Document:

<PAGE>

                                                                    EXHIBIT 10.9

                             Amended and Restated

                            Stockholders' Agreement

                         Dated as of January 25, 1999

                                 by and among

                              DIVERSA CORPORATION

                                      and

                         the Stockholders named herein
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                               Table of Contents

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1.   Definitions............................................       1

2.   Representations and Certain Covenants..................      10
     2.1     By the Company.................................      10
     2.2     By the Stockholders............................      10
     2.3     By the Series A Preferred Stockholders.........      10
     2.4     Covenants of the Stockholders..................      11

3.   Legend on Shares and Notice of Transfer................      11
     3.1     Restrictive Legends............................      11
     3.2     Notice of Transfer.............................      12
     3.3     Prohibited Transfers...........................      13
     3.4     Right of First Refusal; Tag-Along Rights.......      13

4.   Rights to Purchase Additional Stock....................      16

5.   Board of Directors.....................................      17
     5.1    Number of Directors.............................      17
     5.2    Agreement to Vote for Directors.................      17
     5.3    Default of Agreement to Vote....................      18
     5.4    Board Observation Rights........................      18

6.   Affirmative Covenants of the Company...................      18
     6.1    Use of Proceeds.................................      19
     6.2    Consent as to Issuance of Common Stock..........      19
     6.3    Financial Information...........................      19
     6.4    Other Reports and Inspection....................      20
     6.5    Corporate Existence.............................      21
     6.6    Insurance.......................................      21
     6.7    Maintenance of Properties.......................      21
     6.8    Compliance with Obligations.....................      21
     6.9    Taxes...........................................      21
     6.10   Compliance with Law.............................      21
     6.11   Environmental Matters...........................      22
     6.12   Accounting System...............................      22
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                                      i.

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                              Table of Contents
                                  (Continued)

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     6.13   Reservation of Common Stock...................................   22
     6.14   Confidentiality Agreements with Employees and Consultants.....   22
     6.15   Board of Directors Meetings...................................   22
     6.16   Publicity.....................................................   22
     6.17   Registration Rights...........................................   22
     6.18   Key Man Life Insurance........................................   23
     6.19   Voting Agreement with Common Stockholders.....................   23
     6.20   Option Exercises..............................................   23
     6.21   Proprietary Rights............................................   23
     6.22   Approval of Budget............................................   23
     6.23   Repayment of Loan Agreement and Release of Encumbrances.......   23

7.   Negative Covenants of the Company....................................   23
     7.1    Indebtedness; Commitments.....................................   24
     7.2    Restriction on Dividends......................................   24
     7.3    Restriction on Issuances of Shares............................   24
     7.4    Protective Provisions.........................................   24
     7.5    Business......................................................   24
     7.6    Guarantees....................................................   24
     7.7    Conflicting Agreements........................................   24
     7.8    No Acquisitions...............................................   24
     7.9    No Dispositions...............................................   24
     7.10   Employee Stock and Stock Options..............................   25

8.   Confidentiality......................................................   25

9.   Events of Noncompliance..............................................   26
     9.1    Occurrence of Event of Noncompliance..........................   26
     9.2    Remedies......................................................   27

10.  Filing of Reports Under the Exchange Act.............................   27

11.  Registration Rights..................................................   28
     11.1  Demand Registration Rights.....................................   28
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                                      ii.

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                              Table of Contents
                                  (Continued)

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     11.2    Registration Requested by Holders.........................   30
     11.3    "Piggyback" Registrations.................................   31
     11.4    Registrations on S-3......................................   33
     11.5    Company's Obligations in Registration.....................   33
     11.6    Payment of Registration Expenses..........................   35
     11.7    Information from Holders of Registrable Securities........   36
     11.8    Indemnification...........................................   36

12.  Small Business Matters............................................   38
     12.1    Generally: Certain SBIC Covenants.........................   38
     12.2    Regulatory Compliance Cooperation.........................   39
     12.3    Information Rights and Related Covenants..................   40
     12.4    Remedies..................................................   40

13.  Duration of Agreement..............................................  41

14.  Additional Remedies................................................  41

15.  Successors and Assigns; Limitation on Assignment...................  41

16.  Entire Agreement...................................................  42

17.  Notices............................................................  42

18.  Changes............................................................  43

19.  Counterparts.......................................................  43

20.  Headings...........................................................  43

21.  Nouns and Pronouns.................................................  43

22.  Severability.......................................................  43

23.  Governing Law; Jurisdiction........................................  43

24.  New York Life Insurance Company Compliance Obligations.............  43
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                                      iv.
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                 AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT

This Amended and Restated Stockholders' Agreement dated as of January 25, 1999
by and among Diversa Corporation, a Delaware corporation (the "Company"), and
those stockholders of the Company whose names appear on the signature pages
hereof.

                                R E C I T A L S

     Whereas, the Company and the holders of the Series A Preferred Stock have
previously entered into a Stockholders' Agreement dated as of December 21, 1994
by and among the Company (formerly known as Industrial Genome Sciences, Inc.)
and those stockholders whose names appear on the signature pages thereof, as
amended by Amendment No. 1 thereto (the "Original Stockholders' Agreement");

     Whereas, the Company and the holders of the Series A, Series B, Series C
and Series D Preferred Stock have previously entered into a Stockholders'
Agreement dated as of May 13, 1996, as amended on July 14, 1997 and October 22,
1997, by and among the Company and those stockholders whose names appear on the
signature pages thereof (the "Prior Stockholders' Agreement"), which superceded
and replaced in its entirety the Original Stockholders' Agreement;

     Whereas, the Company is entering, or will enter into, a Stock Purchase
Agreement with the Series E Investors pursuant to which the Company will sell
shares of its Series E Preferred Stock to the Series E Investors;

     Whereas, in connection with the sale of the Series E Preferred Stock to the
Series E Investors, the Company and the Stockholders desire to (i) amend and
restate the Prior Stockholders' Agreement to make certain covenants with the
Series E Investors and to grant the Series E Investors certain rights and (ii)
terminate the Prior Stockholders' Agreement in its entirety with such Prior
Stockholders' Agreement being superseded and replaced in its entirety with this
Agreement;

     Now, Therefore, in consideration of the foregoing and of the respective
covenants and undertakings hereunder, the parties hereto do hereby agree as
follows:

1.   Definitions.

     As used in this Agreement, the following terms shall have the following
respective meanings:

     "1997 Plan" shall mean the Company's 1997 Equity Incentive Plan.

     "Affiliate" shall mean, with respect to any Person, (i) a director, officer
or stockholder of such Person, (ii) a spouse, parent, sibling or descendant of
such Person (or spouse, parent, sibling or descendant of any director or
executive officer of such Person), and (iii) any other Person that,

                                       1.
<PAGE>

directly or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with, such Person.

     "Applicable Environmental Law" shall mean CERCLA, RCRA, the Federal Waste
Pollution Control Act, 33 U.S.C. (S) (S) 1261 et seq., the Clean Air Act, 42
U.S.C. (S) (S) 7401 et seq., any similar provisions of state or local law in the
countries and jurisdictions where the properties of the Company are located and
where the Company conducts its business and the regulations thereunder and any
other local, state and/or federal laws or regulations, whether currently in
existence or hereafter enacted, that govern:

          (a)  the existence, cleanup and/or remediation of contamination on
property;

          (b)  the protection of the environment from spilled, deposited or
otherwise emplaced contamination;

          (c)  the control of hazardous wastes; or

          (d)  the use, generation, transport, handling, treatment, storage,
disposal, removal or recovery of Hazardous Materials, including building
materials.

     "Board of Directors" shall mean the Board of Directors of the Company.

     "Budget" shall have the meaning set forth in Section 6.3(d).

     "Business" shall have the meaning set forth in Section 12.1.

     "Business and Condition" shall mean the business, operations, properties,
assets, prospects or condition (financial or otherwise) of the Company.

     "Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks located in the City of New York are authorized or required to be
closed.

     "By-laws" shall mean the By-laws of the Company, as amended.

     "CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)(S) 6901 et seq.

     "Capital Stock" shall mean any (i) shares of Common Stock, Preferred Stock
or any other equity security of the Company, (ii) debt securities convertible
into or exchangeable for any equity security of the Company, (iii) any debt
security or capitalized lease with any equity feature with respect to the
Company, or (iv) options, warrants or other rights to subscribe for, purchase or
otherwise acquire any such equity security or debt security of the Company.

     "Charter" shall mean the Seventh Restated Certificate of Incorporation of
the Company, as filed on December 30, 1998 with the Secretary of State of
Delaware, as the same may be restated and amended from time to time.

     "CIT/VC" shall mean The CIT Group/Venture Capital, Inc. and any successor
thereto.

                                       2
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     "CIT/VC Group" shall mean any entity or Person now existing or hereafter
formed which is affiliated with The CIT Group/Venture Capital, Inc. and any
successors or assigns of any of the foregoing Persons.

     "Commission" shall mean the Securities and Exchange Commission or any other
Federal agency administering the Securities Act at the applicable time.

     "Commitment" shall mean all obligations of the Company and its Subsidiaries
pursuant to long-term leases or similar agreements relating to the use of
personal property.

     "Common Shares" shall mean the issued and outstanding shares of the
Company's Common Stock, $.001 par value per share, at the applicable time.

     "Common Stock" shall mean the Company's authorized Common Stock, $.001 par
value per share.

     "Common Stockholder" shall mean each Person who has purchased Common Stock
from the Company or who acquires Common Stock upon the conversion of preferred
stock, by Transfer or otherwise and who becomes a party to this Agreement.

     "Control" shall mean, with respect to any Person, the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

     "Covenant Preferred Shares" shall mean the issued and outstanding shares of
the Company's Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, and, for purposes of Section 6
only with respect to Sections 6.1, 6.2, 6.3(a) and (b), 6.4 and 6.13, the Series
E Preferred Stock.

     "Covenant Preferred Stockholders" shall mean any holder of Covenant
Preferred Shares and any person to whom Covenant Preferred Shares (or the Common
Stock issued upon conversion thereof) are Transferred.

     "Equity Stock" shall have the meaning set forth in Rule 3a11-l under the
Exchange Act.

     "Event of Noncompliance" shall have the meaning set forth in Section 9.1.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any successor statute and the rules and regulations thereunder, as shall be
in effect from time to time.

     "Excluded Stock" shall mean (a) the Preferred Shares, (b) the Option
Shares, (c) Common Stock issuable upon conversion of the Preferred Shares, (d)
securities issued pursuant to the acquisition of another corporation,
partnership, joint venture, trust or other entity by the Company by merger,
consolidation, stock acquisition, reorganization, or otherwise, (e) Common Stock
issuable upon exercise of options granted pursuant to the Restricted Stock
Option Agreements, (f) Common Stock issuable as a result of stock dividends,
stock splits, stock combinations or other similar transactions by the Company
and (g) securities issued in connection with bank credit facilities, equipment
financing transactions, other leasing lines of

                                       3.
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credit or collaborative arrangements not primarily intended to provide equity
financing to the Company.

     "GAAP" shall mean generally accepted accounting principles of the United
States.

     "Governmental Body" shall mean any United States or state government body,
any agency, commission or authority thereof, or any quasi-governmental or
private body exercising any regulatory or taxing authority thereunder.

     "Group" shall mean as to (a) a Preferred Stockholder that is a limited
partnership, any and all of the venture capital limited partnerships now
existing or hereafter arising that are "affiliates" (as defined by Rule 405
promulgated under the Securities Act), in whole or in part, of one or more
general partners or of one or more general partners of a general partner of such
Stockholder and any predecessor or successor partnership and any limited and
general partners of any such partnership; (b) a Preferred Stockholder that is a
trust, any of the beneficiaries, settlors or grantors now existing or hereafter
arising of, or any Person under common control with, such trust; (c) in the case
of HCV I, HCV II, HCV III and HCV IV, the HCV Group; (d) in the case of Everest
Trust, any grantor or beneficiary thereof, or any other trust, corporate entity
or partnership under common control with Everest Trust for which Rho Management
Company, Inc. acts as investment adviser; (e) in the case of APA Excelsior IV,
L.P., APA Excelsior IV/Offshore, L.P., The P/A Fund, L.P., and the Patricof
Private Investment Club, L.P., the Patricof Group; (f) in the case of the Series
E Investors, any affiliates, in whole or in part, of such Series E Investor; and
(g) any Preferred Stockholder, any other Preferred Stockholder.

     "Hazardous Materials" shall mean any substance which as of the date of this
Agreement shall be identified as "hazardous" or "toxic" or otherwise regulated
under CERCLA or RCRA or which has been or shall be determined at any time by any
agency or court to be a hazardous or toxic substance under Applicable
Environmental Law.  The term "Hazardous Material" shall also include, without
limitation, raw materials, building components (including asbestos), the
products of any manufacturing or other activities on the properties, wastes,
petroleum, and source, special nuclear or by-product material as defined by the
Atomic Energy Act of 1954, as amended (42 U.S.C. (S)(S) 3011 et seq., as
amended.)

     "HCV Group" shall mean, collectively, (i) HCV I, (ii) HCV II, (iii) HCV
III, (iv) HCV IV, (v) any venture capital limited partnership now existing or
hereafter formed which is affiliated with or under common control with one or
more general partners of any general partner of HCV I, HCV II, HCV III and HCV
IV (an "HCV Fund") (including, without limitation, the other HCV Funds); (vi)
any limited partners or affiliates of HCV I, HCV II, HCV III, HCV IV or any
other HCV Fund; and (vii) any successors or assigns of any of the foregoing
persons.

     "HCV I" shall mean HealthCare Ventures I, L.P., a Delaware limited
partnership, including any successor thereto.

     "HCV II" shall mean HealthCare Ventures II, L.P., a Delaware limited
partnership, including any successor thereto.

     "HCV III" shall mean HealthCare Ventures III, L.P., a Delaware limited
partnership, including any successor thereto.

                                       4.
<PAGE>

     "HCV IV" shall mean HealthCare Ventures IV, L.P., a Delaware limited
partnership, including any successor thereto.

     "Initial Public Offering" shall mean the Company's initial distribution of
Common Stock in an underwritten Public Offering to the general public pursuant
to a registration statement filed with and declared effective by the Commission
pursuant to the Securities Act at a price per share which is not less than 300%
of the Conversion Price (as defined in the Charter) of the Series B Preferred
Stock in effect at the time of such public offering and resulting in gross
proceeds (before underwriting commissions and offering expenses) to the Company
of not less than $15 million.

     "Indebtedness" shall mean all liabilities for money borrowed, or for the
deferred portion of the purchase price, payable by the Company or its
Subsidiaries.

     "Key Man Life Insurance" shall have the meaning set forth in Section 6.19.

     "Non-Scientific Founders" shall mean Dr. Peter Korn and Gary Friedman.

     "Offer" shall have the meaning set forth in Section 4(b) hereof.

     "Offered Shares" shall have the meaning set forth in Section 4(a) hereof.

     "Option Shares" shall mean up to 11,275,624 shares of Common Stock issued,
available for issuance or subject to options, warrants, awards or rights granted
or authorized to be granted to employees, consultants and others who provide
services to the Company pursuant to any Stock Plan.

     "Patricof Group" shall mean, collectively, (i) APA Excelsior IV, L.P., (ii)
APA Excelsior IV/Offshore, L.P., (iii) The P/A Fund, L.P., (iv) the Patricof
Private Investment Club, L.P., (v) any venture capital limited partnership or
entity (a "Patricof Fund") now existing or hereafter formed which is affiliated
with or under common control with (x) one or more general partners of any
general partner of APA Excelsior IV, L.P., APA Excelsior IV/Offshore, L.P., The
P/A Fund, L.P., or the Patricof Private Investment Club, L.P., or (y)  managed
or advised by Patricof & Co. Ventures, Inc. or any affiliate thereof (including,
without limitation, the other Patricof Funds); (vi) any limited partners or
affiliates of APA Excelsior IV, L.P., APA Excelsior IV/Offshore, L.P., The P/A
Fund, L.P., or the Patricof Private Investment Club, L.P., or any other Patricof
Fund; and (vii) any successors or assigns of any of the foregoing persons.  Any
reference to APA Excelsior IV, L.P., APA Excelsior IV/Offshore, L.P., The P/A
Fund, L.P., and the Patricof Private Investment Club, L.P., shall mean such
entity and any successor to such entity.

     "Person" shall mean any individual, corporation, partnership, a limited
liability company, joint venture, trust, association, unincorporated
organization, other entity, or Governmental Body.

     "Preferred Shares" shall mean the issued and outstanding shares of the
Company's Series A Preferred Stock, $.001 par value per share, Series B
Peferred Stock, $.001 par value

                                       5
<PAGE>

per share, Series C Preferred Stock, $.001 par value per share, Series D
Preferred Stock, $.001 par value per share, and Series E Preferred Stock, $.001
par value per share.

     "Preferred Stockholder" shall mean any holder of Preferred Shares and any
Person to whom Preferred Shares (or the Common Stock issued upon conversion
thereof) are Transferred.

     "Pro Rata Fraction" shall have the meaning set forth in Section 3.4(b).

     "Public Offering" shall mean a distribution of Common Stock in an
underwritten public offering to the general public pursuant to a registration
statement filed with and declared effective by the Commission pursuant to the
Securities Act.

     "RCRA" shall mean Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)
6901 et seq.

     "Registrable Securities" shall mean the aggregate of Series A Registrable
Securities, the Series B Registrable Securities, the Series C Registrable
Securities, the Series D Registrable Securities and the Series E Registrable
Securities.

     "Regulated Holder" shall mean any holder of the Company's Securities that
is (or that is a subsidiary of a bank holding company that is) subject to the
various provisions of Regulation Y of the Board of Governors of the Federal
Reserve Systems, 12 C.F.R., Part 225 (or any successor to Regulation Y).

     "Regulatory Problem" shall mean (i) any set of facts or circumstances
wherein it has been asserted by any governmental regulatory agency (or CIT/VC
reasonably believes that there is a significant risk of such assertion) that
such Person (or any bank holding company that controls such Person) is not
entitled to hold, or exercise any material right with respect to, all or any
portion of the Securities of the Company which such Person holds or (ii) when
such Person and its Affiliates would own, control or have power (including
voting rights) over a greater quantity of Securities of the Company than is
permitted under any law or regulation or any requirement of any governmental
authority applicable to a Person or to which such Person is subject.

     "Restricted Securities" shall mean the aggregate of Series A Restricted
Securities, the Series B Restricted Securities, the Series C Restricted
Securities, the Series D Restricted Securities and the Series E Restricted
Securities.

     "Restricted Stock Option Agreements" shall mean the Restricted Stock Option
Agreements dated December 21, 1994 between the Company and each of the
Scientific Founders and the Non-Scientific Founders (except Barry Marrs) and the
Restricted Stock Option Agreement dated December 19, 1994 between the Company
and Barry Marrs.

     "SBA" shall have the meaning set forth in Section 12.1.

     "SBIA" shall have the meaning set forth in Section 12.1.

     "SBIC" shall have the meaning set forth in Section 12.1.

                                       6
<PAGE>

     "Scientific Founders" shall mean Dr. Melvin Simon, Dr. Jeffrey H. Miller,
Dr. Barry Marrs and Dr. Karl Stetter.

     "Securities" shall mean, with respect to any Person, such Person's capital
stock or any options, warrants or other Securities which are directly or
indirectly convertible into, or exercisable or exchangeable for, such Person's
capital stock (whether or not such derivative Securities are issued by the
Company).  Whenever a reference herein to Securities refers to any derivative
Securities, such reference shall apply to such derivative Securities and all
underlying Securities directly or indirectly issuable upon conversion, exchange
or exercise of such derivative Securities.

     "Securities Act" shall mean the Securities Act of 1933, as amended, and any
successor statute and the rules and regulations of the Commission thereunder, as
shall be in effect at the applicable time.

     "Series A Preferred Stock" shall mean the Series A Preferred Stock, $.001
par value per share, of the Company.

     "Series A Registrable Securities" shall mean the shares of Common Stock
issued or issuable on conversion or exercise of Series A Restricted Securities,
or constituting a portion of the Series A Restricted Securities.

     "Series A Restricted Securities" shall mean the Series A Preferred Stock
and the Common Stock issued or issuable upon the conversion of the Series A
Preferred Stock, and any other securities of the Company which may be heretofore
or hereafter issued to any of the holders of the Series A Preferred Stock (other
than Series B Preferred Stock) which are convertible into or exercisable or
exchangeable for shares of Common Stock (including, without limitation, other
classes or series of preferred stock, warrants, options or other rights to
purchase Common Stock or convertible debentures or other convertible debt
securities) and any Common Stock (howsoever acquired) by any holder of Series A
Preferred Stock or any Common Stock which has been issued on conversion of
Series A Preferred Stock, which have not been sold (a) in connection with an
effective registration statement filed pursuant to the Securities Act, or (b)
pursuant to Rule 144 or Rule 144A promulgated by the Commission under the
Securities Act.

     "Series A Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of December 21, 1994 by and among the Company and the
parties thereto, as amended by the Stock Purchase Agreement and Amendment to
Stock Purchase Agreement, dated March 15, 1995 by and among the Company and the
parties thereto, as amended by the Stock Purchase Agreement and Amendment to
Stock Purchase Agreement dated July 28, 1995 by and among the Company and the
parties thereto, as amended by Amendment No. 3 to the Stock Purchase Agreement
dated May 13, 1996 by and among the Company and the parties thereto.

     "Series B Preferred Stock" shall mean the Series B Preferred Stock, $.001
par value per share, of the Company.

     "Series B Registrable Securities" shall mean the shares of Common Stock
issued or issuable on conversion or exercise of Series B Restricted Securities,
or constituting a portion of the Series B Restricted Securities.

                                       7.
<PAGE>

     "Series B Restricted Securities" shall mean the Series B Preferred Stock
and the Common Stock issued or issuable upon the conversion of the Series B
Preferred Stock, and any other securities of the Company which may be heretofore
or hereafter issued to any of the holders of the Series B Preferred Stock (other
than Series A Preferred Stock) which are convertible into or exercisable or
exchangeable for shares of Common Stock (including, without limitation, other
classes or series of preferred stock, warrants, options or other rights to
purchase Common Stock or convertible debentures or other convertible debt
securities) and any Common Stock (howsoever acquired) by any holder of Series B
Preferred Stock or any Common Stock which has been issued on conversion of
Series B Preferred Stock, which have not been sold (a) in connection with an
effective registration statement filed pursuant to the Securities Act, or (b)
pursuant to Rule 144 or Rule 144A promulgated by the Commission under the
Securities Act.

     "Series B Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of May 13, 1996, by and among the Company and the purchasers
of the Series B Preferred Stock named as Investors therein.

     "Series C Preferred Stock" shall mean the Series C Preferred Stock, $.001
par value per share, of the Company.

     "Series C Registrable Securities" shall mean the shares of Common Stock
issued or issuable on conversion or exercise of Series C Restricted Securities,
or constituting a portion of the Series C Restricted Securities.

     "Series C Restricted Securities" shall mean the Series C Preferred Stock
and the Common Stock issued or issuable upon the conversion of the Series C
Preferred Stock, and any other securities of the Company which may be heretofore
or hereafter issued to any of the holders of the Series C Preferred Stock which
are convertible into or exercisable or exchangeable for shares of Common Stock
(including, without limitation, other classes or series of preferred stock,
warrants, options or other rights to purchase Common Stock or convertible
debentures or other convertible debt securities) and any Common Stock (howsoever
acquired) by any holder of Series C Preferred Stock or any Common Stock which
has been issued on conversion of Series C Preferred Stock, which have not been
sold (a) in connection with an effective registration statement filed pursuant
to the Securities Act, or (b) pursuant to Rule 144 or Rule 144A promulgated by
the Commission under the Securities Act.

     "Series C Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of July 14, 1997 by and among the Company and the parties
thereto.

     "Series D Preferred Stock" shall mean the Series D Preferred Stock, $.001
par value per share, of the Company.

     "Series D Registrable Securities" shall mean the shares of Common Stock
issued or issuable on conversion or exercise of Series D Restricted Securities,
or constituting a portion of the Series D Restricted Securities.

     "Series D Restricted Securities" shall mean the Series D Preferred Stock
and the Common Stock issued or issuable upon the conversion of the Series D
Preferred Stock, and any other securities of the Company which may be heretofore
or hereafter issued to any of the

                                       8.
<PAGE>

holders of the Series D Preferred Stock which are convertible into or
exercisable or exchangeable for shares of Common Stock (including, without
limitation, other classes or series of preferred stock, warrants, options or
other rights to purchase Common Stock or convertible debentures or other
convertible debt securities) and any Common Stock (howsoever acquired) by any
holder of Series D Preferred Stock or any Common Stock which has been issued on
conversion of Series D Preferred Stock, which have not been sold (a) in
connection with an effective registration statement filed pursuant to the
Securities Act, or (b) pursuant to Rule 144 or Rule 144A promulgated by the
Commission under the Securities Act.

     "Series D Stock Purchase Agreement" shall mean the Stock Purchase Agreement
and Agreement and Plan or Reorganization, dated as of October 22, 1997 by and
among the Company and the parties thereto.

     "Series E Investors" shall mean the investor(s) listed on the Schedule of
Series E Investors attached hereto.

     "Series E Preferred Stock" shall mean the Series E Preferred Stock, $.001
par value per share, of the Company.

