Member agree to provide
services
to the Company to be listed on Schedule 8 under the terms and
conditions
of a Services Agreement, to be attached as Schedule 9, to be entered
into
between the Members and the Company.
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 40 of 48-
<PAGE>
ARTICLE 15
DISPUTE
RESOLUTION
15.1 Informal Dispute Resolution.
(a) Senior Officials. The Members
recognize that a bona fide dispute as
to
certain matters may from time to time arise under this Agreement which
relates
to either Member's rights or obligations. In the event of the occurrence
of
such a dispute, either Member may, by written notice to the other Member,
have
such dispute referred to the Chief Executive Officer of the Diversa
Member
and
the Dow Member executive in charge of industrial biotechnology, or their
successors
or counterparts, for resolution by good faith negotiations within 60
days
after such notice is received at a mutually convenient location or by
telephonic
or video conferencing.
(b) Interim Conduct. If the Members
are unable to reach agreement with
respect
to a dispute between the Members pursuant to Section 15.1.(a), then such
dispute
shall be resolved as described in Section 15.2 below.
15.2 Arbitration. Any dispute under
this Agreement, except one that
arises
with respect to determination of the projects or other disputed matters,
which
is not settled by mutual consent pursuant to Section 15.1, shall be
finally
settled by binding arbitration, conducted in accordance with the
Commercial
Arbitration Rules of the American Arbitration Association (or such
rules
as are appropriate to the dispute) by three independent, neutral
arbitrators
having at least 15 years of experience in the areas of the contested
issues
and appointed in accordance with said rules which will involve each
Member
selecting one arbitrator and the two arbitrators selecting a third. The
procedures
or rules for the arbitration may be modified by mutual consent of the
Members,
including having mediation rather than an arbitration conducted. Any
arbitration
shall be in English held in Chicago, Illinois. The arbitrators shall
determine
what discovery shall be permitted, consistent with the goal of
limiting
the cost and time that the Members must expend for discovery; provided,
however,
that the arbitrators shall permit such discovery, as they deem
necessary
to permit an equitable resolution of the dispute. Any written evidence
originally
in a language other than English shall be submitted in English
translation
accompanied by the original or a true copy thereof. Except as
otherwise
expressly provided in this Agreement, the costs of the arbitration,
including
administrative and arbitrator fees, shall be shared equally by the
Members
and each Member shall bear its own costs and attorneys' and witness'
fees
incurred in connection with the arbitration.
(a) A disputed performance or
suspended performance(s) pending the
resolution
of the arbitration must be completed within a reasonable time period
following
the final decision of the arbitrators.
(b) Any arbitration subject to this
Article 15 shall be completed
within
one year from the filing of notice of a request for such arbitration and
a
written decision with reasons therefore provided to the Members. Any decision
shall
be deemed confidential and not disclosed to any Third Party. Should a
Member
believe that reporting the decision is required by governmental
regulation,
then the Members shall mutually agree as to the content of such
report.
-Page 41 of 48-
<PAGE>
(c) Any decision which requires a
monetary payment shall require such
payment
to be payable in United States dollars, free of any tax or other
deduction.
(d) The Members agree that the
decision shall be the sole, exclusive
and
binding remedy between them regarding any and all disputes, controversies,
claims
and counterclaims presented to the arbitrators. If a decision is not
complied
with by a Member, then any award or decision may be entered in a court
of
competent jurisdiction for a judicial recognition of the decision and an
order
of enforcement.
ARTICLE 16
CONFIDENTIALITY
16.1 Confidentiality.
(a) General. The confidentiality
provisions of the CDA will apply to
Confidential
Information (as defined therein) of the Members and the Company,
whether
provided under this Agreement or other agreements to which the Diversa
Member,
the Dow Member and/or the Company are parties. Additionally, the
Confidential
Information exchanged specifically under this Agreement shall also
be
in accord with the requirements stated in the above definition of
Confidential
Information.
(b) Restricted Access/Return of
Information.
