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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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"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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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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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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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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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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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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(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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(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

 

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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-

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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

 

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<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

 

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<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

 

-Page 32 of 48-

<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.

 

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<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-