     "Series E Registrable Securities" shall mean the shares of Common Stock
issued or issuable on conversion or exercise of Series E Restricted Securities,
or constituting a portion of the Series E Restricted Securities.

     "Series E Restricted Securities" shall mean the Series E Preferred Stock
and the Common Stock issued or issuable upon the conversion of the Series E
Preferred Stock, and any other securities of the Company which may be heretofore
or hereafter issued to any of the holders of the Series E Preferred Stock which
are convertible into or exercisable or exchangeable for shares of Common Stock
(including, without limitation, other classes or series of preferred stock,
warrants, options or other rights to purchase Common Stock or convertible
debentures or other convertible debt securities) and any Common Stock (howsoever
acquired) by any holder of Series E Preferred Stock or any Common Stock which
has been issued on conversion of Series E Preferred Stock, which have not been
sold (a) in connection with an effective registration statement filed pursuant
to the Securities Act, or (b) pursuant to Rule 144 or Rule 144A promulgated by
the Commission under the Securities Act.

     "Series E Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of January 25, 1999, or any additional stock purchase
agreement for the purchase and sale of Series E Preferred Stock, by and among
the Company and the parties thereto.

     "Shares" shall mean and include all shares of voting capital stock of the
Company now owned or hereafter acquired by any Stockholder or transferee of such
Stockholder.

     "Stockholder" shall mean each Person who has purchased Shares from the
Company or who acquires Shares upon conversion of the Preferred Shares, the
exercise of options, Transfer or otherwise and who is a party to this Agreement.

     "Stock Plan" shall mean any stock award or option plan, agreement or
arrangement for officers, directors, consultants, employees and others who
render services to the Company.

                                      9.
<PAGE>

     "Subsidiary" shall mean, with respect to any Person, any corporation of
which securities having the power to elect a majority of that corporation's
Board of Directors (other than securities having that power only upon the
happening of a contingency that has not occurred) are held by such Person or one
or more of its Subsidiaries.

     "Taxes" shall mean all taxes, duties, charges, fees, levies, interest,
penalties, additions to tax or other assessments, including, but not limited to,
foreign, federal, state and local income, excise, employment, property, sales,
use, occupation, value added and franchise taxes and customs duties, imposed by
any Governmental Body and any payments with respect thereto required under any
tax-sharing agreement.

     "Transfer" shall include any sale, assignment, transfer, pledge,
encumbrance, or other disposition of, or the subjecting to a security interest
of, any Restricted Securities, or any disposition of any Restricted Securities
or of any interest therein which would constitute a sale thereof within the
meaning of the Securities Act.

     "Voting Agreement" shall mean the Amended and Restated Voting Agreement
dated as of even date herewith, by and among the Company, the Preferred
Stockholders and certain Common Stockholders, as the same may be amended from
time to time.

2.   Representations and Certain Covenants.

     2.1  By the Company. The Company represents to each Stockholder that:

          (a)  The execution, delivery and performance by the Company of this
Agreement and each other agreement to be entered into by the Company in
connection with this Agreement have been duly authorized by all action required
by law, its Charter, its By-laws or otherwise.

          (b)  This Agreement and such other agreements have been duly executed
and delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable against it in accordance with their
terms.

     2.2  By the Stockholders. Each Stockholder, as to itself or himself,
represents to the Company and the other Stockholders that:

          (a)  The execution, delivery and performance by such Stockholder of
this Agreement and each other agreement to be entered into by such Stockholder
in connection with this Agreement have been duly authorized by all action
required by law, and by the certificate of incorporation and by-laws,
partnership agreement or other governing instrument of such Stockholder.

          (b)  This Agreement and such other agreements have been duly executed
and delivered by such Stockholder and constitutes the legal, valid and binding
obligations of such Stockholder enforceable against it or him in accordance with
their terms.

     2.3  By the Series A Preferred Stockholders. Each holder of the Series A
Preferred Stock agrees to waive any prior breach of the Series A Preferred Stock
Purchase Agreement and

                                      10.
<PAGE>

each other agreement between the Company and the holders of Series A Preferred
Stock. The right of the holders of Series A Preferred Stock are as set forth in
this Agreement, the Series A Stock Purchase Agreement and the Charter; for the
avoidance of doubt, the Series A Stockholders shall not be deemed to have waived
any rights available to them in the future under either of said agreements or
the Charter.

     2.4  Covenants of the Stockholders. Each of the Stockholders hereby waives
any default or Event of Noncompliance that may have occurred prior to the date
hereof with respect to the late reporting or presentation of financial materials
and/or budgets pursuant to Sections 6.3 and 6.22 herein.

3.   Legend on Shares and Notice of Transfer.

     3.1  Restrictive Legends.

          (a)  Each certificate evidencing Shares, and each certificate
evidencing Shares held by subsequent transferees of any such certificate, shall
(unless otherwise permitted by the provisions of Section 3.2 hereof) be stamped
or otherwise imprinted with a legend in substantially the following form:

               THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
               FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
               ACT OF 1933 OR ANY STATE SECURITIES LAW. THESE SECURITIES MAY NOT
               BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF
               SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE SECURITIES
               ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.

          (b)  Each certificate evidencing Shares, and each certificate
evidencing Shares held by subsequent transferees of any such certificate, shall
also be stamped or otherwise imprinted with a legend in substantially the
following form:

               ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
               TERMS AND CONDITIONS OF AN AMENDED AND RESTATED STOCKHOLDERS'
               AGREEMENT, BY AND AMONG DIVERSA CORPORATION, THE HOLDER OF RECORD
               OF THIS CERTIFICATE AND CERTAIN OTHER SIGNATORIES THERETO, AND NO
               TRANSFER OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE EXCEPT IN
               ACCORDANCE WITH SUCH AGREEMENT AND UNTIL SUCH TERMS AND
               CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE
               OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
               RECORD

                                      11.
<PAGE>

               OF THIS CERTIFICATE TO THE SECRETARY OF DIVERSA CORPORATION.

     3.2  Notice of Transfer.

          (a)  Each of the Stockholders, and any other holder of any Shares by
acceptance thereof, agrees that, prior to any Transfer of any Shares, such
holder will give written notice to the Company of such holder's intention to
effect such Transfer and to comply in all other respects with the provisions of
this Section 3.2 and all of the provisions of Section 3.4 hereof. Each such
notice shall contain (i) a statement setting forth the intention of said
holder's prospective transferee with respect to its retention or disposition of
said Shares, and (ii) unless waived by the Company, an opinion of counsel
(reasonably satisfactory to the Company and its counsel) for said holder (who
may be the inside or staff counsel employed by said holder), as to the necessity
or non-necessity for registration under the Securities Act and applicable state
securities laws in connection with such Transfer and stating the factual and
statutory bases relied upon by counsel. The following provisions shall then
apply:

               (i)  If the proposed Transfer of Shares may be effected without
registration or qualification under the Securities Act and any applicable state
securities laws, then the registered holder of such Shares shall be entitled to
Transfer such Shares in accordance with Section 3.3 and the intended method of
disposition specified in the statement delivered by said holder to the Company.

               (ii) If the proposed Transfer of such Shares may not be effected
without registration under the Securities Act or registration or qualification
under any applicable state securities laws, the registered holder of such Shares
shall not be entitled to Transfer such Shares until the requisite registration
or qualification is effective.

          (b)  Notwithstanding the provisions of Section 3.2, (i) in the case of
a Transfer by a holder to a member of such holder's Group, no such opinion of
counsel shall be necessary, provided that the transferee agrees in writing to be
subject to Section 3 hereof to the same extent as if such transferee were
originally a signatory to this Agreement, and (ii) in the case of any holder of
Restricted Securities that is a partnership, no such opinion of counsel shall be
necessary for a Transfer by such holder to a partner of such holder, or a
retired partner of such holder who retires after the date hereof, or the estate
of any holder who retires after the date hereof, or the estate of any such
partner or retired partner if, with respect to such Transfer by a partnership,
such Transfer is made in accordance with the partnership agreement of such
partnership, and the transferee agrees in writing to be subject to the terms of
Section 3 hereof to the same extent as if such transferee were originally a
signatory to this Agreement. Transfers pursuant to this Section 3.3(b) are not
subject to the provisions of Section 3.4.

          (c)  Each certificate evidencing the Shares issued upon such Transfer
(and each certificate evidencing any untransferred balance of such Shares) shall
bear the legends set forth in Section 3.1 hereof unless the Shares are no longer
subject to this Stockholders' Agreement and (i) in the opinion of counsel
(reasonably acceptable to the Company) addressed to the Company the registration
of future Transfers is not required by the applicable provisions of the
Securities Act or applicable state securities laws; (ii) the Company shall have
waived the

                                      12.
<PAGE>

requirement of such legend; or (iii) in the reasonable opinion of counsel to the
Company, such Transfer shall have been made in connection with an effective
registration statement filed pursuant to the Securities Act or in compliance
with the requirements of Rule 144 or Rule 144A (or any similar or successor
rule) promulgated under the Securities Act, and in compliance with applicable
state securities laws, to a person who is not an affiliate (as such term is
defined in the Securities Act) of the Company.

     3.3  Prohibited Transfers.

          (a)  Each Stockholder agrees that it or he shall not Transfer any of
its or his Shares without the prior written consent of the holders of at least
75% in interest of the Preferred Shares, voting together as a class (without
counting the Shares held by such transferring Stockholder) except as provided
for in Section 3.

          (b)  Notwithstanding anything to the contrary contained herein, a
Stockholder may Transfer all or any of its Shares to a member of its Group and,
in the case of any stockholder which is a partnership, to a partner of such
holder, or a retired partner of such holder who retires after the date hereof,
or the estate of any holder who retires after the date hereof, or the estate of
any such partner or retired partner if, with respect to such Transfer by a
partnership, such Transfer is made in accordance with the partnership agreement
of such partnership provided that any such transferee shall agree in writing
with the Company, prior to and as a condition precedent to such transfer, to be
bound by all of the provisions of this Agreement.

          (c)  If requested in writing by the managing underwriters, if any, of
any Public Offering, each Stockholder agrees not to offer, sell, contract to
sell or otherwise dispose of any Shares except as part of such Public Offering
within thirty (30) days before or one hundred and eighty (180) days after the
effective date of the registration statement filed with respect to said
offering, and the Company hereby also so agrees; provided, however, that this
restriction will not apply to transfers permitted under Section 3.3(b).

          (d)  Each Transfer of Shares which is permitted by Section 3 of this
Stockholders' Agreement shall be by written agreement (the "Transfer
Agreement"), in a form reasonably satisfactory to the Company and its counsel,
pursuant to which the transferee (other than a Stockholder who is already a
party to this Stockholders' Agreement) agrees to execute a counterpart copy of
this Stockholders' Agreement, and to abide by, and hold the transferred Shares
subject to, the terms of this Agreement that are applicable to the transferring
Stockholder as of the time of the Transfer and that would have been applicable
to such transferring Stockholder had the transferring Stockholder retained such
transferred Shares.

     3.4  Right of First Refusal; Tag-Along Rights.

          (a)  If a Stockholder (for purposes of this Section, the "Selling
Stockholder") desires to sell all or any part of his Shares pursuant to a bona
fide, arm's-length offer from a creditworthy third party (the "Proposed
Transferee"), the Selling Stockholder shall submit a written offer (the "Offer")
to sell such Shares (the "Offered Shares") to the other Stockholders and the
Company, on terms and conditions, including price, not less favorable to the
other Stockholders and the Company than those on which the Selling Stockholder
proposes to sell the

                                      13.
<PAGE>

Offered Shares to the Proposed Transferee. The Offer shall disclose the identity
of the Proposed Transferee, the number of Offered Shares proposed to be sold,
the total number of Shares owned by the Selling Stockholder, the terms and
conditions, including price, of the proposed sale, the address of the Selling
Stockholder and any other material facts relating to the proposed sale.

          (b)  Subject to and in accordance with the priorities of rights
established in subsection (c) below, each Stockholder shall have the right (the
"Right of First Refusal") to purchase that number of Offered Shares as shall be
equal to the number of Offered Shares multiplied by a fraction, the numerator of
which shall be the number of Shares then owned by such Stockholder and the
denominator of which shall be the aggregate number of Shares then owned by all
of the Stockholders less those owned by the Selling Stockholder (the "Pro Rata
Fraction"). For the purpose of calculating the Pro Rata Fraction, each Preferred
Share shall be deemed to represent the number of Common Shares into which the
Preferred Share is then convertible.

          (c)  Stockholders shall have a right of oversubscription such that if
any Stockholder fails to accept the Offer as to its or his full Pro Rata
Fraction, the other Stockholders, among them, shall have the right to purchase
up to the balance of the Offered Shares not so purchased. Such right of
oversubscription may be exercised by a Stockholder by accepting the Offer as to
more than its or his Pro Rata Fraction. If, as a result thereof, such
oversubscriptions exceed the total number of Offered Shares available in respect
of such oversubscription privilege, the oversubscribing Stockholders shall be
cut back with respect to their oversubscriptions so as to sell the Offered
Shares as nearly as possible in accordance with their respective Pro Rata
Fractions or as they may otherwise agree among themselves.

          (d)  If a Stockholder desires to purchase all or any part of the
Offered Shares, such Stockholder (a "Purchasing Stockholder") shall communicate
in writing its or his election to purchase (an "Acceptance") to the Selling
Stockholder, which Acceptance shall state the number of Offered Shares the
Purchasing Stockholder desires to purchase and shall be delivered in person or
mailed to the Selling Stockholder at the address set forth in the Offer, with a
copy to the Company and the other Stockholders, within twenty (20) days of the
date the Offer was made.

          (e)  If the other Stockholders do not accept the Offer for all of the
Offered Shares, the Company shall have the right to purchase all of the
remaining Offered Shares (including any Tag-Along Shares being offered pursuant
to paragraph (j) below). If the Company desires to purchase all of the remaining
Offered Shares it shall seek the approval of the holders of at least 75% in
interest of the Preferred Shares (excluding those Preferred Shares owned or held
by the Selling Stockholder and any Tag-Along Stockholder pursuant to paragraph
(j) below), voting together as a class. Upon obtaining the requisite approval
from the Preferred Stockholders, the Company shall communicate in writing its
acceptance to the Selling Stockholder and the other Stockholders, which
Acceptance shall be delivered in person or mailed to the Selling Stockholder and
the other Stockholders within thirty (30) days of the date the Offer was made.

          (f)  Sale of the Offered Shares pursuant to this Section 3.4 shall be
made at the offices of the Company no later than the thirtieth (30) day
following the expiration of the 30-day

                                      14.
<PAGE>

period after the Offer is made (or if such thirtieth (30) day is not a Business
Day, then on the next succeeding Business Day). Such sales shall be effected by
the Selling Stockholder's delivery to each Purchasing Stockholder or the
Company, as the case may be, of a certificate or certificates evidencing the
Offered Shares to be purchased by it or him, duly endorsed for transfer to the
Purchasing Stockholder or the Company, as the case may be, which Offered Shares
shall be delivered free and clear of all liens, charges, claims and encumbrances
of any nature whatsoever, against payment to the Selling Stockholder of the
purchase price therefor by the Purchasing Stockholder or Company, as the case
may be. Payment for the Offered Shares shall be made as provided in the Offer or
by wire transfer or certified check.

          (g)  If the Purchasing Stockholders and the Company do not agree to
purchase all of the Offered Shares, then the Offered Shares may be sold by the
Selling Stockholder at any time within 120 days after the date the Offer was
made. Any such sale shall be to the Proposed Transferee, at not less than the
price and upon other terms and conditions, if any, not more favorable to the
Proposed Transferee than those specified in the Offer. Any Offered Shares not
sold within such 120-day period shall continue to be subject to the requirements
of a prior offer pursuant to this Section 3.4.

          (h)  If any Selling Stockholder becomes obligated to sell any Shares
(a "Defaulting Stockholder") to the Company or any Purchasing Stockholder under
this Agreement and fails to deliver such Shares in accordance with the terms of
this Agreement, the Company or the Purchasing Stockholder, as the case may be,
may, at its or his option, in addition to all other remedies it or he may have,
send to the Defaulting Stockholder the purchase price for such Shares as is
herein specified. Thereupon, the Company, upon written notice to the Defaulting
Stockholder, if applicable, shall (x) cancel on its books the certificate or
certificates representing the Shares to be sold and (y) issue, in lieu thereof,
in the name of the Purchasing Stockholder, a new certificate or certificates
representing such Shares, and thereupon all of the Defaulting Stockholder's
rights in and to such Shares shall terminate, except for the right to receive
payment of the purchase price therefor.

          (i)  Notwithstanding anything herein to the contrary, the Selling
Stockholder shall not be obligated to sell any Shares to the Company or the
other Stockholders, and will be free to sell all of the Shares to the Proposed
Transferee, if the Company and the Stockholders do not elect to buy all of the
Shares specified in the Offer.

          (j)  In lieu of exercising the Right of First Refusal, each of the
other Stockholders (for the purposes of this paragraph, the "Tag-Along
Stockholder") shall have the irrevocable right (the "Tag-Along Right") to
require the Selling Stockholder to cause the Proposed Transferee to purchase
from such Tag-Along Stockholder that number of Shares held by such Tag-Along
Stockholder as is equal to the product of the Offered Shares, multiplied by a
fraction, the numerator of which is the number of Shares held by such Tag-Along
Stockholder and the denominator of which is the number of Shares owned by such
Tag-Along Stockholder plus the sum of the number of Shares owned by the Selling
Stockholder and all other Tag-Along Stockholders who are exercising their Tag-
Along Rights (the "Tag-Along Shares"). The sale of the Offered Shares (as
reduced by the Tag-Along Shares, the "Remaining Offered Shares") and the Tag-
Along Shares shall be for the same consideration and otherwise on the same terms
and conditions for all holders. The Tag-Along Right shall be exercised by a Tag-
Along Stockholder

                                      15.
<PAGE>

by notifying the Selling Stockholder and the Company in writing (the "Tag-Along
Notice") within twenty (20) calendar days of receiving the Offer of his
intention to sell his Tag-Along Shares. Failure by any Stockholder to deliver a
Tag-Along Notice during such twenty (20) calendar day period shall be deemed to
constitute the election of such Stockholder not to exercise his Tag-Along
Rights. If the Proposed Transferee does not consummate the purchase of all of
the Remaining Offered Shares and the Tag-Along Shares within 120 calendar days
from the receipt by the Selling Stockholder of a Tag-Along Notice from each of
the other Stockholders, the Offered Shares and Tag-Along Shares shall again
become subject to the terms of this Section 3.

4.   Rights to Purchase Additional Stock.

          (a)  Except for Excluded Stock, the Covenant Preferred Stockholders
shall have the right to subscribe to any and all issuances of Capital Stock of
the Company ("Company Offered Shares"). Each Covenant Preferred Stockholder
shall have the right to purchase that number of Company Offered Shares as shall
be equal to the number of Company Offered Shares multiplied by a fraction, the
numerator of which shall be the number of Shares then owned by such Covenant
Preferred Stockholder and the denominator of which shall be the aggregate number
of Shares then owned by all of the Covenant Preferred Stockholders (the
"Fraction"). For purposes of calculating the Fraction, all issued and
outstanding securities held by the Covenant Preferred Stockholders that are
convertible into or exercisable or exchangeable for shares of Common Stock
(including any issued and issuable Covenant Preferred Shares) or for any such
convertible, exercisable or exchangeable securities, shall be treated as having
been so converted, exercised or exchanged.

          (b)  In the event the Company shall propose to issue Capital Stock
except for Excluded Stock, the Company shall give written notice (the "Offer of
Shares") to each Covenant Preferred Stockholder, which shall set forth the
number and kind or class of shares of Capital Stock proposed to be issued, the
terms and conditions thereof and the price therefor. Such notice shall be given
at least twenty (20) days prior to the issuance of such Capital Stock.

          (c)  The Offer of Shares by its terms shall remain open and
irrevocable for a period of twenty (20) days from the date of its delivery to
such Covenant Preferred Stockholder ("20-Day Period").

          (d)  Each Covenant Preferred Stockholder shall evidence its acceptance
of the Offer of Shares by delivering a written notice ("Notice of Acceptance"),
signed by the Covenant Preferred Stockholder, setting forth the number of
Company Offered Shares which the Covenant Preferred Stockholder elects to
purchase. The Notice of Acceptance must be delivered to the Company prior to the
end of the 20-Day Period.

          (e)  If the Covenant Preferred Stockholders do not tender Notices of
Acceptance for all of the Company Offered Shares, the Company shall have ninety
(90) days from the expiration of the 20-Day Period to sell all or any part of
the Company Offered Shares refused by the Covenant Preferred Stockholders to any
Person(s), but only upon terms and conditions which are in all material respects
no more favorable to such other Person(s) than those set forth in the Offer of
Shares.

                                      16.
<PAGE>

          (f)  Upon the closing of the sale of Company Offered Shares to any
third party (which shall include full payment of the purchase price to the
Company), each Covenant Preferred Stockholder shall (i) purchase from the
Company, and the Company shall issue and sell to such Covenant Preferred
Stockholder, any Company Offered Shares for which such Covenant Preferred
Stockholder tendered a Notice of Acceptance upon the terms specified in the
Offer of Shares and (ii) execute and deliver an agreement restricting transfer
of such Company Offered Shares substantially as set forth in Section 3 of this
Agreement.

          (g)  In each case, any Company Offered Shares not purchased either by
the Covenant Preferred Stockholders or by any other Person in accordance with
this Section 4 may not be sold or otherwise disposed of until they are again
offered to the Covenant Preferred Stockholder under the procedures specified in
this Section 4.

          (h)  If the Capital Stock to be issued by the Company is to be issued
pursuant to a Public Offering (i) notwithstanding the time periods set forth
above, the Company may require that the Covenant Preferred Stockholders make an
election to either (A) commit to purchase shares of Capital Stock from the
Company at a price no higher than the public offering price at the closing of
the Public Offering or (B) waive their rights to subscribe for additional shares
of Common Stock to be issued in the Public Offering, (ii) the subscription right
shall not be applicable to shares issuable if the underwriters exercise their
over-allotment option; and (iii) the amount to be purchased pursuant to this
Section 4(h) may be reduced if in the written opinion of the managing
underwriters of the Public Offering, the purchase of such number of shares by
the Covenant Preferred Stockholders would adversely impact the Public Offering.
Such election shall be made sufficiently in advance of the filing of the
registration statement relating to the Public Offering as shall be reasonably
requested by the Company.

          (i)  The rights provided by this Section 4 may be assigned by any
Covenant Preferred Stockholder which is a limited partnership or a trust to any
and all members of its Group, provided, that all such rights of any assignee to
purchase Company Offered Shares will be subject to receipt of appropriate
representations from such assignee as reasonably requested by the Company to
ensure compliance with all applicable securities laws.

5.   Board of Directors.

     5.1  Number of Directors. In accordance with Section A.6(b)(i) of the
Charter of the Company, the holders of a majority in voting power of the
Covenant Preferred Shares, voting together as a separate class, have been
granted the exclusive right to elect to the Board of Directors that number of
the directors which shall equal a majority of the total number of directors on
the Board of Directors. The Company and each of the other parties hereto hereby
agree to take such actions as are necessary, so that the whole Board of
Directors consists of nine members.

     5.2  Agreement to Vote for Directors. The Company hereby agrees to take
such actions as are necessary, and each of the other parties hereto agrees to
vote his, her or its Covenant Preferred Shares (and any other shares of the
Capital Stock of the Company over which he, she or it exercises voting control),
and take such other actions as are necessary, so as to elect and thereafter
continue in office as Directors of the Company (i) two nominees of the

                                      17.
<PAGE>

holders of the Series A Preferred Stock, (ii) one nominee of the holders of the
Series B Preferred Stock, (iii) one nominee of APA Excelsior IV, L.P., and (iv)
one nominee mutually agreed upon by the holders of at least 75% in interest of
the Covenant Preferred Shares, voting together as a class. Each nominating
Stockholder may replace any nominee designated by such nominating Stockholder
who has been elected to the Board of Directors with a new nominee upon notice to
the Board of Directors and to the other stockholders of the Company. If there is
any increase in size of the Board of Directors, such that there shall be more
than five Preferred Directors (as such term is defined in the Charter of the
Company), then, with respect to such additional directors ("Additional Preferred
Directors"), the Company hereby agrees to take such actions as are necessary,
and each of the other parties hereto agrees to vote his, her or its Covenant
Preferred Shares (and any other shares of the Capital Stock of the Company over
which he, she or it exercises voting control), and take such other actions as
are necessary, so as to elect and thereafter continue in office as Directors of
the Company (i) the nominee(s) of the holders of the Series A Preferred Stock
with respect to one-half of the Additional Preferred Directors, (ii) the
nominee(s) of the holders of the Series B Preferred Stock with respect to one-
half of the Additional Preferred Directors, and (iii) if there is an odd number
of Additional Preferred Directors, a nominee mutually agreed upon by the holders
at least 75% in interest of the Covenant Preferred Shares, voting together as a
class.

     5.3  Default of Agreement to Vote. In case any of the covenants set forth
in this Section 5 shall have been breached by any party hereto, the party or
parties entitled to the benefit of such covenants or agreements may proceed to
protect and enforce their rights either by proceeding in equity and/or by action
at law, including, but not limited to, an action for damages as a result of any
such breach and/or an action for specific performance of any such covenant or
agreement contained in this Section 5 and/or a temporary or permanent
injunction, in any case without showing any actual damage and without
establishing, in the case of an equitable proceeding, that the remedy at law is
inadequate.