(i)
Disclosure of a Member's Confidential Information to any
of the officers, employees,
consultants or agents of the other Member
shall be made only if and to the
extent necessary to carry out rights
and responsibilities under this
Agreement, shall be limited to the
maximum extent possible, consistent
with such rights and
responsibilities, and shall only be
made to persons who are bound to
maintain the confidentiality thereof
and not to use such Confidential
Information except as expressly
permitted by this Agreement.
(ii) Each Member shall use at
least the same standard of care,
but no less than a reasonable standard
of care for this industry, as it
uses to protect its own Confidential
Information to ensure that its
Affiliates, employees, agents,
consultants and other representatives do
not disclose or make any unauthorized
use of Confidential Information
of another Member. Each Member shall
promptly notify the other Member
of any unauthorized use or disclosure
of Confidential Information of
another Member.
(iii) Within 60 days
following termination or expiration of
this Agreement, each Member will
return to the other Member, or
destroy, upon the written request of
the concerned Member, all
Confidential Information disclosed to
it by the concerned Member
pursuant to this Agreement, including
all copies and extracts of
documents; provided that a Member may
retain Confidential Information
of another Member relating to any
license or right to use Intellectual
Property that survives such
termination and one copy of all other
Confidential
-Page 42 of 48-
<PAGE>
Information may be retained in
confidential and inactive legal archives
solely for the purpose of establishing
the contents thereof and to
determine the continuing obligations
of each Member.
(c) Employee Confidentiality
Agreements. The Diversa Member
and the Dow Member each represent that
all of its employees and any
consultants to such Member who shall
have access to Confidential
Information of another Member are
bound by agreements to maintain such
information in confidence and not to
use such information except as
expressly permitted herein. Each
Member agrees to enforce
confidentiality obligations by which
its employees and consultants are
bound.
ARTICLE 17
Miscellaneous
17.1 Technology Fee Payments. In
partial consideration of the Diversa
Member
agreeing to enter into and conduct research and development during the
initial
[***] term of the IE R&D Agreement, the Dow Member shall make the
following
payments to the Diversa Member (collectively the
"Technology Fee
Payments"):
(i) [***] within [***] days of the date of this
Agreement (the
"Exclusivity
Fee Payment"); (ii) [***] within [***] days of the date upon which
the
Company [***]; (iii) [***] within [***] days of the date upon which the
Company
[***]; (iv) [***] within [***] days of the date of this Agreement (the
"Initial
Technology Development Fee Payment"); and (v) [***] on each of the
[***]
subsequent anniversaries of the date of the IE R&D Agreement
(collectively,
the "Subsequent Technology development Fee Payments") (and the
Diversa
Member will provide an invoice to the Dow Member with regard to each
such
payment no later than [***] days prior to each such anniversary).
17.2 Dow Development Costs. [***].
17.3 [***]
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 43 of 48-
<PAGE>
[***].
17.4 Infringement Claims. In the event
that either Member receives a
written
notice of an allegation of possible patent infringement from a third
party
or determines that there is such possible infringement based on the use of
an
enzyme, material or licensed enzyme, such Member shall, within thirty (30)
days,
notify the other Member in writing and provide an explanation of the
circumstances.
17.5 Amendments.(a) Subject to any
contrary provisions of the Act, this
Agreement
may be amended only by the affirmative vote of all of the Members. Any
such
amendment shall be in writing, duly executed by all the Members.
(b) Subject to any contrary provisions
of the Act, the Certificate may
only
be amended by the affirmative vote of all of the Members. Any such
amendment
shall be in writing, and shall be executed and filed in accordance
with
section 18-202 of the Act.
17.6 Nature of Membership Interest;
Agreement Is Binding Upon
Successors.
The interests of Members in the Company constitute their personal
estate.
In the event of the death or legal disability of any Member, the
executor,
trustee or administrator of such Member shall be bound by the
provisions
of this Agreement, including without limitation Sections 9.1 and
10.2.
In the case of a Member which is not a natural person, the successor of
such
Member shall be bound by the provisions of this Agreement, including
without
limitation Sections 9.1 and 10.2.