     5.4  Board Observation Rights. For so long as CIT/VC or any member of the
CIT/VC Group is a holder of Shares, CIT/VC shall have the right to appoint a
designee as an observer to the Board of Directors. For so long as Benefit
Capital Management Corporation is a holder of Shares, Benefit Capital Management
Corporation shall have the right to appoint a designee as an observer to the
Board of Directors. For so long as New York Life Insurance Company is a holder
of Shares, New York Life Insurance Company shall have the right to appoint a
designee as an observer to the Board of Directors. For so long as they hold
observation rights under this Section 5.4, each of CIT/VC, Benefit Capital
Management and New York Life Insurance Company shall be given notice of all such
meetings at the same time and in the same manner as Directors of the Company are
informed.

6.   Affirmative Covenants of the Company.

     Subject to Sections 13 and 15, the Company covenants and agrees that, so
long as any Covenant Preferred Shares are outstanding, except to the extent the
Company receives the approval of the holders at least 75% in interest of the
Covenant Preferred Shares, voting together as a class:

                                      18.
<PAGE>

     6.1  Use of Proceeds. The proceeds of the sale of the Preferred Stock sold
in connection with this Agreement and the Original Stockholders' Agreement shall
be used by the Company to continue the identification and commercialization of
products and processes by genomic analysis of diverse microbes and for working
capital purposes related thereto.

     6.2  Consent as to Issuance of Common Stock. The Company will use its best
efforts to obtain any authorization, consent, approval or other action by and
make any filing with any court or Governmental Body that may be required under
applicable state securities laws in connection with the issuance of any shares
of Common Stock upon conversion of the holder of Covenant Preferred Shares.

     6.3  Financial Information. The Company, except as otherwise indicated,
will deliver to each Covenant Preferred Stockholder:

          (a)  As soon as practicable and in any event within 90 calendar days
after the close of each fiscal year of the Company, copies of (i) the balance
sheet of the Company as of the end of such fiscal year, (ii) statements of
operations of the Company for such fiscal year, and (iii) statements of changes
in cash flows of the Company for such fiscal year, setting forth in each case in
comparative form the corresponding figures of the previous annual period and the
most recent Budget (as defined in clause (d) below), all in reasonable detail,
prepared in accordance with GAAP consistently applied throughout the periods
involved and certified (except for the comparison to the most recent Budget),
without qualification, by Coopers & Lybrand, LLP or another firm of independent
certified public accountants of recognized national standing.

          (b)  As soon as practicable, and in any event within 45 calendar days
after the end of each of the first three fiscal quarters of the Company, an
unaudited balance sheet of the Company as at the end of each such fiscal quarter
and unaudited statements of operations, and changes in cash flows for such
fiscal quarter, setting forth in each case in comparative form corresponding
figures for the preceding year's respective fiscal quarter and for the Budget,
all in reasonable detail, prepared in accordance with GAAP consistently applied
throughout the period involved and certified as being correct and complete and
fairly presenting the results of operations of the Company for the quarter
indicated, subject to year-end audit adjustment, by the principal financial
officer of the Company. In addition, as soon as practicable, and in any event
within 20 calendar days after the end of each fiscal quarter of the Company, the
principal financial officer of the Company will complete and sign a quarterly
financial summary in the form attached hereto as Exhibit A.

          (c)  For each calendar month, as soon as practicable and in any event
within 20 calendar days after the close of each month, copies of (i) the balance
sheet of the Company as of the end of such month, (ii) statements of operations
of the Company for such month, and (iii) statements of changes in cash flows of
the Company for such month setting forth in each case in comparative form the
corresponding figures for the preceding month and for the Budget, for the year
to date and for the comparable periods in the preceding year, all in reasonable
detail, prepared in accordance with GAAP consistently applied throughout the
periods involved and certified as being correct and complete and fairly
presenting the results of operations of the

                                      19.
<PAGE>

Company for the month indicated, subject to year-end audit adjustment, by the
principal financial officer of the Company.

          (d)  As soon as practicable and in any event no later than the end of
each fiscal year of the Company (or by January 30, 1999 for fiscal year 1999), a
proposed annual operating budget for the Company for the succeeding fiscal year,
containing forecasts of profit and loss and cash flow with monthly and quarterly
breakdowns and management's reasonably estimated projections of Indebtedness and
Commitments for the succeeding fiscal year (the "Budget"). The portions of the
Budget relating to Indebtedness, Commitments, acquisitions and dispositions
shall be approved by at least 75% of the Board of Directors. If less than 75% of
the Board of Directors vote to approve the portions of the Budget relating to
Indebtedness, Commitments, acquisitions and dispositions, then those portions of
the Budget shall be adopted if approved by the vote of (i) more than 50% of the
Board of Directors, and (ii) the holders of at least 75% in interest of the
Covenant Preferred Shares, voting as a class. Furthermore, any acquisition
described in Section 7.8 and any disposition described in Section 7.9 shall
require approval in accordance with those Sections.

          (e)  Simultaneously with the delivery of the monthly statements
required by clause (c), copies of a certificate of the principal financial
officer of the Company giving a narrative analysis of operations and trends in
the business of the Company during such month.

          (f)  Promptly upon, and in any event within 10 calendar days after,
their becoming available, a copy of (i) all reports, proxy statements, financial
statements and other materials delivered or sent by the Company to its
stockholders, (ii) all minutes of the proceedings of the Board of Directors of
the Company and all committees thereof and all written consents signed by
directors in lieu of meetings of the Board of Directors and committees thereof,
and (iii) all management letters reviewing the Company's accounting and control
procedures that the Company receives from its independent certified public
accountants.

          (g)  Concurrently with the furnishing of the reports pursuant to
Section 6.3(a) and (b) hereof, an Officer's Certificate stating that the Company
is not in default under, and has not breached, any material agreements or
obligations, including, without limitation, this Agreement, or if any such
default or breach exists, specifying the nature thereof and what actions the
Company has taken and proposes to take with respect thereto.

     If for any period the Company shall have any Subsidiary or Subsidiaries
whose accounts are consolidated with those of the Company, then the financial
statements delivered for such period pursuant to the foregoing clauses (a), (b)
and (c) of this Section 6.3 shall be the consolidated and consolidating
financial statements of the Company and all such consolidated Subsidiaries and
if the financial statements of such Subsidiary or Subsidiaries are not
consolidated with those of the Company, separate financial statements for such
Subsidiary or Subsidiaries shall be provided.

     6.4  Other Reports and Inspection. The Company, upon reasonable prior
notice, will make available to each Covenant Preferred Stockholder or its
representatives or designees during normal business hours (a) all assets,
properties and business records of the Company for inspection and copying and
(b) the directors, officers, employees and public accountant (and by

                                      20.
<PAGE>

this provision the Company hereby authorizes and instructs said accountants to
discuss with such holder and such designees its affairs, finances and accounts
and the responses of attorneys representing the Company to inquiries made by the
Company on behalf of said accountants in connection with their audit of the
financial affairs of the Company) of the Company for interviews concerning the
business, affairs and finances of the Company.

     6.5  Corporate Existence. The Company will, and will cause each of its
Subsidiaries to, maintain preserve and renew its corporate existence and all
material licenses, authorizations and permits necessary to the conduct of its
business.

     6.6  Insurance. The Company will maintain policies of insurance, including
but not limited to, fire, liability, worker's compensation, directors' &
officers' and company reimbursement, business interruption, and product
liability, in such amounts and covering such risks as are customarily carried by
businesses comparable to the business conducted by the Company. The Company has
developed and implemented a risk assessment and insurance program appropriate
for its business; and in connection therewith, to the extent that the insurance
referred to in the forgoing sentence is either not currently maintained or not
maintained in appropriate amounts, the Company will obtain such insurance.

     6.7  Maintenance of Properties. The Company will, and will cause each of
its Subsidiaries to, maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary or desirable
repairs, renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times.

     6.8  Compliance with Obligations. The Company will, and will cause each of
its Subsidiaries to, comply with all other material obligations which it incurs
pursuant to any contract or agreement, whether oral or written, express or
implied, as such obligations become due to the extent to which the failure to so
comply would reasonably be expected to have a material adverse effect upon the
Business and Condition of the Company and its Subsidiaries taken as a whole,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance with
GAAP consistently applied) have been established on its books with respect
thereto.

     6.9  Taxes. The Company will, and will cause each of its Subsidiaries to,
pay when due (i) all Taxes imposed upon it or any of its properties or income,
other than Taxes which are being contested in good faith and which Taxes in the
aggregate do not involve material amounts, and (ii) all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like persons
which, if unpaid, might result in the creation of a lien upon any of its
properties other than claims or demands which are being contested in good faith.

     6.10 Compliance with Law. The Company will, and will cause each of its
Subsidiaries to, comply, in all material respects, with all applicable statutes,
rules, regulations and orders of all Governmental Bodies, with respect to the
conduct of its business and the ownership of its properties, provided that the
Company shall not be deemed to be in violation of this Section 6.10 as a result
of any failure to comply with any provisions of such statutes, rules,
regulations and orders, the noncompliance with which would not result in fines,
penalties, injunctive relief or other civil or criminal liabilities which, in
the aggregate, would materially and

                                      21.
<PAGE>

adversely affect the Business and Condition of the Company and its Subsidiaries
taken as a whole.

     6.11  Environmental Matters. The Company shall promptly advise each
Covenant Preferred Stockholder in writing of any pending or threatened claim,
demand or action by any governmental authority or third party relating to any
Hazardous Materials affecting any properties owned or leased by the Company of
which it has knowledge. The Company shall not discharge, place, release, spill
or dispose of any Hazardous Materials or any other pollutants or effluents upon
any properties owned or leased by the Company or elsewhere (including, but not
limited to, underground injection of such substances) other than in compliance
with the Applicable Environmental Laws and the Company shall not discharge into
the air any emission which would require a permit under the Clean Air Act or its
state counterparts or any other Environmental Laws unless any and all such
permit(s) are obtained prior to any discharge. The stockholders of the Company
shall have no control over, or authority with respect to, the waste disposal
operations of the Company.

     6.12  Accounting System. The Company will maintain a system of accounting
and proper books of record and account, in accordance with GAAP, and will set
aside on its books reserves for depreciation, depletion, obsolescence,
amortization, pending and threatened litigation and otherwise as may be
appropriate in conformance with procedures and recommendations of the Company's
independent public accountants.

     6.13  Reservation of Common Stock. The Company shall reserve and keep
available out of its authorized but unissued Common Stock the number of shares
of Common Stock required for issuance upon the conversion of all of the
Preferred Stock (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Preferred Stock).

     6.14  Confidentiality Agreements with Employees and Consultants. The
Company will enter into confidentiality agreements approved by a majority of the
Board of Directors with employees and consultants of the Company retained after
the date hereof who should have or are proposed to have access to confidential
or proprietary information.

     6.15  Board of Directors Meetings. The Company shall call, and use its best
efforts to have, regular meetings of the Board of Directors on a quarterly
basis. The Company shall pay all reasonable travel expenses and other out-of-
pocket expenses incurred by Directors who are not employed by the Company in
connection with attending meetings of the Board or any committee thereof or in
connection with attendance at meetings related to the business of the Company.

     6.16  Publicity. The Company shall not identify any of the Covenant
Preferred Stockholders as a stockholder or affiliate of the Company in any
advertising or promotional material without the prior written consent of such
Covenant Preferred Stockholder.

     6.17  Registration Rights. The Company shall not hereafter grant to any
persons any rights to register or qualify stock of the Company under Federal or
state securities laws, unless it shall have first obtained the written consent
of the holders of at least 75% in interest of the Covenant Preferred Shares,
voting as a class.

                                      22.
<PAGE>

     6.18  Key Man Life Insurance. The Company has obtained and will maintain
"key man" life insurance policies (the "Key-Man Life Insurance") covering the
lives of such officers of the Company as are designated by the holders of at
least 75% in interest of the Covenant Preferred Shares, voting as a class, in
the amount of $1,000,000, the sole beneficiary of which shall be the Company.

     6.19  Voting Agreement with Common Stockholders.

           (a)  Upon the exercise of any outstanding option or warrant of the
Company (including, without limitation, any options currently outstanding under
the Company's Restated 1994 Employee Incentive and Non-Qualified Stock Option
Plan (the "1994 Plan")), the Company will request that such exercising optionee
or warrant holder become a signatory to the Voting Agreement with respect to the
Common Stock exercisable thereof.

           (b)  The Company shall not hereafter issue any Common Stock or other
voting security (excluding Common Stock issuable upon the exercise of currently
outstanding options granted pursuant to the 1994 Plan) or any security
(including any options under any Stock Plan of the Company) which is convertible
into or exercisable for Common Stock or any other voting security unless, as a
condition precedent to such issuance, the holder of such security agrees to
become a signatory to the Voting Agreement.

     6.20  Option Exercises. Upon the exercise of any option issued under the
1994 Plan, the optionee shall execute a Stock Purchase and Restriction Agreement
in substantially the form of Exhibit B, as amended, to the 1994 Plan.

     6.21  Proprietary Rights. The Company has developed and implemented a
policy, satisfactory to the holders of at least 75% in interest of the Covenant
Preferred Shares, voting together as a class, with regard to noncompetition,
nonsolicitation of employees, suppliers and customers of the Company by current
and future employees of, or consultants to, the Company. It is contemplated that
current and future employees of, or consultants to, the Company will be required
to execute appropriate forms of agreement implementing the foregoing policy.

     6.22  Approval of Budget. The Company shall obtain the approval required by
Section 6.3(d) of the portions of the Budget relating to Indebtedness,
Commitments, acquisitions and dispositions prior to the beginning of each fiscal
year beginning with fiscal year 1998.

     6.23  Repayment of Loan Agreement and Release of Encumbrances. The Company
shall repay all amounts outstanding under the Loan Agreement prior to May 15,
1996 and in connection therewith shall obtain and promptly file such forms
including, without limitation, UCC-3 termination statements as would be required
to release any liens or encumbrances granted by the Company pursuant to the Loan
Agreement.

7.   Negative Covenants of the Company.

     Subject to Section 13 hereof, the Company covenants and agrees with the
Covenant Preferred Stockholders and their transferees that, without the approval
of the holders of at least 75% in interest of the Covenant Preferred Shares,
voting together as a class:

                                      23.
<PAGE>

     7.1  Indebtedness; Commitments. The Company shall not incur any
Indebtedness or Commitments at any time which exceeds by 10% or more of the
amount of Indebtedness or Commitments included in a Budget approved by the Board
of Directors (and the Covenant Preferred Stockholders, if required) in
accordance with Section 6.3(d) hereof. If the Company determines to incur
Indebtedness or Commitments in an amount which exceeds by 10% or more the amount
of Indebtedness or Commitments included in an approved Budget, then the Company
must seek an additional approval in accordance with Section 6.3(d) hereof.

     7.2  Restriction on Dividends. The Company shall not declare or make any
dividend payment or other distribution of assets, properties, cash rights,
obligations or securities on account or in respect of any of its shares of
Common Stock or any shares of preferred stock other than those which are both
(x) required by the Charter, and (y) relate to the Preferred Shares of the
Company.

     7.3  Restriction on Issuances of Shares. The Company shall not issue any
shares of Capital Stock; provided, however, that the Company may issue shares of
Capital Stock pursuant to the options, warrants and rights listed on Schedule
7.3 hereof.

     7.4  Protective Provisions. The Company shall not engage in any of the
actions specified in Sections A.6(c), B.6(c), C.6(c) or D.6(c) of Article III of
its Charter without the written consent in lieu of a meeting, or the affirmative
vote at a meeting called for such purpose, of the holders of Preferred Stock, as
provided in such Sections.

     7.5  Business. The Company will only engage in the businesses of the
identification and commercialization of products and processes by genomic
analysis of diverse microbes and other living materials.

     7.6  Guarantees. The Company will not incur any guarantee or similar
contingent obligation in respect of the indebtedness of others, whether or not
classified on the Company's balance sheet as a liability (a "Guarantee").

     7.7  Conflicting Agreements. The Company will not enter into any agreement
which by its terms might restrict the performance of the Company's obligations
pursuant to the terms of this Agreement or the provisions relating to the
Preferred Stock included in the Charter, including but not limited to
registration rights, and the payment of dividends on, the redemption, voting or
conversion of, the Preferred Stock.

     7.8  No Acquisitions. The Company shall not, nor shall it permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
without the approval of the holders of at least 75% in interest of the Covenant
Preferred Shares, voting together as a class.

     7.9  No Dispositions. Other than in the ordinary course of business and
other than dispositions of obsolete assets, the Company will not, nor shall it
permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of
or agree to sell, lease, encumber or otherwise dispose of, in any transaction or
series of related transactions, any substantial assets of the

                                      24.
<PAGE>

Company without the approval of the holders of at least 75% in interest of the
Covenant Preferred Shares, voting together as a class.

     7.10  Employee Stock and Stock Options. Other than options to purchase up
to 11,275,624 shares of Common Stock which may be issued under the 1994 Plan or
the 1997 Plan, the Company will not issue Common Stock or stock options to its
officers, directors, employees or others who render services to the Company (the
"Employees") unless such Common Stock or options, as the case may be, are issued
pursuant to a stock option plan approved by holders of at least 75% in interest
of the Covenant Preferred Shares, voting as a class, and an agreement in form
and substance satisfactory to holders of at least 75% in interest of the
Covenant Preferred Shares, voting as a class, except for immaterial changes
thereto as shall be approved from time to time by officers of the Company.

8.   Confidentiality.

     The Preferred Stockholders agree to keep the information heretofore or
hereafter furnished to the Preferred Stockholders by the Company or on the
Company's behalf (the "Confidential Material") confidential.  Notwithstanding
the foregoing, the term Confidential Material does not include information that
(i) is or becomes publicly available other than through breach of this Agreement
by the Preferred Stockholders; (ii) is already known to the Preferred
Stockholders at the time of disclosure; (iii) is received by the Preferred
Stockholders from a third party not under an obligation of confidentiality to
the Company or (iv) is independently developed by the Preferred Stockholders
without reference to the Confidential Material.  The Preferred Stockholders
agree to take reasonable precautions to safeguard the Confidential Material from
disclosure to anyone other than appropriate employees, officers, directors,
partners and representatives, including auditors and attorneys, of the Preferred
Stockholders, which persons shall be advised of the confidential nature of such
information.  In the event that any Preferred Stockholder or any of such
Preferred Stockholder's representatives receive a request or demand to disclose
all or any part of the Confidential Material under the terms of a subpoena or
order issued by a court of competent jurisdiction or otherwise, the Preferred
Stockholders shall (i) promptly notify the Company of the existence, terms and
circumstances surrounding such request or demand so that the Company may seek a
protective order or other appropriate relief or remedy or waive compliance with
the terms hereof, (ii) consult with the Company on the advisability of taking
legally advisable steps to resist or narrow such request or demand, and (iii) if
disclosure of such Confidential Material is required, disclose such Confidential
Material and, subject to reimbursement by the Company of Preferred Stockholder's
reasonable expenses, including legal fees, cooperate with the Company in its
efforts to obtain an order or other reliable assurance that confidential
treatment will be accorded to such portion of the disclosed Confidential
Material which the Company may so designate.  If, in the opinion of Preferred
Stockholder's counsel, disclosure by the Preferred Stockholders of all or any
part of the Confidential Material is required by law, the Preferred Stockholders
shall (i) promptly notify the Company of the proposed disclosure, (ii) disclose
only such Confidential Material which is required by law, in the reasonable
opinion of the Preferred Stockholders' counsel, to be disclosed and (iii)
subject to reimbursement by the Company of the Preferred Stockholders'
reasonable expenses, including legal fees, take all legally advisable steps to
obtain an order or other reliable assurance that confidential treatment will be
accorded to the disclosed Confidential Material to the maximum extent possible
or to obtain such other protection under law of the confidential

                                      25.
<PAGE>

nature of such Confidential Material to the maximum extent possible. Any
Preferred Stockholder who is entitled to receive information concerning the
Company pursuant to Sections 6.3 and 6.4, shall as a condition to receipt of
such confidential information, agree to be bound by this Section 8.

9.   Events of Noncompliance.

     9.1  Occurrence of Event of Noncompliance. An event of noncompliance (an
"Event of Noncompliance") hereunder shall occur if:

          (a)  the Company fails in any material respect to perform or observe
any of the covenants contained in the Company fails in any material respect to
perform or observe any of the covenants contained in this Stockholders'
Agreement, the Series A Stock Purchase Agreement, the Series B Stock Purchase
Agreement, the Series C Stock Purchase Agreement or the Series D Stock Purchase
Agreement, or fails in any material respect to comply with any of the provisions
of this Stockholders' Agreement, the Series A Stock Purchase Agreement, the
Series B Stock Purchase Agreement, the Series C Stock Purchase Agreement, the
Series D Stock Purchase Agreement or of its Charter applicable to the Covenant
Preferred Shares or the Registrable Securities (other than the Series E
Registrable Securities);

          (b)  the Company's representations and warranties contained in this
Stockholders' Agreement, the Series A Stock Purchase Agreement (including the
Schedules and Exhibits attached thereto), the Series B Stock Purchase Agreement
(including the Schedules and Exhibits attached thereto), the Series C Stock
Purchase Agreement (including the Schedules and Exhibits attached thereto) or
the Series D Stock Purchase Agreement (including the Schedules and Exhibits
attached thereto) shall be untrue or misleading in any material respect as of
the time when made or as of the closings of such agreements;

          (c)  the Company shall become insolvent, make an assignment for the
benefit of its creditors, call a meeting of its creditors to obtain any general
financial accommodation or suspend business; any material obligation of the
Company shall be accelerated or shall not be paid when due; any judicial
judgment or settlement shall be outstanding, or a case under any provision of
Title 11 of the United States Code, 11 U.S.C. (S) 101 et seq. (the "Bankruptcy
Code"), or any comparable law of any jurisdiction, including provisions for
receivership or reorganization, shall be commenced by or against the Company
which, in the case of an action being commenced against the Company under the
Bankruptcy Code, shall remain unstayed or undismissed for a period of sixty (60)
days;

          (d)  the Company fails to complete, within five years from the date of
the Series B Stock Purchase Agreement either: (i) an Initial Public Offering,
(ii) a sale, liquidation or dissolution of the Company, or (iii) a sale,
transfer or disposition of substantially all of the assets of the Company;

          (e)  the Company (x) incurs Indebtedness or Commitments in violation
of Section 7.1 hereto, (y) pays dividends in violation of Section 7.2 hereto,
and/or (z) issues shares of Capital Stock in violation of Section 7.3 hereto;

                                      26.
<PAGE>

          (f)  a default or an event of default shall occur or exist with
respect to any debt or indebtedness of the Company; or

          (g)  a default or an event of default shall occur or exist with
respect to any material contract of the Company, which default could give rise
to a material claim by a third party against the Company or the Company's
assets.

     9.2  Remedies. In the event of the occurrence and continuation of an Event
of Noncompliance, the holders of at least 75% in interest of the Covenant
Preferred Shares, voting as a class, may:

          (a)  demand, and be entitled to, in accordance with the provision of
Sections A.8, B.8, C.8 and D.8 of Article III of the Charter of the Company, an
immediate (i) redemption of all of the Covenant Preferred Shares held by them
(or a portion of such shares pro rata), and (ii) immediate payment of all
accrued but unpaid dividends and all declared but unpaid dividends;

          (b)  declare an Event of Noncompliance and elect all members of the
Board of Directors, which Board may sell, dispose of, or liquidate the assets
and/or business of the Company in whatever manner it believes will maximize the
return to the Preferred Stockholders, or cause the Company to issue additional
securities in a private placement or Public Offering.

     If the holders of at least 75% in interest of the Covenant Preferred
Shares, voting as a class, declare that an Event of Noncompliance exists, the
Company may, for a period of 30 days after receipt of such declaration of an
Event of Noncompliance, pay the entire redemption amount (including immediate
payment of all accrued but unpaid dividends and all declared but unpaid
dividends), in cash, of the Preferred Stock.  The holders of the Preferred Stock
shall, upon receipt of the full payment of the redemption amount (including
immediate payment of all accrued but unpaid dividends and all declared but
unpaid dividends), transfer and surrender all of their Preferred Stock to the
Company, as instructed, and they shall thereafter no longer have any rights as
stockholders of the Company.

     If the holders of at least 75% in interest of the Covenant Preferred
Shares, voting together as a class, shall send written notice of their
redemption request to the Company, the Company shall promptly give each of the
other holders of Covenant Preferred Shares written notice of the redemption (the
"Redemption Notice").

     The exercise of the foregoing contractual remedies shall be in addition to
all other legal and equitable remedies available to the Preferred Stockholders.

10.  Filing of Reports Under the Exchange Act.

          (a)  The Company shall give prompt notice to the Preferred
Stockholders of (i) the filing of any registration statement (an "Exchange Act
Registration Statement") pursuant to the Exchange Act, relating to any class of
equity securities of the Company, (ii) the effectiveness of such Exchange Act
Registration Statement, and (iii) the number of shares of such class of equity
securities outstanding as reported in such Exchange Act Registration Statement,
in order to enable the Preferred Stockholders to comply with any reporting
requirements under the

                                      27.
<PAGE>

Exchange Act or the Securities Act. Upon the written request of a majority in
interest of the holders of Preferred Shares, the Company shall, at any time
after the Company has registered any shares of Common Stock under the Securities
Act, file an Exchange Act Registration Statement relating to any class of equity
securities of the Company then held by the holders of Preferred Shares or
issuable upon conversion or exercise of any class of debt or equity securities
or warrants or options of the Company then held by the holders of Preferred
Shares, whether or not the class of equity securities with respect to which such
request is made shall be held by the number of persons which would require the
filing of a registration statement under Section 12(g)(1) of the Exchange Act.

          (b)  If the Company shall have filed an Exchange Act Registration
Statement or a registration statement (including an offering circular under
Regulation A promulgated under the Securities Act) pursuant to the requirements
of the Securities Act, which shall have become effective (and in any event, at
all times following the initial public offering of any of the securities of the
Company), then the Company shall comply with all the reporting requirements of
the Exchange Act (whether or not it shall be required to do so) and shall comply
with all other public information reporting requirements of the Commission as a
condition to the availability of an exemption from the Securities Act for the
sale of any of the Restricted Securities by any holder of Restricted Securities
(including any such exemption pursuant to Rule 144 or Rule 144A thereof, as
amended from time to time, or any successor rule thereto or otherwise). The
Company shall cooperate with each holder of Restricted Securities in supplying
such information as may be necessary for such holder of Restricted Securities to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act (under Rule 144 or Rule 144A thereunder or otherwise)
for the sale of any of the Restricted Securities by any holder of Restricted
Securities.

11.  Registration Rights.

     11.1  Demand Registration Rights.

           (a)  Upon written request at any time by holders of Series A
Registrable Securities representing in the aggregate at least 50% of the total
number of Series A Registrable Securities at the time of such request, the
Company shall use its best efforts to effect the registration under the
Securities Act and registration or qualification under all applicable state
securities laws of the Series A Registrable Securities, as requested by the
holders of Series A Registrable Securities, all as provided in the following
provisions of this Section 11. Holders of Series A Registrable Securities may
require the Company to effect no more than one registration under the Securities
Act upon the request of the holders of the Series A Registrable Securities
pursuant to this Section 11.1(a). Any registration which is not declared
effective pursuant to the Securities Act and which does not remain effective as
required by Section 11.5(a) below shall not constitute a registration pursuant
to this Section 11.1(a). A request by a holder of Series A Registrable
Securities to have the Company effect the registration of Series A Registrable
Securities shall not obligate the holder to convert them into Common Stock,
whether or not the registration of the Series A Registrable Securities shall
become effective, unless and until the Series A Registrable Securities are sold
pursuant to the registration statement. The registration rights provided for in
this Section 11.1(a) are in addition to those provided for in Section 11.1(e).

                                      28.
<PAGE>

          (b)  Upon written request at any time by holders of Series B
Registrable Securities representing in the aggregate at least 50% of the total
number of Series B Registrable Securities at the time of such request, the
Company shall use its best efforts to effect the registration under the
Securities Act and registration or qualification under all applicable state
securities laws of the Series B Registrable Securities, as requested by the
holders of Series B Registrable Securities, all as provided in the following
provisions of this Section 11. Holders of Series B Registrable Securities may
require the Company to effect no more than one registration under the Securities
Act upon the request of the holders of the Series B Registrable Securities
pursuant to this Section 11.1(b). Any registration which is not declared
effective pursuant to the Securities Act and which does not remain effective as
required by Section 11.5(a) below shall not constitute a registration pursuant
to this Section 11.1(b). A request by a holder of Series B Registrable
Securities to have the Company effect the registration of Series B Registrable
Securities shall not obligate the holder to convert them into Common Stock,
whether or not the registration of the Series B Registrable Securities shall
become effective, unless and until the Series B Registrable Securities are sold
pursuant to the registration statement. The registration rights provided for in
this Section 11.1(b) are in addition to those provided for in Section 11.1(e).

          (c)  Upon written request at any time by holders of Series C
Registrable Securities representing in the aggregate at least 50% of the total
number of Series C Registrable Securities at the time of such request, the
Company shall use its best efforts to effect the registration under the
Securities Act and registration or qualification under all applicable state
securities laws of the Series C Registrable Securities, as requested by the
holders of Series C Registrable Securities, all as provided in the following
provisions of this Section 11. Holders of Series C Registrable Securities may
require the Company to effect no more than one registration under the Securities
Act upon the request of the holders of the Series C Registrable Securities
pursuant to this Section 11.1(c). Any registration which is not declared
effective pursuant to the Securities Act and which does not remain effective as
required by Section 11.5(a) below shall not constitute a registration pursuant
to this Section 11.1(c). A request by a holder of Series C Registrable
Securities to have the Company effect the registration of Series C Registrable
Securities shall not obligate the holder to convert them into Common Stock,
whether or not the registration of the Series C Registrable Securities shall
become effective, unless and until the Series C Registrable Securities are sold
pursuant to the registration statement. The registration rights provided for in
this Section 11.1(c) are in addition to those provided for in Section 11.1(e).

          (d)  Upon written request at any time by holders of Series D
Registrable Securities representing in the aggregate at least 50% of the total
number of Series D Registrable Securities at the time of such request, the
Company shall use its best efforts to effect the registration under the
Securities Act and registration or qualification under all applicable state
securities laws of the Series D Registrable Securities, as requested by the
holders of Series D Registrable Securities, all as provided in the following
provisions of this Section 11. Holders of Series D Registrable Securities may
require the Company to effect no more than one registration under the Securities
Act upon the request of the holders of the Series D Registrable Securities
pursuant to this Section 11.1(d). Any registration which is not declared
effective pursuant to the Securities Act and which does not remain effective as
required by Section 11.5(a) below shall not constitute a registration pursuant
to this Section 11.1(d). A request by a holder of Series D Registrable
Securities to have the Company effect the registration of Series D Registrable
Securities shall not obligate the holder to convert them into Common Stock,
whether or not the

                                      29.
<PAGE>

registration of the Series D Registrable Securities shall become effective,
unless and until the Series D Registrable Securities are sold pursuant to the
registration statement. The registration rights provided for in this Section
11.1(d) are in addition to those provided for in Section 11.1(e)

          (e)  Upon written request at any time by holders of Registrable
Securities representing in the aggregate at least 50% of the total number of
Registrable Securities at the time of such request, the Company shall use its
best efforts to effect the registration under the Securities Act and
registration or qualification under all applicable state securities laws of the
Registrable Securities, as requested by the holders of Registrable Securities,
all as provided in the following provisions of this Section 11. Holders of
Registrable Securities may require the Company to effect no more than two
registrations under the Securities Act, in the aggregate, upon the request of
the holders of Registrable Securities pursuant to this Section 11.1(e). Any
registration which is not declared effective pursuant to the Securities Act and
which does not remain effective as required by Section 11.5(a) below shall not
constitute one of the two registrations which the Company is obligated to effect
pursuant to this Section 11.1(e). A request by a holder of Shares to have the
Company effect the registration of Registrable Securities shall not obligate the
holder of Shares to convert them into Common Stock, whether or not the
registration of the Registrable Securities shall become effective, unless and
until the Registrable Securities are sold pursuant to the registration
statement. The registration rights provided for in this Section 11.1(e) are in
addition to those provided for in Sections 11.1(a), (b), (c) and (d).

     11.2  Registration Requested by Holders. Whenever the Company shall be
requested, pursuant to Section 11.1 hereof, to effect the registration of any of
the Registrable Securities under the Securities Act (a "Request for
Registration"), the Company shall promptly give notice of such proposed
registration to all holders of Registrable Securities and thereupon shall, as
expeditiously as possible, use its best efforts to effect the registration under
the Securities Act and under all applicable state securities laws of:

           (a)   all Registrable Securities which the Company has been requested
to register pursuant to the Request for Registration; and

           (b)   all other Registrable Securities which holders of Registrable
Securities have, within thirty (30) days after the Company has given such
notice, requested the Company to register;

           (c)   all to the extent requisite to permit the sale or other
disposition by the holders of the Registrable Securities so to be registered. If
the holders of Registrable Securities who requested the registration of
Registrable Securities engage one or more underwriters to distribute such
Registrable Securities, the Company shall permit the managing underwriter(s) and
counsel to the underwriter(s) at the Company's expense to visit and inspect any
of the properties of the Company, examine its books, take copies and extracts
therefrom and discuss the affairs, finances and accounts of the Company with its
officers, employees and public accountants (and by this provision the Company
hereby authorizes said accountants to discuss with such underwriter(s) and such
counsel its affairs, finances and accounts), at reasonable times and upon
reasonable notice, with or without a representative of the Company being
present. The Company shall have the right to include in any registration of
Registrable Securities required

                                      30.
<PAGE>

pursuant to this Section 11.2 additional shares of its Common Stock to be issued
by the Company ("Company Securities") or shares of Common Stock ("Third Party
Registrable Securities") that have the benefit of duly exercised registration
rights contractually binding on the Company, provided that if any Registrable
Securities to be so registered for sale are to be distributed by or through
underwriters, then all Registrable Securities to be so registered for sale and
Company Securities and Third Party Registrable Securities, if any, shall be
included in such underwriting on the same terms and provided, however, that if,
in the written opinion of the managing underwriter(s), the total amount of such
securities to be registered will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without otherwise materially and adversely
affecting the entire offering, then the Company shall exclude from such
underwriting (x) first, the maximum number of Company Securities and Third Party
Registrable Securities as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering and (y) then, the minimum
number of Registrable Securities, pro rata to the extent practicable, on the
basis of the number of Registrable Securities requested to be registered among
the participating holders of Registrable Securities, as is necessary to reduce
the size of the offering. A registration that covers both Registrable
Securities, Company Securities and Third Party Registrable Securities shall be
deemed to have been requested pursuant to a Request for Registration pursuant to
the applicable subsection Section 11.1 if the Registrable Securities of the type
covered by such subsection constitute at least 50% of the total offering on the
effective date of the registration statement but shall not be deemed to be one
of the registrations referred to in the applicable subsection of Section 11.1
hereof if Registrable Securities of the type covered by such subsection
constitute less than 50% of the total offering on the effective date of the
registration statement.

     11.3 "Piggyback" Registrations.

          (a)  If the Company at any time proposes other than in accordance with
a Request for Registration to register any of its securities under the
Securities Act on Form S-1, S-2 or S-3 or on any other form upon which the
Registrable Securities may be registered for sale to the general public, whether
for its own account or for the account of others, the Company will at each such
time give notice to all holders of Registrable Securities of such proposal at
least thirty (30) days before the Company files a registration statement. Upon
the request of any holder of Registrable Securities given within twenty (20)
days after the Company has given such notice, the Company will cause the
Registrable Securities which the Company has been requested to register by such
holder of Registrable Securities to be registered under the Securities Act, all
to the extent requisite to permit the sale or other disposition by such holder
of Registrable Securities of the Registrable Securities so registered.

          (b)  If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed by or
through a firm of underwriters, then any Registrable Securities which the
Company has been requested to register pursuant to clause (a) of this Section
11.3 shall also be included in such underwriting on the same terms as other
securities of the same class as the Registrable Securities included in such
underwriting, provided that if, in the written opinion of the managing
underwriter(s), the total amount of such securities to be so registered, when
added to the Registrable Securities and the securities held by holders of
securities other than the Registrable Securities, if any, will exceed the
maximum amount of the

                                      31.
<PAGE>

Company's securities which can be marketed (i) at a price reasonably related to
their then current market value, or (ii) without otherwise materially and
adversely affecting the entire offering, then (subject to clause (d) of this
Section 11.3) the Company shall exclude from such underwriting (x) first, the
maximum number of securities, if any, other than Registrable Securities, being
sold for the account of persons other than the Company as is necessary to reduce
the size of the offering and (y) second, the minimum number of Registrable
Securities, if any, as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering (any such reduction in
Registrable Securities to be made pro rata to the extent practicable on the
basis of the number of Registrable Securities requested to be registered among
the participating holders of Registrable Securities).

          (c)  If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed for the
account of holders of Third Party Registrable Securities or holders (other than
the Company) of other securities of the Company other than Registrable
Securities by or through a firm of underwriters of recognized standing under
underwriting terms appropriate for such transaction, then any Registrable
Securities which the Company has been requested to register pursuant to clause
(a) of this Section 11.3 shall also be included in such underwriting on the same
terms as other securities included in such underwriting, provided that if, in
the written opinion of the managing underwriter or underwriters, the total
amount of such securities to be so registered, when added to such Registrable
Securities, will exceed the maximum amount of the Company's securities which can
be marketed (i) at a price reasonably related to their then current market
value, or (ii) without otherwise materially and adversely affecting the entire
offering, then the Company shall exclude from such underwriting the number of
Registrable Securities and other securities, pro rata to the extent practicable,
on the basis of the number of securities requested to be registered, as is
necessary in the opinion of the managing underwriter(s) to reduce the size of
the offering.

          (d)  Notwithstanding Section 11.3 (a) and (b), the Company shall not
exclude more Registrable Securities from registration than is necessary to
reduce the number of Registrable Securities to be registered to one-fifth of the
total number of securities to be registered, provided, however, that the Company
may exclude all Registrable Securities from registration in connection with the
Company's Initial Public Offering in its sole discretion, whether or not such
exclusion is required in the opinion of the managing underwriter(s).

          (e)  Notwithstanding anything to the contrary contained herein, the
provisions of clause (y) of Section 11.3(b) and the provisions of Section
11.3(d) limiting the amount of the Registrable Securities requested to be
registered that may be excluded from such registration may be waived by the
affirmative vote of holders of 50% of the Registrable Securities requested to be
registered. If, by reason of the provisions of Section 11.3(b) or Section
11.3(d), in any public offering other than the Company's Initial Public
Offering, more than 10% of the Registrable Securities requested to be registered
are excluded from such registration statement, then, in each such case, the
holders of the Registrable Securities shall be entitled to an additional demand
registration pursuant to Section 11.1(e) and shall be entitled to an additional
registration pursuant to Section 11.1 at the Company's expense, without
reimbursement, in accordance with Section 11.6.

                                      32.
<PAGE>

     11.4 Registrations on S-3. At such time as the Company shall have qualified
for the use of Form S-3 (or any successor form promulgated under the Securities
Act), each holder of Registrable Securities shall have the right to request in
writing an unlimited number of registrations on Form S-3 (except that the
holders of Series E Registrable Securities shall only have the right to request
in writing three (3) registrations on Form S-3), provided that the Registrable
Securities proposed to be included in each such registration statement have a
proposed aggregate offering price of at least $500,000 and that no holder shall
have a right to request that Registrable Securities be registered on Form S-3
during any calendar year if Registrable Securities of such holder were included
in a registration statement on Form S-3 pursuant to a request made by such
holder during such calendar year.  Each such request by a holder shall: (a)
specify the number of Registrable Securities which the holder intends to sell or
dispose of, and (b) state the intended method by which the holder intends to
sell or dispose of such Registrable Securities.  Upon receipt of a request
pursuant to this Section 11.4, the Company shall use its best efforts to effect
such registration or registrations on Form S-3.

     11.5 Company's Obligations in Registration. Whenever the Company is
obligated to effect the registration of any Registrable Securities under the
Securities Act, as expeditiously as possible the Company will use its best
efforts to:

          (a)  prepare and file with the Commission, a registration statement
with respect to such Registrable Securities and cause such registration
statement to become and remain effective, provided, that the Company shall not
be required to keep such registration statement effective, or to prepare and
file any amendments or supplements thereto, after the later of (i) the last
business day of the ninth month following the date on which such registration
statement becomes effective under the Securities Act or such longer period
during which the holders of the Registrable Securities registered thereunder
shall pay all expenses reasonably incurred to keep such registration statement
effective with respect to any of the Registrable Securities so registered or
(ii) the date on which all of the Registrable Securities registered pursuant to
such registration statement have been sold; provided further that in the event
the Commission shall have declared any other registration statement with respect
to an offering of securities of the Company to be effective within four months
prior to the Company's receiving a Request for Registration, the Company may
delay the effective date of the registration statement filed in response to the
Request for Registration until six months after the effective date of the
previous registration statement;

          (b)  prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration statement whenever
the holders of Registrable Securities covered by such registration statement
shall desire to dispose of the same;

          (c)  furnish to the holders of Registrable Securities for whom such
Registrable Securities are registered or are to be registered such number of
copies of a printed prospectus, including a preliminary prospectus and any
amendments or supplements thereto, in conformity with the requirements of the
Securities Act, and such other documents as such holders of

                                      33.
<PAGE>

Registrable Securities may reasonably request in order to facilitate the
disposition of such Registrable Securities;

          (d)  notify each holder of Registrable Securities, at any time when a
prospectus relating to the Registrable Securities covered by such registration
statement is required to be delivered under the Securities Act, of the Company's
becoming aware that the prospectus in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and at the request of any holder of Registrable
Securities, prepare and furnish to such holder any reasonable number of copies
of any supplement to or amendment of such prospectus necessary so that, as
thereafter delivered to any purchaser of the Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading;

          (e)  register or qualify the Registrable Securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as the holders of Registrable Securities for whom such Registrable
Securities are registered or are to be registered shall reasonably request, and
do any and all other reasonable acts and things which may be necessary or
advisable to enable such holders of Registrable Securities to consummate the
disposition in such jurisdictions of such Registrable Securities; provided,
however, that the Company shall not be required to consent to general service of
process for all purposes in any jurisdiction where it is not then subject to
process, qualify to do business as a foreign corporation where it would not be
otherwise required to qualify or submit to liability for state or local taxes
where it is not otherwise liable for such taxes;

          (f)  furnish to the holders of Registrable Securities for whom such
Registrable Securities are registered or are to be registered an agreement
satisfactory in form and substance to them by the Company and each of its
officers, directors and holders of 5% or more of any class of capital stock,
that during the thirty (30) days before and the 180 days after the effective
date of any underwritten public offering, the Company and such officers,
directors and 5% security holders shall not offer, sell, contract to sell or
otherwise dispose of any shares of capital stock or securities convertible into
capital stock, except as part of such underwritten public offering and except
that gifts may be made to relatives or their legal representatives upon the
condition that the donees agree in writing to be bound by the restrictions
contained in this clause (f) of Section 11.5;

          (g)  furnish to the holders of Registrable Securities for whom such
Registrable Securities are registered or are to be registered at the closing of
the sale of such Registrable Securities by such holders of Registrable
Securities a signed copy of (i) an opinion or opinions of counsel for the
Company acceptable to such holders of Registrable Securities in form and
substance as is customarily given to underwriters in public offerings, and (ii)
a "cold comfort" letter from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accounts to underwriters in an underwritten public offering, to the
extent that such "cold comfort" letters are then available to selling
stockholders;

                                      34.
<PAGE>

          (h)  otherwise use its efforts to comply with all applicable rules and
regulations of the Commission, and, if required, make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first day of the Company's first calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

          (i)  use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed on the principal securities exchange
on which similar equity securities issued by the Company are then listed, if the
listing of such Registrable Securities is then permitted under the rules of such
exchange or, if similar equity securities are not listed, to include the
Registrable Securities on the National Association of Securities Dealers
Automated Quotation System;

          (j)  in connection with any underwritten offering, enter into an
underwriting agreement with the underwriter(s) of such offering in the form
customary for such underwriter(s) for similar offerings, including such
representations and warranties by the Company, provisions regarding the delivery
of opinions of counsel for the Company and accountants' letters, provisions
regarding indemnification and contribution, and such other terms and conditions
as are at the time customarily contained in such underwriter's underwriting
agreements for similar offerings (and, at the request of any holder of
Registrable Securities that are to be distributed by such underwriter(s), any or
all (as requested by such holder) of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriter(s) shall also be made to and for the benefit of such holder); and

          (k)  permit any holder of Registrable Securities who, in the sole
judgment, exercised in good faith, of such holder, might be deemed to be a
controlling person of the Company, to participate in the preparation of such
registration statement and to require the insertion therein of material,
furnished to the Company in writing, that in the judgment of such holder, as
aforesaid, should be included, except to the extent that the Company shall
reasonably object to the inclusion of such material.

     11.6 Payment of Registration Expenses. The costs and expenses of all
registrations and qualifications under the Securities Act, and of all other
actions which the Company is required to take or effect pursuant to this Section
11, shall be paid by the Company or holders of Third Party Registrable
Securities or other securities of the Company other than Registrable Securities,
if any (including, without limitation, all registration and filing fees,
printing expenses, expenses incident to filings with the National Association of
Securities Dealers, Inc., auditing costs and expenses, and the reasonable fees
and disbursements of counsel for the Company and one special counsel for the
holders of Registrable Securities) and the holders of Registrable Securities
shall pay only the underwriting discounts and commissions and transfer taxes, if
any, relating to the Registrable Securities sold by them; provided that the
Company shall pay without reimbursement such costs and expenses of (i) no more
than two registrations which become effective under the Securities Act as a
result of Requests for Registration pursuant to Section 11.1 and (ii) no more
than three registrations which become effective under the Securities Act as a
result of registrations on Form S-3 pursuant to the request of the holders of
Series E Registrable Securities under Section 11.4, and provided, further, that
in the event more

                                      35.
<PAGE>

than two registrations as described in clause (i) above or three registrations
as described in clause (ii) above, as applicable, become effective under the
Securities Act, the holders of Registrable Securities and other securities, if
any, included in such registrations shall reimburse the Company pro rata for all
registration and filing fees, reasonable printing expenses, reasonable auditing
costs and expenses (excluding costs and expenses of the Company's annual audit)
and the reasonable fees and expenses of counsel for the Company and the selling
stockholders and such reimbursement shall be made to the Company within five (5)
business days after the effective date of such a registration statement.

     11.7  Information from Holders of Registrable Securities. Notices and
requests delivered by holders of Registrable Securities to the Company pursuant
to this Section 11 shall contain such information regarding the Registrable
Securities to be so registered and the intended method of disposition thereof as
shall reasonably be required in connection with the action to be taken. Each
holder of Registrable Securities hereby agrees to provide the Company, or its
agents or designees, with all information reasonably required in connection with
the registration under the Securities Act or any applicable state securities law
of any Registrable Securities.

     11.8  Indemnification. In the event of any registration under the
Securities Act of any Registrable Securities pursuant to this Section 11, the
Company shall indemnify and hold harmless each holder of Registrable Securities
disposing of such Registrable Securities and each other person, if any, which
controls (within the meaning of the Securities Act) such holder of Registrable
Securities and each other person (including underwriters) who participates in
the offering of such Registrable Securities, against any losses, claims, damages
or liabilities, joint or several, to which such holder of Registrable Securities
or controlling person or participating person may become subject under the
Securities Act or otherwise, to the extent that such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which such
Registrable Securities were registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) or necessary to make the statements therein not
misleading, and will reimburse such holder of Registrable Securities and each
such controlling person or participating person for any legal or any other
expenses reasonably incurred by such holder of Registrable Securities or such
controlling person or participating person in connection with investigating or
defending any such loss, claim, damage, liability or proceeding, provided, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary or final prospectus or amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such holder of Registrable
Securities or such controlling or participating person, as the case may be,
specifically for use in the preparation thereof. Each such holder of Registrable
Securities will, if requested by the Company prior to the initial filing of any
such registration statement, agree in writing, severally but not jointly, to
indemnify and hold harmless the Company and each person which controls (within
the meaning of the Securities Act) the Company and each other person (including
underwriters) who participates in the offering of such

                                      36.
<PAGE>

Registrable Securities against all losses, claims, damages and liabilities to
which the Company or such controlling person or participating person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue statement of
any material fact contained, on the effective date thereof, in any registration
statement under which such Registrable Securities were registered under the
Securities Act, or in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in the case of
a prospectus, in the light of the circumstances under which they were made) not
misleading, to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such statement or omission made in such registration
statement, preliminary or final prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such holder of Registrable Securities
and specifically stated to be for use in the preparation thereof.  Each
indemnified party shall cooperate with each indemnifying party in defending any
loss, claim, damage, liability or proceeding.

     (a)  Indemnification similar to that specified in the preceding clause of
this Section 11.8 (with appropriate modifications) shall be given by the Company
and, at the Company's request, each holder of Registrable Securities with
respect to any registration or other qualification of securities under any state
securities and "blue sky" laws.

     (b)  If the indemnification provided for in clauses (a) and (b) of this
Section 11.8 is unavailable or insufficient to hold harmless an indemnified
party, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party referred to in clauses (a) and (b) of this
Section 11.8 in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and the indemnified party on the other
hand in connection with statements or omissions which resulted in losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omissions. The parties agree that
it would not be just and equitable if contributions pursuant to this clause were
to be determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
first sentence of this clause. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this clause shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any loss, claim, damage, liability or proceeding which is the
subject of this clause. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

     (c)  Each indemnified party shall notify the indemnifying party in writing
within ten (10) days after its receipt of notice of the commencement of any
action against it in respect of which indemnity may be sought from the
indemnifying party pursuant to this

                                      37.
<PAGE>

Section 11.8. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party, the indemnifying party will be
entitled to participate in the defense with counsel satisfactory to such
indemnified party. Each indemnified party shall cooperate with each indemnifying
party in defending any loss, claim, damage, liability or proceeding.

          (d)  Notwithstanding clauses (a) through (c) of this Section 11.8, the
aggregate amount which may be recovered by the Company, controlling persons of
the Company or underwriters from each holder of Registrable Securities pursuant
to the indemnification and contribution provided for in this Section 11.8 shall
be limited to the total net proceeds for which the Registrable Securities were
sold by such holder of Registrable Securities.