17.7 Representation of Shares of
Companies or Interests in Other
Entities.
Any Director, the president, any vice president or the secretary or
any
assistant secretary of this Company is authorized to vote, represent and
exercise
on behalf of this Company all rights incident to any and all shares of
any
other company or companies, or any interests in any other entity, standing
in
the name of this Company. The authority herein granted to said Directors or
officers
to vote or represent on behalf of this Company any and all shares held
by
this Company in any other company or companies, or any interests in any other
entity,
may be exercised either by such Directors or officers in person or by
any
other person authorized so to do by proxy or power of attorney duly executed
by
said Directors or officers.
In the event of any inconsistency in
the actions taken by a Director,
the
president, vice president, secretary, assistant secretary, treasurer or
assistant
treasurer with respect to matters described in this Section 17.7, the
decision
or action of the chairman shall prevail over the decision or action of
a
Director, and the decision or action of a Director shall prevail over any
decision
or action of an officer (other than an officer who is also a Director),
and
the decision or action of the president shall prevail over that of any other
officer.
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 44 of 48-
<PAGE>
17.8 Seal. The Members or Board of
Directors may adopt a seal of the
Company
in such form as the Members or the Board of Directors (as the case may
be)
shall decide.
17.9 Mutual Representations. The Dow
Member and the Diversa Member each
represents
and warrants as follows:
(a) It is a corporation duly organized,
validly existing and is in good
standing
under the laws of the jurisdiction of its incorporation, is qualified
to
do business and in good standing as a foreign corporation in each
jurisdiction
in which the performance of its obligations hereunder requires such
qualification
and has all requisite power and authority, corporate or otherwise,
to
conduct its business as now being conducted, to own, lease and operate its
properties
and to execute, deliver and perform this Agreement.
(b) The execution, delivery and
performance by it of this Agreement
have
been duly authorized by all necessary corporate action and do not and will
not:
(a) require any consent or approval of its stockholders or (b) violate any
provision
of any law, rule, regulation, order, writ, judgment, injunction,
decree,
determination or award presently in effect having applicability to it or
any
provision of its charter documents.
(c) This Agreement is a legal, valid
and binding obligation of it,
enforceable
against it in accordance with its terms and conditions.
17.10 Non-Competition. Except as
permitted by Section 3.8(b), the Dow
Member,
the Diversa Member and their Affiliates agree [***]
during the period in
which
they are a Member. In addition, except as permitted by Section 3.8(b), (a)
the
Breaching Member if this Agreement is terminated under Section 10.2(a)(i),
(b)
the Change of Control Member if this Agreement is terminated under Section
10.2(a)(iii),
or (c) the Selling Member in the event of a sale of the Selling
Member's
Membership Interest under Section 10.2(b), together with such Member's
Affiliates,
agree [***], during the [***] period following termination of this
Agreement.
The period during which a Member is subject to the limitations
described
in the preceding sentences is referred to herein as the "Non-
competition
Period." Regardless of the percentage control or ownership, except
as
permitted by Section 3.8(b), the Dow Member and the Diversa
Member agree
[***].
In addition, [***]. Notwithstanding the foregoing, in no event shall the
Dow
Member license to third parties
*CONFIDENTIAL
TREATMENT REQUESTED
-Page 45 of 48-
<PAGE>
Confidential
Information or technology of the Company or the Diversa
Member,
except
as specifically permitted by the Industrial Enzymes Development Agreement
or
the Contract Manufacturing Agreement. However, the Company may license to
third
parties in accord with the LLC License.
17.11 Entire Agreement. This Agreement
and the exhibits and schedules
hereto
and any side letter agreements entered into by the Members as of the date
of
this Agreement relating to potential termination of this Agreement,
constitute
the entire agreement between the Members 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.
17.12 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, except as expressly
provided
herein. In addition, neither Member can assign this Agreement or the
rights
and obligations thereunder to another party without
the prior written
consent
of the other Member as more further described in Article 9.
17.13 Governing Law. This Agreement
shall be governed by and construed
under
the substantive laws of the State of Delaware, without regard to Delaware
choice
of law provisions.