          (e)  Notwithstanding any of the foregoing, if, in connection with an
underwritten public offering of Registrable Securities, the Company, the selling
stockholders and the underwriter(s) enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification and contribution among the parties, the indemnification and
contribution provisions of this Section 11.8 shall be deemed inoperative for
purposes of such offering.

12.  Small Business Matters.

     12.1 Generally: Certain SBIC Covenants. CIT/VC is a Small Business
Investment Company ("SBIC") licensed by the United States Small Business
Administration ("SBA"). In order for CIT/VC to acquire and hold the Series B
Preferred Stock, it obtained from the Company certain representations and rights
as set forth below. As a material inducement to CIT/VC to purchase the Series B
Preferred Stock pursuant to the Series B Stock Purchase Agreement, the Company
made, and hereby makes the following representations and warranties and agrees
to comply with the following covenants:

          (a)  Assuming that CIT/VC's investment in the Company satisfies the
requirements of 13 C.F.R. (S)107.865(d), and has complied with the requirements
of 13 C.F.R. (S)107.865(e), the Company, together with its "affiliates" (as that
term is defined in 13 C.F.R. (S)121.103), is a "small business concern" within
the meaning of the Small Business Investment Act of 1958, as amended ("SBIA"),
and the regulations thereunder, including Title 13, Code of Federal Regulations,
(S)121.301(c). The information set forth in the SBA Forms 480, 652 and Part A of
Form 1031 regarding the Company and its affiliates, when it was delivered to
CIT/VC at the closing of the sale of the Series B Preferred Stock under the
Series B Stock Purchase Agreement, was accurate and complete.

          (b)  The proceeds from the sale of the Series B Preferred Stock were
or will be used by the Company to (1) finance working capital and other
corporate needs and (2) pay expenses related to the transactions contemplated by
the Series B Stock Purchase Agreement. No portion of such proceeds (i) were or
will be used to provide capital to a corporation licensed under the SBIA, (ii)
were or will be used to acquire farm land, (iii) were or will be used to fund
production of a single item or defined limited number of items, generally over a
defined production period, and such production constituted or will constitute
the majority of the activities of the Company and its Subsidiaries (examples
include motion pictures and electric generating

                                      38.
<PAGE>

plants), or (iv) were or will be used for any purpose contrary to the public
interest (including, but not limited to, activities which are in violation of
law) or inconsistent with free competitive enterprise, in each case, within the
meaning of 13 C.F.R. (S)107.720.

          (c)  Neither the Company's nor any of its Subsidiaries' primary
business activity involves, directly or indirectly, providing funds to others,
the purchase or discounting of debt obligations, factoring or long-term leasing
of equipment with no provision for maintenance or repair, and neither the
Company nor any of its Subsidiaries is classified under Major Group 65 (Real
Estate) of the SIC Manual. The assets of the business of the Company and its
Subsidiaries (the "Business") will not be reduced or consumed, generally without
replacement, as the life of the Business progresses, and the nature of the
business does not require that a stream of cash payments be made to the
Business' financing sources, on a basis associated with the continuing sale of
assets (examples of such businesses would include real estate development
projects and oil and gas wells). (See 13 C.F.R. 107.720)

          (d)  The proceeds from the sale of the Series B Preferred Stock were
not or will not be used substantially for a foreign operation. This subsection
(d) does not prohibit such proceeds from being used to acquire foreign materials
and equipment or foreign property rights for use or sale in the United States.

     12.2 Regulatory Compliance Cooperation.

          (a)  CIT/VC agrees to use commercially reasonable best efforts to
avoid the occurrence of a Regulatory Problem. In the event that CIT/VC
determines that it has a Regulatory Problem, the Company agrees to use
commercially reasonable efforts to take all such actions as are reasonably
requested by CIT/VC in order (A) to effectuate and facilitate any transfer by
CIT/VC of any Securities of the Company then held by CIT/VC to any Person
designated by CIT/VC (subject, however, to compliance with Section 3 of this
Agreement), (B) to permit CIT/VC (or any Affiliate of CIT/VC) to exchange all or
any portion of the voting Securities of the Company then held by such Person on
a share-for-share basis for shares of a class of non-voting Securities of the
Company, which non-voting Securities shall be identical in all respects to such
voting Securities, except that such new Securities shall be non-voting and shall
be convertible into voting Securities on such terms as are requested by CIT/VC
in light of regulatory considerations then prevailing, and (C) to continue and
preserve the respective allocation of the voting interests with respect to the
Company arising out of CIT/VC's ownership of voting Securities of the Company
and/or provided for in this Agreement before the transfers and amendments
referred to above (including entering into such additional agreements as are
requested by CIT/VC to permit any Person(s) designated by CIT/VC to exercise any
voting power which is relinquished by CIT/VC upon any exchange of voting
Securities for nonvoting Securities of the Company); and the Company shall enter
into such additional agreements, adopt such amendments to this Agreement, the
Company's Charter and the Company's By-laws and other relevant agreements and
taking such additional actions, in each case as are reasonably requested by
CIT/VC in order to effectuate the intent of the foregoing. If CIT/VC elects to
transfer Securities of the Company to a Regulated Holder in order to avoid a
Regulatory Problem, the Company shall enter into such agreements with such
Regulated Holder as it may reasonably request in order to assist such Regulated
Holder in complying with applicable laws, and regulations to which it is
subject. Such agreements may include restrictions on the

                                      39.
<PAGE>

redemption, repurchase or retirement of Securities of the Company that would
result or be reasonably expected to result in such Regulated Holder holding more
voting securities or total securities (equity and debt) than it is permitted to
hold under such laws and regulations.

          (b)  In the event CIT/VC has the right to acquire any of the Company's
Securities from the Company or any other Person (as the result of Sections 3 or
4 of this Agreement or otherwise), at CIT/VC's request the Company will offer to
sell to CIT/VC non-voting Securities (or, if the Company is not the proposed
seller, will arrange for the exchange of any voting securities for non-voting
securities immediately prior to or simultaneous with such sale) on the same
terms as would have existed had CIT/VC acquired the Securities so offered and
immediately requested their exchange for non-voting Securities pursuant to
Section 12.1(a) above.

          (c)  In the event that any Subsidiary of the Company ever offers to
sell any of its Securities to CIT/VC, then the Company will cause such
Subsidiary to enter into agreements with CIT/VC on substantially similar terms
as this Section 12.

     12.3 Information Rights and Related Covenants.

          (a)  Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), the Company shall provide to CIT/VC a
written assessment, in form and substance satisfactory to CIT/VC, of the
economic impact of CIT/VC's financing under the Series B Stock Purchase
Agreement, specifying the full-time equivalent jobs created or retained, the
impact of the financing on the consolidated revenues and profits of the Business
and on taxes paid by the Business and its employees (See 13 C.F.R. 107.630(e)).

          (b)  Upon the request of CIT/VC (or any Affiliate of CIT/VC to whom
CIT/VC has Transferred any Securities of the Company), the Company will (A)
provide to such Person such financial statements and other information as such
Person may from time to time reasonably request for the purpose of assessing the
Company's financial condition and (B) furnish to such Person all information
reasonably requested by it in order for it to prepare and file SBA Form 468 and
any other information reasonably requested or required by the SBA or any
successor entity thereto.

          (c)  The Company will at all times comply with the non-discrimination
requirements of 13 C.F.R., Parts 112, 113 and 117.

     12.4 Remedies. The Company understands that its violation of this Agreement
may result in CIT/VC being required by the SBA to sell the Series B Preferred
Stock, and such sale may be at depressed prices due to the circumstances and
timing of the sale. Therefore, in addition to all other remedies available to
CIT/VC for the Company's violation of this Agreement, the Company agrees that
CIT/VC shall be entitled to seek specific enforcement or other equitable relief
to prevent a violation by the Company of the terms of this Agreement, and the
Company waives any requirement that CIT/VC posts any bond as a condition to
seeking or obtaining equitable relief. CIT/VC acknowledges and agrees that the
remedies available to CIT/VC for the Company's violation of this Agreement shall
be limited to whatever equitable relief may be available (such as specific
performance, injunctive relief and rescission), damages

                                      40.
<PAGE>

resulting from CIT/VC being required to divest the Series B Preferred Stock and
costs of enforcement. CIT/VC expressly waives any claims for damages resulting
from any loss of, or restrictions imposed upon the use of, its SBIC license as a
result of the Company's breach of Section 12 of this Agreement.

13.  Duration of Agreement. The rights and obligations of each Stockholder,
except the rights and obligations contained in Sections 3.1, 3.2, 3.3(c), 10, 11
and 12 hereof, and the covenants hereunder to that Stockholder shall terminate
as to each Stockholder upon the closing of the Initial Public Offering by the
Company. The obligations contained in Sections 8, 11 and 12 shall survive
indefinitely until, by their respective terms, they are no longer applicable.

14.  Additional Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement, the Series A Stock Purchase Agreement,
the Series B Stock Purchase Agreement, the Series C Stock Purchase Agreement,
the Series D Stock Purchase Agreement and/or the Series E Stock Purchase
Agreement shall have been breached by any party hereto, the party or parties
entitled to the benefit of such covenants or agreements may proceed to protect
and enforce their rights either by proceeding in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach; and/or an action for specific performance of any such covenant or
agreement contained in this Agreement, the Series A Stock Purchase Agreement,
the Series B Stock Purchase Agreement, the Series C Stock Purchase Agreement,
the Series D Stock Purchase Agreement and/or the Series E Stock Purchase
Agreement and/or a temporary or permanent injunction, in any case without
showing any actual damage and without establishing, in the case of an equitable
proceeding, that the remedy at law is inadequate. The rights, powers and
remedies of the parties under this Agreement are cumulative and not exclusive of
any other right, power or remedy which such parties may have under any other
agreement or law. No single or partial assertion or exercise of any right, power
or remedy of a party hereunder shall preclude any other or further assertion or
exercise thereof. Any purported Transfer in violation of the provisions of this
Agreement shall be void ab initio.

15.  Successors and Assigns; Limitation on Assignment. Except as otherwise
expressly provided herein, this Agreement shall bind and inure to the benefit of
the Company, each of the Stockholders and the respective successors or heirs and
personal representatives and permitted assigns of the Company and each of the
Stockholders. Each Stockholder agrees further that, it shall not sell any Shares
to any Person not a party to this Agreement unless such Person contemporaneously
with such sale executes and delivers to the Company an agreement to be bound by
the Stockholders' obligations hereunder, whereupon such Person shall have the
same obligations as the Preferred Stockholders under this Agreement. The terms,
representations, warranties and covenants contained in Sections 6 and 7 hereof
shall be binding upon and shall inure to the benefit of and be enforceable by,
the Preferred Stockholders and their respective successors, transferees and
assignees, provided, that the rights granted to the Preferred Stockholders by
Sections 6.3 and 6.4 may not be transferred or assigned to, and shall not inure
to the benefit of, a successor, transferee or assignee of the Preferred
Stockholders which is engaged in any business which directly competes with the
Company in any line of business engaged in, or planned to be engaged in, by the
Company. It is understood and agreed among the parties hereto that this
Agreement and the representations, warranties, and covenants made herein are
made expressly and solely for the benefit of the other party or parties hereto
(or their respective

                                      41.
<PAGE>

successors or permitted assigns), and that no other person shall be entitled or
be deemed to be a third-party beneficiary of any party's rights under this
Agreement.

16.  Entire Agreement. This Agreement, the Series A Stock Purchase Agreement,
the Series B Stock Purchase Agreement, the Series C Stock Purchase Agreement,
the Series D Stock Purchase Agreement, the Series E Stock Purchase Agreement,
the Charter and the By-Laws of the Company and each of the other documents
delivered in connection with the sale by the Company of its Series E Preferred
Stock pursuant to the Series E Stock Purchase Agreement contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior stockholders' agreements, including the Prior Stockholders'
Agreement and the Original Stockholders' Agreement, and all other prior and
contemporaneous arrangements or understandings with respect thereto. The parties
hereto, including the Company and the holders of at least 75% in interest of the
outstanding shares of Series A, B, C and D Preferred Stock, voting together as a
class, hereby agree that all rights granted and covenants made under the Prior
Stockholders' Agreement are hereby waived, released and terminated in their
entirety and shall have no further force or effect whatsoever. The rights and
covenants provided herein set forth the sole and entire agreement between the
parties hereto with respect to the subject matter hereof.

17.  Notices. All notices, requests, consents and other communications hereunder
to any party shall be deemed to be sufficient if contained in a written
instrument delivered in person, duly sent by first class registered or certified
mail, postage prepaid, or telecopied or telexed, addressed or telecopied to such
party at the address or telecopier number set forth below, or such other address
or telecopier number as may hereafter be designated in writing by the addressee
in a notice complying as to delivery with the terms of this Section 17;
provided, however, that if the Stockholder is foreign, notice shall be sent by
both air courier, and telecopied or telexed to such Stockholder:

                              If to the Company:

                              Diversa Corporation
                          10665 Sorrento Valley Road
                              San Diego, CA 92121
                      Attention: Chief Executive Officer
                        Telecopier No.:  (619) 623-5180

                                with a copy to:

                              Cooley Godward LLP
                             4365 Executive Drive,
                                  Suite 1100
                              San Diego, CA 92121
                          Telecopier:  (619) 453-3555
                   Attention:  M. Wainwright Fishburn, Esq.

     If to any other party to this Stockholders' Agreement, to the address
listed for such party on Schedule 17 hereto, or for persons who become party to
this Stockholders' Agreement after

                                      42.
<PAGE>

its initial execution, to the address listed for such person on the signature
page to this Stockholders' Agreement.

     All such notices, requests, consents and communications shall be deemed to
have been given (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of telex or telecopier transmission, on the date on
which the sender receives machine confirmation of such transmission, and (c) in
the case of mailing, on the fifth business day following the date of such
mailing.

18.  Changes. The terms and provisions of Sections 5, 6 and 7 of this Agreement
may not be modified or amended, or any of the provisions thereof waived,
temporarily or permanently, except pursuant to the written consent of (a) the
Company, and (b) the holders of at least 75% in interest of the Covenant
Preferred Shares, voting together as a class. Except as expressly set forth in
the preceding sentence and Section 11.3(e), the terms and provisions of this
Agreement may not be modified or amended, or any of the provisions hereof
waived, temporarily or permanently, except pursuant to the written consent of
(i) the Company, and (ii) the holders of at least 75% in interest of the
Preferred Shares, voting together as a class.

19.  Counterparts. This Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.

20.  Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.

21.  Nouns and Pronouns. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of names and pronouns shall include the plural and vice-versa.

22.  Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability. Such prohibition or
unenforceability in any one jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

23.  Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein.

24.  New York Life Insurance Company Compliance Obligations. Nothing in this
Agreement shall diminish the continuing obligations of New York Life Insurance
Company to comply with applicable requirements of law that it maintain
responsibility for the disposition of, and control over its admitted assets,
investments and property, including (without limiting the generality of the
foregoing) the provisions of Section 1411(b) of the New York Insurance Law, as
amended, and as hereinafter from time to time in effect.

                                      43.
<PAGE>

     In Witness Whereof, the parties hereto have executed this Agreement on the
date first above written, in the case of corporations by their respective
officers thereunto duly authorized.

                                    Diversa Corporation

                                    By:   /s/ Terrance J. Bruggeman
                                       -----------------------------
                                    Name: Terrance J. Bruggeman
                                         ---------------------------
                                    Title: Chief Executive Officer
                                          --------------------------

                                    Stockholders:

                                    HealthCare Ventures III, L.P.

                                    By:  HealthCare Partners III, L.P.
                                    its: General Partner

                                    By: /s/ Jeffrey Steinberg
                                       -----------------------------
                                    Name: Jeffrey Steinberg
                                         ---------------------------
                                    Title: General Partner
                                          --------------------------

                                    HealthCare Ventures IV, L.P.

                                    By:  HealthCare Partners IV, L.P.
                                    its: General Partner

                                    By: /s/ Jeffrey Steinberg
                                       -----------------------------
                                    Name: Jeffrey Steinberg
                                         ---------------------------
                                    Title: General Partner
                                          --------------------------

                                    HealthCare Ventures V, L.P.

                                    By:  HealthCare Partners V, L.P.
                                    its: General Partner

                                    By: /s/ Jeffrey Steinberg
                                       -----------------------------
                                    Name: Jeffrey Steinberg
                                         ---------------------------
                                    Title: General Partner
                                          --------------------------

                                      44.
<PAGE>

                                    APA Excelsior IV/Offshore, L.P.

                                    By:  Patricof & Co. Ventures, Inc.
                                    its: Investment Advisor

                                    By: /s/ Patricia M. Cloherty
                                       -----------------------------
                                    Name: Patricia M. Cloherty
                                         ---------------------------
                                    Title: Co. Chairman
                                          --------------------------

                                    APA Excelsior IV, L.P.

                                    By:  APA Excelsior IV Partners, L.P.
                                    its: General Partner

                                    By:  Patricof & Co. Managers, Inc.
                                    its: General Partner

                                    By: /s/ Patricia M. Cloherty
                                       -----------------------------
                                    Name: Patricia M. Cloherty
                                         ---------------------------
                                    Title: President
                                          --------------------------

                                    The P/A Fund, L.P.

                                    By:  APA Pennsylvania Partners II, L.P.
                                    its: General Partner

                                    By: /s/ Patricia M. Cloherty
                                       -----------------------------
                                    Name: Patricia M. Cloherty
                                         ---------------------------
                                    Title: General Partner
                                          --------------------------

                                    Patricof Private Investment Club, L.P.

                                    By:  Patricof & Co. Managers, Inc.
                                    its: General Partner

                                    By: /s/ Patricia M. Cloherty
                                       -----------------------------
                                    Name: Patricia M. Cloherty
                                         ---------------------------
                                    Title: President
                                          --------------------------

                                      45.
<PAGE>

                                    Larry Abrams

                                    /s/ Jeffrey Steinberg
                                    ----------------------------------

                                    Aetna Life Insurance Company

                                    By: /s/ [ILLEGIBLE]
                                       -------------------------------
                                    Name:_____________________________
                                    Title: Vice President
                                          ----------------------------

                                    Axiom Venture Partners, L.P.

                                    By:_______________________________
                                    Name:_____________________________
                                    Title:____________________________

                                    William Baum

                                    /s/ William Baum
                                    ----------------------------------

                                    Benefit Capital Management
                                    Corporation

                                    By: /s/ Sue Decarlo
                                       -------------------------------
                                    Name: Sue Decarlo
                                         -----------------------------
                                    Title: Senior Vice President & CFO
                                          ----------------------------

                                    Terrance J. Bruggeman

                                    /s/ Terrance J. Bruggeman
                                    ----------------------------------

                                    Lee S. Casty

                                    /s/ Lee S. Casty
                                    ----------------------------------

                                      46.

<PAGE>

                                   The Cit Group/Venture Capital, Inc.

                                   By: /s/ [ILLEGIBLE]
                                      -------------------------------
                                   Name: [ILLEGIBLE]
                                        -----------------------------
                                   Title: [ILLEGIBLE]
                                         ----------------------------

                                   CSK Venture Capital Co., Ltd

                                   By:_______________________________
                                   Name:_____________________________
                                   Title:____________________________

                                   The Donald D. Johnston Trust

                                   By: /s/ Donald D. Johnston
                                      -------------------------------
                                      Donald D. Johnston, Trustee

                                   Finfeeds International Limited

                                   By:_______________________________
                                   Name:_____________________________
                                   Title:____________________________

                                   Donald C. Garaventi

                                   /s/ Donald C. Garaventi
                                   ---------------------------------

                                   GC&H Investments

                                   By: /s/ John L. Cardoza
                                      ------------------------------
                                   Name: John L. Cardoza
                                        ----------------------------
                                   Title: Executive Partner
                                         ---------------------------

                                   Barry Glickman

                                   /s/ Barry Glickman
                                   ---------------------------------

                                      47.
<PAGE>

                                    Hudson Trust

                                    By: Scott M. Ciccor
                                        ------------------------------
                                    Name: Scott M. Ciccor
                                          ----------------------------
                                    Title:  Trustee
                                           ---------------------------

                                    Frank Landsberger

                                    /s/ Frank Landsberger
                                    ----------------------------------

                                    Kenneth F. Logue

                                    /s/ Kenneth F. Logue
                                    ----------------------------------

                                    Mentus Money Purchase Plan

                                    By: /s/ Guy J. Ionnuzzi
                                       -------------------------------
                                    Name: Guy J. Ionnuzzi
                                         -----------------------------
                                    Title: President
                                          ----------------------------

                                    For: New York Life Insurance

                                    By: /s/ Richard F. Drake
                                       -------------------------------
                                    Name: Richard F. Drake
                                         -----------------------------
                                    Title: Director, Venture Capital
                                          ----------------------------

                                    Novartis Agribusiness
                                    Biotechnology Research, Inc.

                                    By: /s/ Stephen V. Evola
                                       -------------------------------
                                    Name: Stephen V. Evola
                                         -----------------------------
                                    Title: Co - President
                                          ----------------------------

                                      48.
<PAGE>

                                    Rho Management Trust II

                                    By:  /s/ Peter Klakanis
                                       ------------------------------
                                    Name:    Peter Klakanis
                                         ----------------------------
                                    Title:       C.F.O.
                                          ---------------------------

                                    Raymond D. Rice

                                    /s/ Raymond D. Rice
                                    ---------------------------------

                                    Jay M. Short

                                    /s/ Jay M. Short
                                    ---------------------------------

                                    R. Patrick Simms

                                    /s/ R. Patrick Simms
                                    ---------------------------------

                                    Melvin I. Simon

                                    /s/ Melvin I. Simon
                                    ---------------------------------

                                    State of Michigan

                                    By:______________________________
                                    Name:____________________________
                                    Title:___________________________

                                    Kathleen H. Van Sleen

                                    /s/ Kathleen H. Van Sleen
                                    ---------------------------------

                                      49.
<PAGE>

                                  SCHEDULE 17

                                    NOTICES

If to HealthCare Ventures III, L.P., HealthCare Ventures IV, L.P. and HealthCare
Ventures, V, L.P.:

     Twin Towers at Metro Park
     379 Thornall Street
     Edison, New Jersey 08837
     Fax No.:  (908) 906-1450
     Attention:  Jeffrey Steinberg

with a copy to:

     Pepper, Hamilton & Scheetz LLP
     1235 Westlakes Drive, Suite 400
     Berwyn, Pennsylvania 19312-2401
     Fax No.:  (610) 640-7835
     Attention:  Chris Miller

If to APA Excelsior IV, L.P.; APA Excelsior IV/Offshore, L.P.; The P/A Fund,
L.P.; or Patricof Private Investment Club, L.P.:

     Patricof & Co. Ventures, Inc.
     445 Park Avenue
     11th Floor
     New York, New York 10022
     Fax No.: (212) 319-6155
     Attention:  Patricia M. Cloherty

with a copy to:

     Shereff, Friedman, Hoffman & Goodman, LLP
     919 Third Avenue
     20th Floor
     New York, NY 10022
     Fax No.: (212) 758-9526
     Attention: Robert M. Friedman, Esq.

If to Mr. Larry Abrams:

     24 Central Park South
     New York, New York 10019
     Fax No.: (212) 758-2976
<PAGE>

If to Aetna Life Insurance Company:

     Aetna Life Insurance Company
     151 Farmington Avenue, - RC21
     Hartford, CT 06156-9000
     Fax No.: (860) 273-8650
     Attention:  David M. Clarke

If to Axiom Venture Partners, L.P.:

     Axiom Venture Partners, L.P.
     City Place II, 17/th/ Floor
     185 Asylum Street
     Hartford, Connecticut 06103
     Attention:  Samuel F. McKay
     Fax No.:  (203) 548-7797

If to William Baum:

     Diversa Corporation
     10665 Sorrento Valley Road
     San Diego, CA 92121
     Fax No.: (619) 623-5180

If to Benefit Capital Management Corporation:

     39 Old Ridgebury Road
     Danbury, CT 06817
     Fax No.: (203) 794-2693
     Attention:  Susan DeCarlo

If to Terrance J. Bruggeman:

     Diversa Corporation
     10665 Sorrento Valley Road
     San Diego, CA 92121
     Fax No.: (619) 623-5180

If to Mr. Lee S. Casty:

     c/o French-American Securities, Inc.
     200 West Adams Street
     Suite No. 1500
     Chicago, IL  60606
     Fax No.: (312) 407-5746

<PAGE>

If to The CIT Group/Venture Capital, Inc.:

        The CIT Group/Venture Capital, Inc.
        650 CIT Drive
        Livingston, NJ 07039
        Fax No.: (201) 740-5555
        Attention: Bruce Schackman

If to CSK Venture Capital Co., Ltd.:

        Kenchiku Kaikan 7/th/ Floor
        5-26-20 Shiba
        Minatoku, Tokyo 108
        Japan
        Fax No.: 81.03.3457.7070
        Attention:  Fumio Takahashi

If to The Donald D. Johnston Trust:

        The Donald D. Johnston Trust
        18 Oyster Shell Lane
        Hilton Head Island, SC 29926
        Fax No.: (803) 681-6493
        Attention: Donald P. Johnston, Trustee

If to Finnfeeds International Limited:

        Finnfeeds International Limited
        P.O. Box 777
        Marlborough, Wiltshire, UK
        Fax No.: 44(0)1672517778
        Attention: Richard Cooper

with a copy to:

        Carter, Ledyard & Milburn
        2 Wall Street
        New York, NY 10005
        Fax No.:  (212) 732-3232
        Attention:  Kirstin T. Knight, Esq.