17.14 Counterparts. This Agreement may
be executed 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.
17.15 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 otherwise specified, references to Sections or
Articles
are to the Sections or Articles in this Agreement. Unless the context
otherwise
requires, the term "including" shall mean "including, without
limitation".
17.16 Delaware Limited Liability
Company Act Prevails. Unless the
context
otherwise requires, the general provisions, rules of construction and
definitions
contained in the Act and the Delaware General Corporation Law shall
govern
the construction of this Agreement; provided, however, that in the event
of
any inconsistency between such laws, the provisions of the Act shall prevail.
-Page 46 of 48-
<PAGE>
17.17 Export Controls. This Agreement
is made subject to any
restrictions
concerning the export of Licensed Products or Research Results (as
such
terms are defined in the IE R&D Agreement) or Intellectual Property
(collectively,
"Technology") from the United States that may be imposed upon
either
Member from time to time by laws or regulations of the United States.
Neither
Member will export, directly or indirectly, any Technology to any
country
for which the United States government or any agency thereof at the time
of
export requires an export license or other governmental approval, without
first
obtaining the written consent to do so from the Department of Commerce,
Bureau
of Export Administration, or other agency of the United States government
when
required by applicable statute or regulation.
17.18 Severability. If one or more
provisions of this Agreement are
held
by a proper court to be unenforceable under applicable law, portions of
such
provisions, or such provisions in their entirety, to the extent necessary
and
permitted by law, shall be severed herefrom, and the
balance of this
Agreement
shall be enforceable in accordance with its terms.
17.19 Publicity. Neither Member shall
disclose the details of this
Agreement
or related agreements to any third party without the prior written
consent
of the other Member, provided, however, upon the signing of this
Agreement,
the Dow Member and the Diversa Member will jointly
develop a public
announcement
to disclose the fact that the Members have entered into this
Agreement;
and provided further that a Member may make sure disclosure as is
required
to comply with applicable laws or regulations (such as disclosure to
the
Securities and Exchange Commission) or to comply with a court or
administrative
order, provided that the party required to make such disclosure
takes
all reasonable and lawful actions to obtain confidential treatment for
such
disclosure and, if possible, to minimize the extent of such disclosure and
promptly
notifies the other Member regarding such disclosure.
17.20 Publication. The provisions of
the CDA Agreement shall apply with
respect
to proposed publications or public disclosure of research results under
this
Agreement.
17.21 Costs. The Members agree to be
responsible for their own costs
and
expenses related to the formation of preparation and execution of this
Agreement.
17.22 Insurance. The Members agree
that the Board of Directors shall
direct
the Company from time to time to purchase adequate, reasonable and
customary
personal, property and product liability insurance
17.23 Notices. Any notice to be given
under this Agreement shall be in
writing
and shall be deemed given when received and may be sent by mail, express
courier
or facsimile to:
If
to the Diversa Member: If to the Dow Member:
Diversa
Corporation The
Dow Chemical Company
Attn: President Attn:
10665
Sorrento Valley Road
2030 Dow Center
San
Diego, California 92121 Midland, MI 48674
(858)
623-5190(FAX)
(517) 636-4033 (FAX)
-Page 47 of 48-
<PAGE>
IN WITNESS WHEREOF, the Members hereby
execute this Limited Liability
Company
Agreement as of June 29, 2000. This Agreement may be signed in
separate
counterparts by facsimile.
Diversa Corporation
By /s/ Jay M. Short
------------------------------------
Name Jay M. Short
----------------------------------
Title Chief Executive Officer
---------------------------------
The Dow
Chemical Company
By /s/ G.E. Merszei
------------------------------------
Name G.E. Merszei
----------------------------------
Title Vice President and
Treasurer
---------------------------------
ACCEPTED
AND AGREED
New
Venture LLC
By /s/ Fernand
Kaufmann
--------------------------------------
Name Fernand Kaufmann
------------------------------------
Title Chairman of the Board of Directors
-----------------------------------
-Page 48 of 48-