If to Donald C. Garaventi:

        330 Indian Harbor Boulevard
        Vero Beach, FL 32963
        Fax No.: (561) 234-2374

<PAGE>

If to GC&H Investments:

        c/o Cooley Godward llp
        4365 Executive Drive
        Suite 1100
        San Diego, CA 92121-2128
        Fax No.:  (619) 453-3555
        Attention:  Wain Fishburn, Esq.

If to Barry Glickman:

        Diversa Corporation
        10665 Sorrento Valley Road
        San Diego, CA 92121
        Fax No.: (619) 623-5180

If to Hudson Trust:

        c/o Summit Asset Management Company, Inc.
        666 Plainsboro Road
        Suite 445, The Office Center
        Plainsboro, NJ 08536
        Fax No.: (609) 275-1892
        Attention:  Irene S. March

If to Frank Landsberger:

        Mojave Therpeutic, Inc.
        715 Olde Saw Mill River Road
        Terrytown, NY 10591
        Fax No.: (914) 347-0292

If to Kenneth F. Logue:

        Logue and Rice
        8000 Towers Crescent Drive
        Suite 650
        Vienna, VA 22182-2700
        Fax No.: (703) 761-4248

If to Mentus Money Purchase Plan:

        Aventine
        8910 University Center Lane
        Suite 750
        San Diego, CA 92122-1085
        Fax No.: (619) 455-6872
        Attention: Guy Iannuzzi

<PAGE>

If to New York Life Insurance:

        51 Madison Avenue
        New York, NY 10010
        Fax No.: (212) 447-4122
        Attention: Himi Kittner

If to Novartis Agribusiness Biotechnology Research, Inc.:

        Novartis Agribusiness Biotechnology
         Research, Inc.
        3054 Cornwallis Road
        Research Triangle Park, NC 27709
        Fax No.: (919) 541-8585
        Attention: Dr. Juanjo Estruch

with a copy to:

        Novartis Seeds, Inc.
        7240 Holsclaw Road
        Gilroy, CA 95020-8027
        Fax No.: (408) 848-8129
        Attention: Allen E. Norris, Esq.

If to Rho Management Trust II:

        Rho Management Trust II
        767 Fifth Avenue
        43rd Floor
        New York, New York 10153
        Fax No.: (212) 751-3613
        Attention: Joshua Ruch

with a copy to:

        Gregory F.W. Todd, Esq.
        888 Seventh Avenue, Suite 4500
        New York, NY 10019
        Fax No.: (212) 246-5151

If to Raymond D. Rice:

        Logue and Rice
        8000 Towers Crescent Drive
        Suite 650
        Vienna, VA 22182-2700
        Fax No.: (703) 761-4248

<PAGE>

If to Jay M. Short:

        Diversa Corporation
        10665 Sorrento Valley Road
        San Diego, CA 92121
        Fax No.: (619) 623-5180

If to R. Patrick Simms:

        Diversa Corporation
        10665 Sorrento Valley Road
        San Diego, CA 92121
        Fax No.: (619) 623-5180

If to Melvin I. Simon

        1075 Old Mill Road
        Pasadena, CA 91108
        Fax No.: (818) 577-9266

If to State of Michigan:

        Acting Administrator
        State of Michigan
        Department of Treasury
        Treasury Building
        430 West Allegan
        Lansing, MI 48922
        Fax No.: (517) 335-3668
        Attention:  Garry Neal

If to Kathleen H. Van Sleen:

        Diversa Corporation
        10665 Sorrento Valley Road
        San Diego, CA 92121
        Fax No.: (619) 623-5180

<PAGE>

LIST OF SCHEDULES

Schedule of Series E Investors

Schedule 7.3 - Outstanding Options, Warrants and Rights

Schedule 17 - Notices

LIST OF EXHIBITS

Exhibit A - Quarterly Financial Summary

                                      iv.
<PAGE>

                         SCHEDULE OF SERIES E INVESTORS

<TABLE>
<CAPTION>
Name and Address                         No. of Shares
<S>                                      <C>
Novartis Agribusiness                        5,555,556
 Biotechnology Research, Inc.
3054 Cornwallis Road
Research Triangle Park, NC 27709
                                          ____________
            Total                            5,555,556
</TABLE>
<PAGE>

                                  SCHEDULE 7.3

                    OUTSTANDING OPTIONS, WARRANTS AND RIGHTS

<PAGE>

                         SCHEDULE 4.2 - CAPITALIZATION

                              DIVERSA CORPORATION
                             CAPITALIZATION TABLE
                       Projected After Series E Closing

<TABLE>
<CAPTION>
                                                                                                                       Total
                                                              Total Shares                                     Fully-Diluted Shares
                           --------------------------------------------------------------------------------------------------------
                            Series A    Series B    Series C   Series D     Common      Warrants(a)   Options(b)     #        %
                           --------------------------------------------------------------------------------------------------------
<S>                        <C>          <C>         <C>       <C>          <C>         <C>            <C>         <C>         <C>
PATRICOF FUNDS:
APA Excelsior IV, L.P.
The P/A Fund, L.P.
APA Excelsior IV/Offshore,
 L.P.
Patricof Private Investment
 Club, L.P.
-----------------------------------------------------------------------------------------------------------------------------------
       Total Patricof Funds
-----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE FUNDS:
HealthCare Ventures III, L.P.
HealthCare Ventures IV, L.P.
HealthCare Ventures V, L.P.
-----------------------------------------------------------------------------------------------------------------------------------
     Total HealthCare Funds
-----------------------------------------------------------------------------------------------------------------------------------
OTHER INVESTORS:
Benefit Capital Management
  Corporation
New York Life Insurance
  Company
CSK Venture Capital Co.,
  Ltd.
State of Michigan
GC&H Investments
Mentus Money Purchase Plan
Logue, Kenneth F.
Rice, Raymond D.
Finnfeeds International
  Limited
Abrams, Larry
Axiom Venture Partners, L.P.
Comdisco Warrant
Johnston, Donald
Rho Management Trust II
Aetna Life Insurance Company
Landsberger, Frank
Casty, Lee
Hudson Trust
The CIT Group/Venture
  Capital, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
      Total Other Investors
-----------------------------------------------------------------------------------------------------------------------------------
FOUNDERS:
The Institute for Genomic
  Research, et al.
Haseltine, Wm.
Miller, Jeffrey H.
Simon, Melvin I.
Stetter, Karl O.
Kom, Peter, et al.
Friedman, Gary, et al.
-----------------------------------------------------------------------------------------------------------------------------------
             Total Founders
-----------------------------------------------------------------------------------------------------------------------------------
EMPLOYEES & CONSULTANTS:
      CURRENT EMPLOYEES
Bruggeman, Terrance
Short, Jay
Van Sleen, Kathleen
Simms, Patrick
Baum, Bill
-----------------------------------------------------------------------------------------------------------------------------------
       Subtotal Management
-----------------------------------------------------------------------------------------------------------------------------------
Other Employees
Pool Available (c)
-----------------------------------------------------------------------------------------------------------------------------------
    Total Current Employees
-----------------------------------------------------------------------------------------------------------------------------------
TERMINATED EMPLOYEES
Marrs, Barry
Garaventi, Don
Other Terminated Employees
-----------------------------------------------------------------------------------------------------------------------------------
  Total Terminated Employees
-----------------------------------------------------------------------------------------------------------------------------------
Glickman, Bary
Carroll, Daniel (Director)
Other Consultants
-----------------------------------------------------------------------------------------------------------------------------------
       Total Employees and
               Consultants
-----------------------------------------------------------------------------------------------------------------------------------
Grand Total
===================================================================================================================================
</TABLE>
FOOTNOTES:
(a)  [****]
(b)  [****]
(c)  [****]

                                              * CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                                   Exhibit A

                      FORM OF QUARTERLY FINANCIAL SUMMARY

<PAGE>

             Request to CFO's for Quarterly Financial Information

Company:_______________________________________________________

Submitted By:_______________       Period Ending:______________

Qtly. Payroll Taxes Paid  Yes [  ]  No [  ]

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Quarterly Financial Report ($000)
------------------------------------------------------------------------------------------------------------------------------
                                               Current Financial                                   YTD Financial
------------------------------------------------------------------------------------------------------------------------------
                                   Actual                          Budget                 Actual YTD           Budget YTD
------------------------------------------------------------------------------------------------------------------------------
                           Current        Prior Year     Current        Prior Year.
                             Qtr.            Qtr.          Qtr.            Qtr.       Current  Prior Year  Current  Prior Year
------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>            <C>            <C>           <C>      <C>         <C>      <C>
Revenues
------------------------------------------------------------------------------------------------------------------------------
Net Income (loss)
------------------------------------------------------------------------------------------------------------------------------
Gross Margin $
------------------------------------------------------------------------------------------------------------------------------
Gross Margin %
------------------------------------------------------------------------------------------------------------------------------
EBITDA
------------------------------------------------------------------------------------------------------------------------------
Cash Flow from Operations
------------------------------------------------------------------------------------------------------------------------------
                                                 Current Qtr.             Prior Year Qtr.               Previous Qtr.
------------------------------------------------------------------------------------------------------------------------------
Cash & Cash Equivalents
------------------------------------------------------------------------------------------------------------------------------
Total Current Assets
------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities
------------------------------------------------------------------------------------------------------------------------------
Long Term Debt
------------------------------------------------------------------------------------------------------------------------------
Backlog
------------------------------------------------------------------------------------------------------------------------------
# of Employees/Stores
------------------------------------------------------------------------------------------------------------------------------
Cash Used (Burn Rate)
------------------------------------------------------------------------------------------------------------------------------
  (**If you've attached your cap table, you
     don't need to complete this section         Current Qtr.             Prior Year Qtr.               Previous Qtr.
               Capitalization
------------------------------------------------------------------------------------------------------------------------------
Common Shares Outstanding
------------------------------------------------------------------------------------------------------------------------------
Common equivalent after conversion
------------------------------------------------------------------------------------------------------------------------------
Common equivalent of Warrants & Options
------------------------------------------------------------------------------------------------------------------------------
Total shares fully diluted
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                          By: (CFO): __________________________<PAGE>

                                                                   EXHIBIT 10.15

                                              Confidential Treatment Requested
                                           Under 17 C.F.R. (S)(S) 200.80 (b) (4)
                                                    200.83 and 230.406

                               LICENSE AGREEMENT

                                    BETWEEN

                           THE DOW CHEMICAL COMPANY

                                      AND

                              DIVERSA CORPORATION

                                               *Confidential Treatment Requested

                                       1
<PAGE>

<TABLE>
<CAPTION>
      ARTICLE                                  TITLE                                  PAGE NUMBER
-------------------------------------------------------------------------------------------------
<C>                                         <S>                                              <C>
 I                                          DEFINITIONS                                         1
-------------------------------------------------------------------------------------------------
 II                                     PATENT LICENSE GRANT                                    4
-------------------------------------------------------------------------------------------------
 III                                          PAYMENTS                                          6
-------------------------------------------------------------------------------------------------
 IV                                        PATENT RIGHTS                                        9
-------------------------------------------------------------------------------------------------
 V                                        CONFIDENTIALITY                                      11
-------------------------------------------------------------------------------------------------
 VI                                          ASSIGNMENT                                        12
-------------------------------------------------------------------------------------------------
 VII                              THIRD PARTY INFRINGEMENT CLAIMS                              12
-------------------------------------------------------------------------------------------------
 VIII                             PATENT ENFORCEMENT & LITIGATION                              13
-------------------------------------------------------------------------------------------------
 IX                         U.S. EXPORT CONTROL AND GOVERNMENT LICENSES                        14
-------------------------------------------------------------------------------------------------
 X                             PRODUCT LIABILITY AND INDEMNIFICATION                           15
-------------------------------------------------------------------------------------------------
 XI                                    WARRANTY & DISCLAIMER,                                  16
-------------------------------------------------------------------------------------------------
 XII                                    TERM AND TERMINATION                                   17
-------------------------------------------------------------------------------------------------
 XIII                                      FORCE MAJEURE                                       18
-------------------------------------------------------------------------------------------------
 XIV                                     DISPUTE RESOLUTION                                    19
-------------------------------------------------------------------------------------------------
 XV                                           NOTICES                                          20
-------------------------------------------------------------------------------------------------
 XVI                                  MISCELLANEOUS PROVISIONS                                 21
-------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
        APPENDIX                                TITLE                                        PAGE
-------------------------------------------------------------------------------------------------
 <C>                                         <S>                                            <C>
 A                                         PATENT RIGHTS                                       A
-------------------------------------------------------------------------------------------------
 A-1                                   DIVERSA PATENT RIGHTS                                  A-1
-------------------------------------------------------------------------------------------------
 A-2                               DIVERSA PATENT RIGHTS [****]                               A-2
-------------------------------------------------------------------------------------------------
</TABLE>

                                       i

<PAGE>

<TABLE>
<CAPTION>
                                                ROYALTY BEARING PRODUCTS
--------------------------------------------------------------------------------------------------------------------
<C>                                                 <S>                                                   <C>
 A-3                                            DIVERSA PATENT RIGHT [****]                               A-3
--------------------------------------------------------------------------------------------------------------------
 B                                                  JOINT PATENT RIGHTS                                   B-1
--------------------------------------------------------------------------------------------------------------------
 C                                                   LICENSED PRODUCT                                     C-1
--------------------------------------------------------------------------------------------------------------------
 D                                                ROYALTY BEARING PRODUCT                                 D-1
--------------------------------------------------------------------------------------------------------------------
 E                                        ROYALTY BEARING PRODUCT CLASSIFICATION                          E-1
--------------------------------------------------------------------------------------------------------------------
 F                                                   ROYALTY SCHEDULE                                     F-1
--------------------------------------------------------------------------------------------------------------------
 G                                                   OPTION AGREEMENT                                     G-1
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      ii

<PAGE>

     This LICENSE AGREEMENT (including the Appendices hereto, the "License") is
by and between THE DOW CHEMICAL COMPANY, a corporation duly formed and existing
under the laws of the State of Delaware, having a place of business at 2030 Dow
Center, Midland, Michigan 48674, United States of America ("DOW" or a "Party"),
and DIVERSA CORPORATION, a corporation duly formed and existing under the laws
of the State of Delaware, having a place of business at 10665 Sorrento Valley
Road, San Diego, California 92121, United States of America ("DIVERSA" or a
"Party").

                                R E C I T A L S

A.   DIVERSA has discovered and developed enzymes and has expertise in the
     rearrangement of DNA to produce and discover genes utilizing proprietary
     technologies for the rapid discovery, development and optimization of
     enzymes.

B.   DOW has expertise in the discovery, development and production of chemical
     compounds.

C.   DOW and DIVERSA are concurrently with this License entering into a separate
     Collaborative Research and Development Agreement ("Agreement") in order to
     perform research together to discover and optimize the function of new
     genes, processes and products resulting thereupon that can be used by DOW
     to produce certain, desired commercial chemical compounds.

D.   DIVERSA represents that it has Patent Rights and Know-How that pertain to
     this License.

E.   DOW is desirous of obtaining, and DIVERSA wishes to grant to DOW, a
     worldwide, exclusive royalty-bearing license to use Patent Rights and
     Licensed Products in Research Target Processes.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the Parties hereby agree as follows:

                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

When used in this License, the following terms shall have the meanings set out
below, unless the context requires otherwise.  The singular shall be interpreted
as including the plural and vice versa, unless the context clearly indicates
otherwise.

                                       1
<PAGE>

1.1  "Affiliate" means any corporation, firm, limited liability company,
     partnership or other entity that directly or indirectly controls or is
     controlled by or is under common control with a Party to this License.
     Control for this purpose means ownership, directly or through one or more
     affiliated entities, of 50 percent (50%) or more of the shares of stock
     entitled to vote for the election of directors in the case of a
     corporation, or 50 percent (50%) or more of the equity interests in the
     case of any other type of legal entity, or any other arrangement whereby a
     Party controls or has the right to control the board of directors or
     equivalent governing body of a corporation or other entity.

1.2  "Agreement" means the Collaborative Research Agreement between DOW and
     DIVERSA, executed concurrently with this License.

1.3  "Areas of Interest" means the development of Improved Enzymes (as defined
     below) for use in the following [****] specific areas:
     (a)   [****]
     (b)   [****]
     (c)   [****]

1.4  "Confidential Information" means all information, Know-How, scientific,
     technical, or non-technical data, samples and Materials, business plans,
     and marketing and sales information disclosed by one Party to the other
     under this License, and including information disclosed under the Agreement
     regarding Licensed Products, whether disclosed or provided in oral, written
     (including but not limited to electronic, facsimile, paper or other means),
     graphic, photographic or any other form, except to the extent that such
     information:
           (a)   as of the date of disclosure is known to the receiving Party as
                 shown by written documentation, other than by virtue of a prior
                 confidential disclosure from the disclosing Party to the
                 receiving Party;
           (b)   as of the date of disclosure is in, or subsequently enters, the
                 public domain through no fault or omission of the receiving
                 Party;
           (c)   as of the date of disclosure or thereafter is obtained from a
                 Third Party free from any obligation of confidentiality; or
           (d)   as of the date of disclosure or thereafter is developed by the
                 receiving Party independent of the disclosure by the disclosing
                 Party as evidenced by written documentation.

1.5  "Controls" or "Controlled" means, with respect to intellectual property,
     possession by DIVERSA (other than by virtue of this License) of the ability
     to grant licenses or sublicenses to DOW without violating the terms of any
     agreement or other arrangement with any Third Party and to the reasonable,
     good faith knowledge and belief of DIVERSA, without violating the rights of
     a Third Party.

                                               *Confidential Treatment Requested
                                       2
<PAGE>

1.6  [****] means a [****] that is not [****] whereupon the [****] shall be
     [****] on the [****] and [****] of the [****] including a [****] of [****]
     an [****].

1.7  "Effective Date" means the date of last signature of the Parties at the end
     of this License.

1.8  "Field" means [****]

1.9  "Improved Enzyme" means an enzyme or enzymes, either ex vivo or in vivo,
     provided to DOW by DIVERSA which is within the claims of Patent Rights or
     Joint Patent Rights or that incorporates, is derived from, or is
     identified, discovered, developed or made through the use of Know-How,
     which is developed in the Areas of Interest under the Agreement.

1.10 "Joint Patent Rights" means patent rights, which are jointly developed or
     invented by both Parties under the Agreement in accordance with its terms,
     as shown in Appendix B, which Appendix B-1 may be modified to include joint
     patent rights obtained during the Research Term under the Agreement, and
     which rights pertain to a Licensed Product. Joint Patent Rights concern
     only the scope of the claims that have not been held invalid or
     unenforceable after all appeals have been exhausted. Claims shall be deemed
     valid unless held otherwise.

1.11 "Know-How" means all Research Results, as defined and obtained under the
     Agreement, and all know-how, nonpatented inventions, improvements,
     discoveries, data, instructions, processes, formulas, sequences,
     information (including, without limitation, chemical, physical and
     analytical, safety, manufacturing and quality control data and
     information), procedures, devices, methods and trade secrets which are
     conceived, discovered or invented during the term of the Agreement, and
     which are necessary or appropriate to develop and commercialize Licensed
     Products. (Know-How does not include inventions within the Patent Rights or
     Joint Patent Rights.)

1.12 "Licensed Product" means (i) any Improved Enzyme which is used to convert a
     Research Target (as defined in the Agreement) into a product using a
     Research Target Process, or (ii) any Improved Enzyme which is based on or
     incorporates or is identified, discovered, or developed under the
     Agreement, for which both (i) and (ii) are designated by the RMC, and
     encompassed

                                               *Confidential Treatment Requested
                                       3
<PAGE>

     within DIVERSA Patent Rights or Joint Patent Rights and listed on Appendix
     C, which is attached hereto and made a part hereof and which is identical
     to Appendix G of the Agreement.

1.13 "Material" means the original, tangible materials of any type provided by
     DOW or DIVERSA to the other Party in order that the recipient can perform
     its obligations under this License.

1.14 "Net Sales" means the amount invoiced on sales of Royalty Bearing Product
     by DOW and its Affiliates to a Third Party, less the following deductions
     to the extent included in the amounts invoiced:
           (a)  [****] and
           (b)  [****] and
           (c)  [****] and
           (d)  [****] and
           (e)  [****]

     Net Sales shall not include sales between or among DOW and its Affiliates.

1.15 "Patent Rights" means patent and patent applications Controlled solely by
     DIVERSA as shown in Appendix A, including:
     (a)   all patents and patent applications which are conceived of under the
           Agreement, and which are necessary (but for this License DOW would
           infringe these patents) for DOW to make, use or sell the Royalty
           Bearing Products; and are listed on Appendix A-1, attached hereto and
           made a part hereof, which Appendix A-1 may be modified to include
           Patent Rights obtained during this License;
     (b)   the patents and patent applications listed on Appendix A-2, attached
           hereto and made a part hereof, are patent rights of DIVERSA that
           [****] and
     (c)   any divisions, continuations, continuations-in-part, reissues,
           reexaminations, extensions or other governmental actions which extend
           any of the subject matter of the patent applications or patents in

                                               *Confidential Treatment Requested

                                       4
<PAGE>

           (i) or (ii) above, and any substitutions, confirmations, patents-of-
           addition, registrations or revalidations of any of the foregoing,
           which Patent Rights are necessary (but for this License DOW would
           infringe these patents) for DOW to make, use or sell the Royalty
           Bearing Products, which shall be listed on Appendix A-1 or A-2,
           respectively;
     (d)   [****]

     in each case, which are Controlled by DIVERSA. All patents and patent
     applications subject to this definition are listed on Appendix A or will be
     included on Appendix A as they are developed or obtained under the
     Agreement and this License. Patent Rights concern only the scope of the
     claims that have not been held invalid or unenforceable after all appeals
     have been exhausted. Claims shall be deemed valid unless held otherwise.

1.16 "Royalty Bearing Product" means the material resulting from the application
     of a Licensed Product or a Licensed Product in a Research Target Process
     (defined in the Agreement), which shall be classified by its Royalty
     Bearing Product Classification and listed in Appendix D, attached hereto
     and made a part hereof. (If DIVERSA manufactures for DOW a Licensed Product
     using an in vivo Improved Enzyme, it shall be subject to a separate
     agreement.)

1.17 "Royalty Bearing Product Classification" means the [****] in accord with
     Appendix E, as attached hereto and made a part hereof. The Royalty Bearing
     Product [****]

1.18 "Royalty Schedule" means the [****] Royalty Bearing Product, as determined
     by the [****] read from the [****] on Appendix F, attached hereto and made
     a part hereof.

1.19 "Territory" means the world.

1.20 "Third Party" means anyone other than DOW or DIVERSA, or their respective
     Affiliates.

                                               *Confidential Treatment Requested

                                       5
<PAGE>

                                  ARTICLE II

                             PATENT LICENSE GRANT
                             --------------------

2.1  Grant of License to DOW - Subject to the terms and conditions of this
     License, DIVERSA hereby grants to DOW, and DOW hereby accepts:
     (a)   an a exclusive, royalty-bearing, worldwide license, including the
           right to grant sublicenses pursuant to Section 2.4, under the DIVERSA
           Patent Rights and Joint Patent Rights to make, have made, import,
           have imported, use, have used, sell, have sold and otherwise exploit
           Royalty Bearing Products;
     (b)   an exclusive, world-wide license, including the right to grant
           sublicenses pursuant to Section 2.4, under DIVERSA's enzymes [****]
           to use enzymes to convert Research Target(s) into products via
           Research Target Processes (Research Target and Research Target
           Processes are defined as in the Agreement). The royalty for this
           grant is obtained by DIVERSA under (a);
     (c)   a non-exclusive, royalty-bearing, world-wide license to [****] and
     (d)   a royalty-free license to any Know-How required to exploit the rights
           granted under (a), (b), and (c), and for DOW or its Affiliates to
           perform research on any Improved Enzyme.

2.2  Grant of Right to DIVERSA - If DOW desires that any Licensed Product be
     further modified after DIVERSA supplies it to DOW under the terms of the
     Agreement, then DOW may request that:
     (a)   DIVERSA perform such added modification under the Agreement, if it is
           still in effect; or
     (b)   if the Agreement is no longer in effect, then using good faith, the
           Parties shall negotiate terms consistent with the intent of obtaining
           a Licensed Product; or
     (c)   if DIVERSA declines to do such modification within thirty (30) days
           or an agreement is not reached within three (3) months having terms
           similar to the Agreement and providing for the work to commence
           within thirty (30) days of the signature date, [****]

                                               *Confidential Treatment Requested

                                       6
<PAGE>

     Notwithstanding the above, [****] if (i) a transfer or sale of
     substantially all of the business of DIVERSA to which this License relates
     occurs, whether by merger, sale of stock, sale of assets or otherwise, to a
     [****] or (ii) bankruptcy, insolvency, dissolution or winding up of DIVERSA
     (other than dissolution or winding up for the purposes of reconstruction or
     amalgamation). [****].  DOW would continue to pay DIVERSA for any Royalty
     Bearing Product under this License.

2.3  Grant of Rights to Use Licensed Products for New Research Targets within
     the Field after Termination of the Agreement - In the event DOW desires to
     obtain exclusive or non-exclusive rights to Licensed Products to make, have
     made, use, sell, offer for sale and import products in new Research Targets
     within the Field, DIVERSA and DOW agree to negotiate such rights in good
     faith, subject to any prior obligations DIVERSA has regarding the granting
     of said rights. If DIVERSA becomes aware of new Research Targets for
     Licensed Products within the Field, then DIVERSA shall notify DOW of such
     Licensed Product application, and [****]. If DOW declines to negotiate a
     license and DIVERSA and a Third Party desire to use a Licensed Product for
     a new Research Target, DIVERSA and DOW agree to negotiate for DIVERSA to
     pay DOW royalties on net sales of such Licensed Product in such Research
     Target consistent with the royalties DOW pays to DIVERSA under this License
     as indicated in Table 1 of Appendix F attached hereto.

2.4  Sublicensing - The exclusive license granted under Section 2.1(a) to DOW
     includes the right to sublicense Third Parties, whether or not Affiliates
     of DOW, including the right to enter into distributor contracts,
     manufacturing contracts, or other commercial transactions, including but
     not limited to sublicensing a competitor of DOW. DOW will be responsible
     for all payments due to DIVERSA as a result of any sublicensee and
     Affiliate Net Sales in the Field in the Territory. DOW will be responsible
     for the observance by all sublicensees of all applicable provisions of this
     License and will use its reasonable good faith efforts to cause all
     sublicensees to observe the covenants in this License (i.e., regarding
     confidentiality, maintaining records, reporting Net Sales, and governmental
     regulations). All sublicenses, other than a label license for DOW Net
     Sales, shall be in writing. DOW shall notify DIVERSA in writing within
     thirty (30) days of the grant of any

                                               *Confidential Treatment Requested

                                       7
<PAGE>

     sublicense hereunder. Notwithstanding the foregoing, DOW shall have no
     right under any circumstances to sublicense any rights to the DIVERSA
     Patent Rights listed on Appendix A-3, and licensed to DOW hereunder.

2.5  Reservations by DOW - DOW reserves the right to work with Third Parties
     outside the Areas of Interest, or after the Agreement terminates within the
     Areas of Interest, or to conduct its own research within the Areas of
     Interest.

2.6  Ex vivo Improved Enzyme Production - If DOW chooses not to exclusively
     manufacture a Licensed Product, DIVERSA shall be given a right of first
     refusal to manufacture such Licensed Product. DIVERSA must submit a bid
     which is competitive with any other Third Party supplier. Any bid received
     by DIVERSA shall be held confidential by DOW. If DIVERSA is the lowest
     cost, most effective producer of the Licensed Product, DOW and DIVERSA
     shall negotiate in good faith a separate manufacturing agreement for
     DIVERSA to provide the relevant Licensed Product to or on behalf of DOW.
     Such agreement may include the development of additional technology for
     such production. If such an agreement is negotiated, it shall contain at a
     minimum terms for a worldwide, non-exclusive license for the Know-How and
     any Patent Rights required (whether under this License in Appendix B-2 or
     developed separately). This [****].

2.7  Prior Option Agreement - DOW exercised its rights under a prior Option
     (copy attached for reference as Appendix H) for a license to a precursor
     for an Improved Enzyme and paid DIVERSA the exercise fee. This License
     shall also be a grant to the technology and the precursor Improved
     Enzyme(s) developed under that Option in the same manner for a Licensed
     Product.

                                  ARTICLE III

                                   PAYMENTS
                                   --------

3.1  Milestone Payment for Option under Section 2.7 - To meet the milestone
     payment due DIVERSA under the Option in accord with Section 2.7, DOW shall
     pay DIVERSA Two Hundred Thousand Dollars ($200,000) within thirty (30) days
     from the Effective Date. This License shall suffice for the exercise of the
     Option for a license.

                                               *Confidential Treatment Requested

                                       8
<PAGE>

3.2  License Product Nomination - When an Improved Enzyme is identified by the
     RMC under the Agreement as being adequately developed for
     commercialization, then DOW must inform DIVERSA in writing within sixty
     (60) days whether such Improved Enzyme shall become a Licensed Product
     under this License. If DOW desires to designate an Improved Enzyme as a
     Licensed Product, then it shall be listed on either Appendix C or D under
     the terms of this License and classified by DOW under the Royalty Bearing
     Product Classification of Appendix E as to which Royalty Schedule applies
     in accord with Appendix F. Up to three (3) Improved Enzymes per Royalty
     Bearing Product can be designated as Licensed Product(s). Within [****] of
     designation of more than one Improved Enzyme as a Licensed Product, DOW
     will select [****] Licensed Product for each Royalty Bearing Product, and
     all other Licensed Product(s) shall revert to Improved Enzyme status. If
     DOW does not designate an Improved Enzyme as a Licensed Product, then
     DIVERSA may license such Improved Enzyme to a Third Party for other than
     any Research Target without further obligation to DOW, unless Section 3.8
     applies.

3.3  License Fees - Within thirty (30) days of the identification by the RMC of
     a Licensed Product in accordance with Section 3.2, DOW shall pay to DIVERSA
     a license fee of [****] dollars. Only [****].

3.4  Commercialization Fees - Within thirty (30) days of the first commercial
     sale by DOW of each Royalty Bearing Product from a commercial scale plant,
     DOW shall pay to DIVERSA [****] dollars. Only [****].

3.5  Royalty Payments - Royalties owed for each Royalty Bearing Product are
     subject to Section 4.8 and shall vary according to Table 1 in the Royalty
     Schedule set forth on Appendix F. Upon pilot plant evaluation for each
     Royalty Bearing Product, DOW will propose to DIVERSA the Royalty Bearing
     Product Classification and specific royalty from Table 1 in the Royalty
     Schedule in Appendix F. DIVERSA and DOW shall discuss the proposal. The
     proposal shall be subject to DIVERSA approval, which shall not be
     unreasonably withheld. In the [****].

                                               *Confidential Treatment Requested

                                       9
<PAGE>

3.6  Method of Payment - All payments due under this License shall be made in
     with the respective sections of Article III by check or by bank wire
     transfer in immediately available funds to a bank account designated in
     writing to DOW by DIVERSA. In the event that the due date of any payment
     subject to this Article III hereof is a Saturday, Sunday or national
     holiday, such payment may be paid on the following business day. Any late
     payments shall bear interest, to the extent permitted by applicable law, at
     the prime rate (as reported by the Bank of America, San Francisco,
     California or its successor bank) on the date such payment is due plus two
     (2%) percent, calculated on the number of days such payment is delinquent.
     The rights provided in this Section 3.6 shall in no way limit any other
     remedies available to DIVERSA hereunder.

3.7  Sublicense Payments - Any sublicense agreement for Royalty Bearing Product
     shall contain royalty provisions that at a minimum provide for the payment
     of the same running royalty as would similarly be paid to DIVERSA by DOW in
     accord with Section 3.5. DOW will be responsible for any auditing for
     performance for similar terms and conditions by a sublicensee.

3.8  [****].

3.9  [****].

3.10 Exchange Rate and Payment - Royalty payments shall be paid to DIVERSA in US
     dollars in funds to be deposited in a US account as instructed in writing
     by DIVERSA in accordance with Section 3.6. If DOW receives payment on
     Royalty Bearing Products in currency other than US dollars, such payments
     shall be converted to US dollars on the last day of the calendar quarter
     using an exchange rate established by a leading New York bank, such as
     CitiBank, and published in The Wall Street Journal, but are not due for
     sixty (60) days from the last day of each calendar quarter for each Royalty
     Bearing Product.

                                               *Confidential Treatment Requested

                                      10
<PAGE>

     If DOW receives payment in a form other than a currency, it shall be
     estimated at its fair market value and converted to U.S. dollars.

3.11 Quarterly Royalty Reports and Payments - Within sixty (60) days after the
     close of each calendar quarter, DOW shall submit a report on the Net Sales
     on Royalty Bearing Product for the Territory in sufficient detail to enable
     a calculation of the royalty due in accord with Article III and payment of
     the royalty (if any) due. The quarterly reports will also specify the
     calculations based on Sections 3.7 and 3.10, Royalty Bearing Product
     Classifications made, the royalty rate from Table 1 of the Royalty Schedule
     in Appendix F for a given Royalty Bearing Product, and identification of
     any Licensed Products that are returned as Improved Enzymes.

3.12 Books of Account - DOW shall maintain true and complete books of account
     containing an accurate record of all data necessary for the proper
     computation of royalty payments due from it or on behalf of any Affiliate.
     Such records shall be maintained for at least five (5) years after the date
     of the pertinent royalty payment.

3.13 Audit Right - DIVERSA shall have the right through a firm of independent
     public accountants to whom DOW has no reasonable objection, to examine the
     books of account of DOW at reasonable times within three (3) years after
     the end of the calendar year to which they relate (but not more than once
     in each calendar year) for the purpose of verifying the correctness of any
     report concerning payment of royalties under Article III. Such examination
     shall be made during normal business hours at the place of business of DOW.
     The information provided as a result of any such examination shall be
     maintained in confidence on the terms specified in Article V. The fees and
     expenses of such an audit shall be borne by DIVERSA, unless such audit
     discloses an underpayment of more than five percent (5%) of the amount due
     under this License. In such case, DOW shall bear the full cost of such
     audit. If any such audit shows any underpayment or overcharge, a correcting
     payment or credit against future royalties shall be made. Any payment
     required from DOW to DIVERSA from such audit shall be made within thirty
     (30) days of DIVERSA's receipt of the auditors' statement. DOW shall be
     subject to a penalty as if the payment were deemed late in accord with
     Section 3.6.

3.14 Withholding Tax Payments - If any taxes for DIVERSA's account, withholding
     or otherwise, are levied by any taxing authority in the Territory in
     connection with the receipt by DIVERSA of any amounts payable under Article
     III of this License according to any tax treaty or agreement between the
     United States and any country in the Territory, then DOW shall have the

                                       11
<PAGE>

     right to pay such taxes to the local tax authorities and the payment to
     DIVERSA shall be the net amount due after reduction by the amount of such
     taxes, together with
           (a)   evidence of payment of such taxes and a translation thereof
                 into English,
           (b)   indication of the amount of such tax paid, and
           (c)   indication of the country in the TERRITORY and the authority to
                 whom it was paid, and
           (d)   other information required for DOW to comply with DOW's royalty
                 reporting obligations under this License.

                                  ARTICLE IV

                                 PATENT RIGHTS
                                 -------------

4.1  DIVERSA to Maintain Patent Rights - DIVERSA shall have the obligation and
     be responsible at its own cost and expense for prosecuting the patent
     applications in Patent Rights for maintaining and extending those Patent
     Rights for the term of this License. DIVERSA shall use good faith efforts
     to prosecute, issue and maintain all Patent Rights.

     DIVERSA shall supply DOW with a copy of all Patent Rights applications,
     their published texts, and issued patents. Where available a translation
     into English shall be provided.

4.2   Joint Patent Rights -
      In those instances where joint inventors (as defined by 35 U.S.C. et seq.)
      between DOW (or its Affiliate) and DIVERSA (or its Affiliate) result in a
      patentable invention, then DOW and DIVERSA shall mutually determine, using
      their good faith efforts:
           (a)   whether DOW or DIVERSA shall file a patent application;

           (b)   whether the patent application has joint ownership and joint
                 claim structure; and

           (c)   which Party should prosecute the patent application and pay the
                 annuities.

     Thus DOW shall have joint ownership rights to such Joint Patent Rights in
     accord with Article II. If either Party desires exclusive rights to Joint
     Patent Rights, then such Party must notify the other and both Parties shall
     negotiate in good faith. Should such joint inventorship arise, then the
     Parties shall discuss in good faith how the costs are shared, which Party
     should file the Joint Patent Rights, where the Joint Patent Rights should
     be

                                       12
<PAGE>

     filed, and, if term extension or restoration is available, who should
     extend the patent. DIVERSA shall use its reasonable good faith efforts to
     obtain the Joint Patent Rights and secure the broadest scope reasonably
     possible in view of the commercial intent of DOW.

     Each Party shall supply the other Party with a copy of all joint patent
     applications, their published texts, and issued patents included in the
     Joint Patent Rights under its control and their official actions and shall
     advise the other Party on the content of any responses. Where available a
     translation into English shall be provided.

4.3  Notice of Patent Lapse of Patent Rights and Joint Patent Rights -DIVERSA
     shall promptly advise DOW of the grant, lapse, nullification, revocation,
     surrender, or invalidation of any of the Patent Rights and Joint Patent
     Rights under its control at least in advance of any abandonment to enable
     DOW to assume that prosecution, at DOW's expense, should DOW not agree to
     such abandonment. If under these facts, DOW succeeds in issuing the Patent,
     then patent costs shall be credited against royalty payments. DOW shall
     promptly advise DIVERSA of the grant, lapse, nullification, revocation,
     surrender, or invalidation of any of the Joint Patent Rights under its
     control at least in advance of any abandonment to enable DIVERSA to assume
     that prosecution, at DIVERSA's expense, should DIVERSA not agree to such
     abandonment.

4.4  Validity, Non-Infringement - DIVERSA does not warrant that the manufacture,
     use and sale of Licensed Products do not fall within the scope of Third
     Party patents or the industrial property rights of a Third Party. However,
     to the best of DIVERSA's knowledge, information and belief, that as of the
     Royalty Bearing Product Classification, the [****] for the [****] does not
     fall within the scope of Third Party patents which are not owned or
     licensed by DIVERSA.

4.5  Disclaimer of Warranties as to Patent Rights - Other than as stated in
     Section 4.4, DIVERSA makes no representation that the inventions covered in
     any Patent Rights are patentable or that the Patent Rights are or will be
     valid or enforceable, nor does DIVERSA warrant or represent that the
     exercise of the rights licensed hereunder is free of infringement of patent
     rights of Third Parties.

4.6  Hold Harmless - [****] agrees to hold [****] harmless for patent
     infringement under [****]

                                               *Confidential Treatment Requested

                                       13
<PAGE>

     which may be [****] under this License so long as this License is in effect
     and is not terminated.

4.7  Cooperation - DIVERSA and DOW shall use good faith efforts to cooperate
     with respect to any issues that concern the development of the Licensed
     Product under this License. DOW is aware that competition in the Territory
     is likely if no Patent Rights or Joint Patent Rights exist or are obtained,
     and DOW accepts this License with that knowledge. DIVERSA shall promptly
     inform DOW of any references of which DIVERSA becomes aware which might
     significantly impact the scope of the Patent Rights or Joint Patent Rights
     or dominate Patent Rights or Joint Patent Rights.

4.8  Patent Rights Issues - DOW [****] owes DIVERSA under Article III for
     Royalty Bearing Products made using Licensed Products [****] DIVERSA agrees
     that it [****]

4.9  Country list for Global Filing Issues - DIVERSA shall file all Patent
     Rights at least in the US and PCT [****]

4.10 DOW technology and patents - DOW may develop and patent technology in the
     Field or Areas of Interest during this License. DOW does not need to pay
     any royalty to DIVERSA on such technology or patents unless it is dominated
     by any DIVERSA patents. [****]

                                   ARTICLE V

                                CONFIDENTIALITY
                                ---------------

5.1  Efforts - Each Party shall use good faith efforts to retain in confidence
     and not disclose to any Third Party each other's Confidential Information

                                               *Confidential Treatment Requested

                                       14
<PAGE>

     disclosed pursuant to the terms of this License. Such "good faith efforts"
     shall mean the same degree of care, but no less than a reasonable degree of
     care, as the receiving Party uses to protect its own Confidential
     Information of a like nature. All Confidential Information initially
     received in a non-written form shall be reduced to writing within thirty
     (30) days by the disclosing Party and such writing provided to the
     receiving Party. The receiving Party shall not be obligated if such writing
     is not received timely. DOW shall continue to use the same good faith
     efforts with respect to the DIVERSA Confidential Information already in its
     possession under the Agreement. Each Party may use Confidential Information
     of the other Party only to the extent required to accomplish the purposes
     of this License.

5.2  Notwithstanding the provisions of Section 5.1, if the receiving Party
     becomes legally compelled to disclose any of the disclosing Party's
     Confidential Information, the receiving Party shall promptly advise the
     disclosing Party of such required disclosure in order that the disclosing
     Party may seek a protective order confidential treatment or such other
     remedy as the disclosing Party may consider appropriate in the
     circumstances. The receiving Party shall disclose only that portion of the
     Confidential Information which it is legally required to disclose. Such a
     disclosure shall not release the receiving Party with respect to the
     Confidential Information so disclosed except to the extent of permitting
     the required disclosure.

5.3  Disclosure to Affiliates, Contractors - DOW may disclose Confidential
     Information to its Affiliates, sublicensees, consultants, contractors
     (parties under contract with DOW for the custom manufacturing or shipping
     of Royalty Bearing Product or obtention of registration in the Territory),
     as may be necessary to exercise the rights granted hereunder and to
     register and prepare for commercialization of Royalty Bearing Product, and
     to commercialize Royalty Bearing Product under this License, under
     conditions of confidentiality at least as stringent as those set out in
     Article V.

5.4  Survival of Confidentiality - Termination of this License for any reason
     shall not relieve the Parties of their obligations under Article V. The
     provisions of Article V shall survive termination of this License for ten
     (10) years.

                                       15
<PAGE>

                                  ARTICLE VI

                                  ASSIGNMENT
                                  ----------

6.1  DOW - DOW shall have the right to assign its rights in this License (or any
     part hereof) to an Affiliate: provided, however, that DOW shall continue to
     be responsible for the obligations of any such Affiliate. DOW may assign
     its rights hereunder in connection with the transfer or sale of all or
     substantially all of the business of DOW to which this License relates,
     whether by merger, sale of stock, sale of assets or otherwise.

6.2  DIVERSA - DIVERSA shall have the right to assign its rights in this License
     (or any part hereof) to an Affiliate: provided, however, that DIVERSA shall
     continue to be responsible, using its reasonable best efforts, for the
     obligations of any such Affiliate, including honoring the terms of this
     License. DIVERSA may assign its rights hereunder in connection with the
     transfer or sale of all or substantially all of the business of DIVERSA to
     which this License relates, whether by merger, sale of stock, sale of
     assets or otherwise.

                                  ARTICLE VII

                        THIRD PARTY INFRINGEMENT CLAIMS
                        -------------------------------

7.1  Defense of Third Party Patent Claims - If a claim is brought by a Third
     Party that the manufacture, use or the sale of a Royalty Bearing Product in
     the Territory (regardless of use) infringes a patent of such Third Party,
     DOW will give prompt written notice to DIVERSA of such claim if it concerns
     Patent Rights or Joint Patent Rights. The Parties shall confer in accord
     with Section 7.2.

7.2  Mutual Decisions - From the Effective Date and using their good faith
     efforts, DIVERSA and DOW shall discuss any claim or suit brought by a Third
     Party for patent infringement and mutually evaluate whether that Third
     Party's patent is infringed by the manufacture, use or sale of Royalty
     Bearing Product by DOW or its Affiliates in the Territory. Specifically,
     DIVERSA and DOW shall mutually try to agree on:

                                       16
<PAGE>

           (a)   the strategy for such suit or claim, e.g. whether to negotiate
                 a settlement, sue or withdraw selling Royalty Bearing Product
                 from the country in the Territory in which infringement is
                 claimed;

           (b)   the basis to be determined for sharing the costs of litigation,
                 damages awarded, and royalty to be paid to the Third Party.
                 [****].

           (c)   which Party should conduct the defense or if both DIVERSA and
                 DOW should jointly defend; and the consequences of such
                 decisions, such as amendment to this License with regard to
                 royalties due to DIVERSA.

7.3  Third Party License - The Parties shall use their good faith efforts
     (either individually or together) to [****]. As of the Royalty Bearing
     Product Classification, DIVERSA is not aware of the need for any such Third
     Party license.

                                 ARTICLE VIII

                        PATENT ENFORCEMENT & LITIGATION
                        -------------------------------

8.1  Prosecution by DIVERSA -

     8.1.1  DIVERSA, at its sole discretion, may take action on its own behalf
            and expense to institute any action or proceeding by reason of
            infringement of any of the Patent Rights related to a Royalty
            Bearing Product. If either Party learns of any infringement of
            Patent Rights by a Third Party, it shall promptly notify the other
            Party. DIVERSA shall have the first right, at its own expense, to
            prosecute all litigation against a Third Party infringer. DOW shall
            provide all reasonable cooperation, including [****] required to
            prosecute such litigation. DOW shall be consulted concerning the
            litigation. DIVERSA gets to [****].

     8.1.2  If the possible infringement concerns a Licensed Product for the
            Research Target that is [****] then DIVERSA shall [****] and removal
            from the market place of all infringing

                                               *Confidential Treatment Requested

                                      17
<PAGE>

            Third Party products. DIVERSA will bear the costs and shall be
            entitled to any recovery obtained from such litigation, settlement
            or compromise thereof. If DIVERSA elects not to take action for such
            infringement, then DOW may do so at DOW's expense and shall be
            entitled to any recovery obtained from such litigation, settlement
            or comprise thereof and DOW retains all damages received.

     8.1.3  If the infringement of the Licensed Product is in areas that are
            [****] then DIVERSA shall [****]

     8.1.4  If a Patent Right is finally declared invalid or unenforceable in a
            judicial or administrative proceeding from which no appeal is or can
            be taken, then from and after that date with respect to that Patent
            Right in that country of the Territory, [****] If no other Patent
            Right is providing protection in that country of the Territory, then
            [****]

8.2  Neither Party Defends - If neither DIVERSA nor DOW will defend the Patent
     Rights in a particular country in the Territory, then for that Patent
     Rights in that country the royalty under Article III is [****] upon that
     decision.

8.3  Joint Patent Rights Suits - If the litigation concerns Joint Patent Rights,
     then both DIVERSA and DOW shall mutually work together and divide equally
     any recovery, but each shall pay their own costs.

8.4  Settlement - Any settlement of an infringement suit, whether brought by DOW
     or by DIVERSA, shall be subject to the consent of both Parties, which
     consent shall not be unreasonably withheld.

8.5  Cooperation - Each Party shall cooperate with the other Party to the extent
     reasonably requested in any legal action:
     (i)    brought by a Third Party against one Party; or
     (ii)   brought by a Third Party against both Parties; or
     (iii)  taken against a Third Party by either Party regarding Patent Rights
            or Joint Patent Rights in the Field in the Territory, and each Party
            shall have the right to participate in any defense, compromise or
            settlement to the extent that, in its judgment, it may be prejudiced
            thereby.

                                               *Confidential Treatment Requested

                                       18
<PAGE>

     In addition, DOW shall not settle any claim or suit in any manner that
     shall adversely affect any Patent Rights or Joint Patent Rights, require
     any payment by DIVERSA or reduce the royalty due to DIVERSA hereunder
     without the prior written consent of DIVERSA.

                                  ARTICLE IX

                   EXPORT CONTROL AND GOVERNMENT REGULATIONS
                   -----------------------------------------

9.1  Compliance by DIVERSA - DIVERSA agrees to comply with all governmental
     regulations for shipping Improved Enzyme, whether in vivo or in vitro, to
     DOW or any regulation for safety of the culture.

9.2  Compliance by DOW - DOW agrees to comply with all necessary United States,
     European and other country's governmental regulations in the Territory with
     respect to export of Know-How and any Royalty Bearing Product. DOW agrees
     to not export or re-export any Know-How or Royalty Bearing Product received
     from DIVERSA or the direct products of such technology to any prohibited
     country listed in the U.S. Export Administration Regulations (15 C.F.R.
     (S)700 et seq.) unless properly authorized by the U.S. Government.

9.3  Clearances - DOW agrees to obtain all necessary clearances from any
     government in the Territory for export or re-export with respect to the
     Know-How or Royalty Bearing Product.

                                   ARTICLE X

                     PRODUCT LIABILITY AND INDEMNIFICATION
                     -------------------------------------

10.1 Indemnity by DIVERSA - DIVERSA shall indemnify and hold DOW, its agents,
     directors, officers, employees and Affiliates harmless from and against any
     and all liabilities, claims, demands, damages, costs, expenses or money
     judgments (including reasonable attorneys' fees and expenses) incurred by
     or rendered against any of them for personal injury, sickness, disease or
     death or property damage which directly arise out of:
     (a)   the intentional misconduct or negligence of DIVERSA; or

                                       19
<PAGE>

     (b)   the breach by DIVERSA of its representations, warranties or
           agreements given in this License; or
     (c)   any activity carried out with Licensed Product by DIVERSA other than
           through DOW and its Affiliates under this License or other written
           agreements between the Parties;
     provided, however, that DOW shall give DIVERSA notice in writing as soon as
     practicable of any such claim or lawsuit and shall permit DIVERSA to
     undertake the defense thereof (including the right to settle the claim
     solely for monetary consideration)at DIVERSA's expense.  However,
           (i)   DOW will cooperate in such defense by providing access to
                 witnesses and evidence available to it. DOW shall have the
                 right to participate in any defense to the extent that in its
                 judgment, DOW may be prejudiced thereby; and
           (ii)  in any claim or suit in which DOW seeks indemnification by
                 DIVERSA, DOW shall not settle, offer to settle or admit
                 liability or damages in any such claim or suit without the
                 prior written consent of DIVERSA.

10.2 Indemnity by DOW - DOW shall defend, indemnify and hold DIVERSA and its
     Affiliates, and their respective agents, directors, officers, and employees
     harmless from and against any and all losses, liabilities, claims, demands,
     damages, costs, expenses or money judgments (including reasonable
     attorneys' fees and expenses) incurred by or rendered against any of them
     for personal injury, sickness, disease or death or property damage which
     arise out of
     (i)   the [****] of Royalty Bearing Product by DOW or its Affiliates,
           except for those instances provided in Section 10.1 for which DIVERSA
           is obligated to indemnify DOW; or
     (ii)  the breach by DOW of any of its representations, warranties or
           covenants contained in this License or any agreement contemplated by
           the terms of this License; or
     (iii) the intentional misconduct or gross negligence of DOW;

     provided, however, that DIVERSA shall give DOW notice in writing in accord
     with Article XV as soon as practicable of any such claim or lawsuit and
     shall permit DOW to undertake the defense thereof at DOW's expense.
     However,
     (i)   DIVERSA will cooperate in such defense by providing access to
           witnesses and evidence available to it. DIVERSA shall have the right
           to participate in any defense to the extent that in its judgment,
           DIVERSA may be prejudiced thereby; and
     (ii)  In any claim or suit in which DIVERSA seeks indemnification by DOW,
           DIVERSA shall not settle, offer to settle or admit liability or
           damages in any such claim or suit without the prior written consent
           of DOW.

                                               *Confidential Treatment Requested

                                       20
<PAGE>

                                  ARTICLE XI

                            WARRANTY AND DISCLAIMER
                            -----------------------

11.1 Belief of Accuracy - DIVERSA represents that the [****] and any [****]
     transferred or provided to DOW hereunder are believed to be accurate and
     complete as of their then current status at DIVERSA at the date when the
     Licensed Product is added to Appendix C or D or as of the Effective Date
     and that DIVERSA's interpretations and conclusions drawn therefrom were
     made in good faith and in the exercise of DIVERSA's scientific judgment as
     of the dates of the documents contained therein, and that to the best of
     DIVERSA's knowledge, data subject to regulations is in compliance with such
     regulations.

11.2 Reliance - DOW represents that it will be solely relying on its own
     evaluation of the Licensed Product and the other Confidential Information
     transferred or provided to it hereunder and on its scientific expertise in
     using the same in its development and commercialization of Royalty Bearing
     Product.

11.3 Mutual Representations - DIVERSA and DOW each represents and warrants as
     follows:

     11.3.1  Organization - 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
             License.

     11.3.2  Authorization - The execution, delivery and performance by it of
             this License 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.

     11.3.3  Binding Agreement - This Agreement is a legal, valid and binding
             obligation of it, enforceable against it in accordance with its
             terms and conditions.

                                               *Confidential Treatment Requested

                                      21
<PAGE>

     11.3.4  Warranty Disclaimer - EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
             THIS License, NEITHER Party MAKES ANY REPRESENTATION OR WARRANTY OF
             ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO ANY Confidential
             Information, Patent Rights, Know-How, Improved Enzymes, Licensed
             Products, OR OTHER TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER
             SUBJECT MATTER OF THIS License AND HEREBY DISCLAIMS ANY WARRANTY OF
             MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-
             INFRINGEMENT, OR VALIDITY OF TECHNOLOGY OR PATENT CLAIMS, ISSUED OR
             PENDING, WITH RESPECT TO ANY AND ALL OF THE FOREGOING.

     11.3.5  Limited Liability - EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER
             DIVERSA NOR DOW WILL BE LIABLE TO THE OTHER PARTY WITH RESPECT TO
             ANY SUBJECT MATTER OF THIS License 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.

                                  ARTICLE XII

                              TERM AND TERMINATION
                              --------------------

12.1 Term - Unless terminated under the provisions of this Article XII, this
     License shall continue in full force and effect until the expiration of the
     last to expire Patent Rights and Joint Patent Rights listed on Appendices A
     and B, subject to the survivorship clause Section 12.7.

12.2 [****]

                                               *Confidential Treatment Requested

                                       22
<PAGE>

12.3  Termination by DOW - DOW may surrender and terminate this License on three
      (3) months written notice to DIVERSA, either for specific Royalty Bearing
      Products or this License as a whole. DOW will disclose to DIVERSA its
      reasons for any such termination. It is understood that upon evaluation
      for commercialization some Royalty Bearing Products may be re-designated
      as Licensed Products and also that some Licensed Products may be re-
      designated as Improved Enzymes.

12.4  Termination by DIVERSA - DIVERSA shall have the further right to terminate
      this License immediately, but separately on each Royalty Bearing Product,
      on written notice to DOW if:
      (a)  DOW shall cease to carry on business or a receiver shall be
           appointed to DOW's assets; or
      (b)  DOW fails to meet any of its payments in accord with Article III;
           however, DOW shall be entitled to a period of sixty (60) days from
           the delivery of a notice of failure to pay in which to remedy or to
           undertake to remedy the same; or
      (c)  DOW breaches any material provision (e.g., Sections 2.2 and 2.4) of
           this License and has not cured such breach within thirty (30) days
           after written notice thereof by DIVERSA.

12.5  On Termination - DOW shall, upon termination of this License by DIVERSA
      under Section 12.4, termination by DOW under Section 12.3, or termination
      by either Party under Section 12.8:
      (a)  pay to DIVERSA all payments and royalties due or accrued at the
           termination date within thirty (30) days after termination; and
      (b)  make no further use of any kind of any and all Know-How and
           Confidential Information of DIVERSA disclosed hereunder by DIVERSA,
           except to the extent such information has become public knowledge
           other than through fault of DOW, and make no further use of the
           surviving Patent Rights.

12.6  Effect of Termination.
      (a)  Upon termination of this License, all rights to the DIVERSA
           Intellectual Property as defined in the Agreement shall revert to
           DIVERSA; and
       (b) Within thirty (30) days following the termination of this License,
           but separately on each Royalty Bearing Product, each party shall
           return to the other Party, or destroy, upon the written request of
           the other Party, any and all Confidential Information of the other
           Party in its possession; and
      (c)  Expiration or termination of this License shall not relieve the
           Parties of any obligation accruing prior to such expiration or
           termination.

                                       23
<PAGE>

12.7  Survival of [****] - On termination of this License: the obligations of
      confidentiality set forth in Article V shall survive for the time stated
      therein; Export Control compliance set forth in Article IX shall survive;
      and the indemnification obligations set forth in Article X and third party
      infringement claims set forth in Article VII shall also survive as to all
      claims or actions arising from events which occurred before termination.
      Article XIV shall survive termination of this License so long as any
      disputes arising prior to such termination exist.

12.8  Bankruptcy - If either Party (the "Insolvent Party") files for protection
      under bankruptcy laws, makes an assignment for the benefit of creditors,
      appoints or suffers appointment of a receiver or trustee over its
      property, files a voluntary petition under any bankruptcy or insolvency
      act or has any such petition filed against it which is not discharged
      within 60 days of the filing thereof, then the other Party may, at its
      sole election upon notice to the Insolvent Party, terminate this License
      by written notice under Section 15.1.

      All rights and licenses granted under or pursuant to this License shall be
      deemed to be, for purposes of Section 365(n) of the US Bankruptcy Code,
      licenses or rights to "intellectual property" as defined under Section
      101(52) of the US Bankruptcy Code. The Parties agree that each Party, as a
      licensee of such rights under this License, shall retain and may fully
      exercise all of its rights and elections under the US Bankruptcy Code,
      subject to performance by the licensee of its preexisting obligations
      under this License.

                                  ARTICLE XIII

                                 FORCE MAJEURE
                                 -------------

13.1  Event of Force Majeure - In the event that performance under this License,
      or any obligation hereunder, is hindered, delayed or prevented by reason
      of acts of God, strikes, lockouts, labor troubles, intervention of any
      governmental authority, fire, riots, insurrections, invasions, war or
      other reason of similar nature beyond the reasonable control of the Party
      and are without its fault or negligence, then performance of that act
      shall be excused for the period of the delay and the period for the
      performance of that act shall be extended for an equivalent period.

13.2  Notification. Upon occurrence of an event of force majeure, the affected
      Party shall promptly notify the other Party in writing, setting forth the
      nature of the occurrence, its expected duration and how that Party's
      performance is affected.

                                               *Confidential Treatment Requested

                                       24
<PAGE>

      The affected Party shall resume the performance of its obligations as soon
      as practicable after the force majeure event ceases.

                                  ARTICLE XIV

                               DISPUTE RESOLUTION
                               ------------------

14.1  Choice of Law - This License shall be governed by the laws of the State of
      Delaware, excepting its conflict of laws principles, in all respects of
      validity, construction and performance, except that all questions
      concerning the construction, validity, coverage or infringement of Patent
      Rights or Joint Patent Rights shall be decided in accordance with the
      patent law of the country where the patent was granted.

14.2  Disputes - Both Parties shall make good faith efforts to resolve any
      questions concerning construction and performance under this License,
      excluding Patent Rights and antitrust issues, by:

      14.2.1  Notice, contact and negotiation, all proceedings and documents in
              English, between the Parties listed under Article 15.1 within one
              hundred twenty (120) days from the date of the notice by
              negotiation either by telephone or by meeting in Denver, CO; and

      14.2.2  If unsuccessful under Article 14.2.1, then senior executive
              management with settlement authority and counsel of DOW and
              DIVERSA shall meet at a mutually agreeable location within sixty
              (60) days from a date of notice that Article 14.2.1 failed to
              resolve the issues. Counsel shall present the legal and factual
              arguments to such executives in English, with supporting evidence
              if necessary, and resolution by these executives is expected
              within ten (10) days, which may be reduced to writing in English
              as an amendment to this License; and

      14.2.3  If such executives have not met or resolved the issues under
              Article 14.2.2, then within seventy five (75) days from the date
              of the notice under Article 14.2.1, the Parties shall submit the
              issues to mediation in Chicago, IL, in English, in accordance with
              the Rules of the American Arbitration Association ("AAA"), which
              may be modified by the Parties, and judgment shall not be binding.
              The Parties agree that the following procedures shall be adhered
              to even though they may, in part, not be in full conformance with
              said Rules:

              (a)  Three Mediators shall be selected from a list of at least 20
                   arbitrators selected by the AAA composed of counsel with

                                       25
<PAGE>

           chemistry, molecular biology or pharmaceutical expertise who are
           practicing or retired partners in law firms or in-house corporate
           counsel not affiliated with the Parties with at least 15 years of
           experience in law and knowledge of the pertinent laws of any country
           relevant to the dispute. The mediation proceedings and reports shall
           be in English. The time from the beginning of submission for
           mediation and conclusion of any oral or written proceedings shall not
           exceed six (6) months; and
      (b)  Limited discovery to only that which each Party has a substantial,
           demonstrable need, and shall be conducted in the most expeditious and
           cost-effective manner. The Mediators shall resolve any issues with
           regard to the discovery. Decision by the Mediators shall be given in
           writing within thirty (30) days from the end of oral proceedings; and
      (c)  The decision by the Mediators is binding, but should either Party
           then need to have a Court of competent jurisdiction for the Parties
           enforce the decision, either Party may introduce into court the
           decision reached by Mediation with its supporting evidence.

                                  ARTICLE XV

                                    NOTICES
                                    -------

15.1  Official -Any notice, request or communication specifically provided for
      or permitted to be given under this License must be in writing and may be
      delivered by hand delivery, overnight courier service, or electronic
      transmission such as facsimile, and shall be deemed effective as of the
      time of actual delivery thereof to the addressee.  For purposes of notice
      the addresses of the Parties shall be as follows:

      If to DIVERSA:

                Diversa Corporation
                10665 Sorrento Valley Road
                San Diego, California  92121

                        Attention:  Jay M. Short, PhD
                                    Chief Executive Officer

                                       26
<PAGE>

                                Telephone:  619-623-5135
                                Facsimile:  619-623-5180

      With a copy to:

           Diversa Corporation
           10665 Sorrento Valley Road
           San Diego, California  92121

                 Attention:     Carolyn Erickson
                                Director, Intellectual Property
                                Telephone:  619-623-5104
                                Facsimile:  619-453-9133

      If to DOW:

           The Dow Chemical Company
           Patent Department
           1790 Building, Washington Street
           Midland, Michigan  48674

                 Attention:     Karen L. Kimble
                                Senior Counsel

                                [****]

                                               *Confidential Treatment Requested

                                       27
<PAGE>

15.2  Development Issues - For purposes of commercial development reporting, the
      addresses of the Parties shall be as follows:

      If to DIVERSA:

              Diversa Corporation
              10665 Sorrento Valley Road
              San Diego, California  92121

                   Attention:  Jay M. Short, PhD
                               Chief Executive Officer

                               Telephone:  619-623-5135
                               Facsimile:  619-623-5180

      If to DOW:

              The Dow Chemical Company
              1707 Building, Washington Street
              Midland, Michigan 48674

                   Attention:  William Dowd
                               Biomaterials Platform Director

                               [****]

                                  ARTICLE XVI

                           MISCELLANEOUS PROVISIONS
                           ------------------------

16.1  Amendments - This License may be amended only in writing executed by both
      Parties.

16.2  Entirety of Agreement - This License together with the Agreement sets
      forth the entire agreement and understanding between the Parties hereto
      with respect to the commercialization of Royalty Bearing Products in the
      Territory.

16.3  Severability - If any term or provision under this License is deemed
      invalid under the laws of a particular country or jurisdiction, the
      invalidity shall not invalidate

                                               *Confidential Treatment Requested

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<PAGE>

      the whole License but it shall be construed as if not containing that
      particular term or provision and the rights and obligations of the Parties
      shall be construed and enforced accordingly. The Parties shall negotiate
      in good faith a substitute provision in compliance with the law to as
      nearly as possible retain the Parties intent in legally valid language.

16.4  Waivers, Cumulative Remedies - A waiver by either Party of any term or
      condition of this License in any one instance shall not be deemed
      construed to be a waiver of such term or condition for any similar
      instance in the future or of any subsequent breach hereof. All rights,
      remedies, undertakings, obligations and agreements contained in this
      License shall be cumulative and none of them shall be a limitation of any
      other remedy, right, undertaking, obligation or agreement of either Party.

16.5  Headings - Headings in this License are included herein for ease of
      reference and shall not affect the meaning of the provisions of this
      License, nor shall they have any other legal effect.

16.6  Other Documents - Each Party agrees to execute such additional papers or
      documents in customary legal form and to make such governmental filings or
      applications as may be necessary or desirable to effect the purposes of
      this License and carry out its provisions.

16.7  Publicity - Neither DOW nor DIVERSA shall make the financial terms of this
      License public, except as required by law or by mutual consent. Either
      Party may make such disclosure of the existence of this License to its
      attorneys, advisors, investors, prospective investors, leaders and other
      financing sources, under circumstances that reasonably ensure
      confidentiality. In the event that a filing of a copy of this License with
      the US Securities and Exchange Commission is required, then DIVERSA shall
      seek confidential treatment of information considered confidential by DOW
      and shall redact the financial and as much other information as possible.

      Any press release or publicity of this License shall be reviewed and
      approved by both Parties prior to any release. It is expected that a Q&A
      outline for use in responding to inquires about this License shall be
      prepared and used by both Parties. Thereafter both Parties may disclose
      the information contained in such press release and Q&A outline without
      the need for further approval. In no event shall the financial terms of
      this License be publicly disclosed, except as note in the first paragraph
      of Section 16.7.

                                      29
<PAGE>

      In addition, DIVERSA may make public statements regarding the Licensed
      Products by announcing in general terms that DOW has exercised its license
      to them.

16.8  Interpretation - DOW and DIVERSA acknowledge and agree that: (i) each
      Party and its counsel reviewed and negotiated the terms and provisions of
      this License and have contributed to its revision; (ii) the rule of
      construction to the effect that any ambiguities are resolved against the
      drafting Party shall not be employed in the interpretation of this
      License; and (iii) the terms and provisions of the License shall be
      construed fairly as to all Parties hereto and not in favor of or against
      any Party, regardless of which Party was generally responsible for the
      preparation of this License.

16.9  Counterparts - This License may be executed simultaneously in two (2) or
      more counterparts, each of which shall be deemed an original.

16.10 No Agency or Partnership - Nothing contained in this License shall give
      either Party the right to bind the other Party, or be deemed to constitute
      either Party as an agent for the other Party or as a partner with the
      other Party or any Third Party.

                                      30
<PAGE>

IN WITNESS WHEREOF, the Parties have caused this License to be executed in
duplicate originals as of the last signature date below, by their duly
authorized representatives. This License is intended to be signed concurrently
with the Agreement and shall not be effective until the Agreement has also been
executed by both Parties. Such License may be subject to management and/or Board
approval by each Party. Upon signature such Board approval is indicated to have
been obtained.

DIVERSA CORPORATION                          THE DOW CHEMICAL COMPANY

By ________________________                  By_________________________________

Name   Jay M. Short, PhD                     Name  Fernand Kaufmann

Title  Chief Executive Officer                      Title  Vice President
                                                    New Businesses and
                                                    Strategic Development

Date__________________________               Date______________________________

                                      31
<PAGE>

                                  Appendix A-3
                                  ------------

                    Diversa Patent Rights [****]

                                    [****]

                                               *Confidential Treatment Requested
<PAGE>

                                   Appendix E

                     Royalty Bearing Product Classification

Product Classifications:

The Royalty Bearing Product shall be classified according to the following
definitions:

       .  [****]

       .  [****]

       .  [****]

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                                   Appendix F
                                   ----------

Royalty Schedule

[****]

[****]

[****]

[****]

[****]

[****]

                                               *Confidential Treatment Requested
<PAGE>

[****]

[****]

[****]

[****]

<PAGE>

                               OPTION AGREEMENT

THIS option agreement (hereinafter "OPTION") is made between THE DOW CHEMICAL
COMPANY (hereinafter "DOW" or a "Party"), a corporation duly formed and existing
under the laws of the State of Delaware, having a place of business at 2030 Dow
Center, Midland, Michigan 48674, United States of America, and Recombinant
BioCatalysis Inc. (hereinafter "RBI" or a "Party"), a corporation duly formed
and existing under the laws of Delaware, having a place of business at 10665
Sorrento Valley Road, San Diego, CA 92121;

WITNESSETH:

WHEREAS, DOW possess an enzyme for use in a recycle process or with a reaction
coproduct produced by DOW; and

WHEREAS, DOW has proprietary rights in this enzyme and desires that the enzyme
be improved; and

WHEREAS, RBI desires to undertake the further evaluation of this enzyme under
the terms of this OPTION and, if RBI is able to improve on this enzyme, RBI is
willing to grant DOW an exclusive or non-exclusive license to such improvements;

WHEREAS, DOW desires to obtain an exclusive or non-exclusive, global license to
this improved enzyme; and

WHEREAS, RBI desires to supply DOW with such improved enzyme.

NOW, THEREFORE, DOW and RBI, in consideration of the mutual covenants contained
herein, agree as follows:

ARTICLE 1 - DEFINITIONS

When used in this OPTION, the following terms shall have the meanings set out
below, unless the context requires otherwise. The singular shall be interpreted
as including the plural and vice versa, unless the context clearly indicates
otherwise.

1.1  "AFFILIATE" means a corporation or any other entity that at any time during
     the term of this OPTION directly or indirectly through one or more
     intermediaries is CONTROLLED by the designated Party, but only for so long
     as the relationship exists. A corporation or other entity shall no longer
     be an AFFILIATE when through loss, divestment, dilution or other reduction
     of a Party's ownership, the Party loses CONTROL of such corporation or
     other entity.

1.2  "CANDIDATE ENZYMES" means those ENZYMES which meet the criteria of
     exhibiting initial hydrolysis rates (Vmax) significantly higher than the
     wild type (wt) recombinant ENZYME [*****].

                                               *Confidential Treatment Requested
<PAGE>

     [****]

1.3  "CDA" means a Confidential Disclosure Agreement between the Parties
     effective August 27, 1996, a copy attached hereto as Appendix E.

1.4  "CONFIDENTIAL INFORMATION" means any proprietary information of a Party
     that is submitted to the other Party hereunder, including, but not limited
     to PATENTS, JOINT PATENTS, ENZYME, sample of ENZYME, TECHNOLOGY, the FIELD,
     financial terms of this OPTION, business information of RBI or DOW and
     business development plans for an ENZYME.

1.5  "CONTROL" or "CONTROLLED" shall mean, in the case of a corporation,
     ownership or control, directly or indirectly, of more than fifty percent
     (50%) of the shares of stock entitled to vote for the election of directors
     and, in the case of an entity other than a corporation, ownership or
     control, directly or indirectly, of more than 50% of the assets or the
     ability in the case of either a corporate or non-corporate entity to direct
     the management and affairs of such entity.

1.6  "EFFECTIVE DATE" means June 30,1997.

1.7  "ENZYME" means any enzyme supplied by DOW to RBI for use under this OPTION
     in the FIELD, including TECHNOLOGY such as its amino acid or DNA sequence,
     or expression system; and any improvements to such enzyme (e.g., where the
     productivity of the enzyme is increased and/or where the product inhibition
     is lowered) when done by RBI.

1.8  "EVOLVED ENZYMES" means those ENZYMES which meet the criteria of exhibiting
     initial hydrolysis rates at least 6-fold that of the wild type (wt)
     recombinant ENZYME for a multiply halogenated organic molecule in aqueous
     buffer in the presence of the product as an inhibitor. Kinetically, an
     EVOLVED ENZYME is characterized as having a Vmax (at 100 mM of product) >
                                                                             -
     6.0 times Vmax (recombinant ENZYME at 0 mM of product).

1.9  "FIELD" means the use of ENZYME in a recycle process or with a reaction
     coproduct produced by DOW where the ENZYME [*****].

1.10 "IMPROVED ENZYMES" means those ENZYMES which meet the criteria of [*****].

1.11 "LETTER OF INTENT" means the agreement signed between DOW and RBI,
     effective May 27, 1997, a copy attached hereto for reference as Appendix A.

                                               *Confidential Treatment Requested
<PAGE>

1.12 "LICENSE" means a license agreement contemplated under Section 5.2 to be
     granted by RBI to DOW if, by no later than the end of the OPTION TERM, DOW
     notifies RBI in writing of its desire to exercise its rights to obtain a
     license.

1.13 "JOINT PATENTS" means those PATENTS in the FIELD which are jointly owned by
     and have claims present by employees of both DOW and RBI during the term of
     this OPTION and, if they exist, shall be listed in Appendix B, which shall
     be reviewed and updated [*****], to be attached hereto and made a part
     hereof.

1.14 "OPTION TERM" means until December 1, 1998 for an exclusive LICENSE and
     until January 31, 1999 for a non-exclusive LICENSE, unless extended in
     writing by the Parties.

1.15 "PATENTS" means all patent applications and patents to which RBI has rights
     which claim improvements to the ENZYME made by RBI (or other inventions,
     including but not limited to, apparatus, made by RBI in the course of
     performing work under the RESEARCH PLAN) during this OPTION TERM, together
     with any continuations, continuations-in-part, divisions, reissues,
     registrations, confirmations, patents-of -addition, and extensions of the
     foregoing, which claims cover the preparation, use or per se ENZYME in the
     TERRITORY, which shall be listed in Appendix C (such patents to be mutually
     agreed upon to be listed if regarding other inventions), to be attached
     hereto and made a part hereof, and reviewed and updated annually as of the
     EFFECTIVE DATE.

1.16 "PRODUCTIVITY ENZYMES" means those ENZYMES which meet the criteria of
     exhibiting at least [*****].

1.17 "RESEARCH PLAN" means a mutually agreed upon plan for RBI to perform
     research activities to improve ENZYME for commercial use to achieve TARGET
     ACTIVITY in the FIELD during the OPTION TERM in accord with Appendix D,
     attached hereto and made a part hereof.

1.18 "SIGNATURE DATE" means the date of the last signature of the Parties to
     this OPTION.

1.19 "TARGET ACTIVITY" refers to the Milestone [*****] target for the [*****].
     It is determined at the [*****] and projected from the Milestone 2 data to
     be sufficient for a [*****]. It is defined in terms of [*****].

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1.20 "TECHNOLOGY" means data for ENZYME, including for example physical
     properties, DNA sequence, Vmax and Ki and process to make them

1.21 "TERRITORY" means the world.

ARTICLE 2 - GRANT OF OPTION

2.1  Grant of OPTION - RBI hereby grants to DOW, and DOW hereby accepts either:

     (1)  an exclusive right during the OPTION TERM to acquire an exclusive
          LICENSE to make, have made, use, sell, import and have sold ENZYME(S)
          for the FIELD in the TERRITORY under the PATENTS, JOINT PATENTS and
          TECHNOLOGY and subject to Section 5.3; or

     (2)  a non-exclusive right during the OPTION TERM to acquire a nonexclusive
          LICENSE to make, have made, use, sell, import and have sold ENZYME(S)
          for the FIELD in the TERRITORY under the PATENTS, JOINT PATENTS and
          TECHNOLOGY and subject to Section 5.3.

Whether (1) or (2) above is selected is solely DOW's choice during the OPTION
TERM.

2.2  Reservation - DOW reserves for itself and its AFFILIATES the right to do
     internal research on ENZYMES (excluding any improvements to the ENZYMES
     made by RBI) within the FIELD during the OPTION TERM.

2.3  Expansion of FIELD - In the event that DOW wishes to expand the FIELD at
     the time of exercise of the LICENSE, the Parties agree to discuss in good
     faith the proposed expansion of the FIELD and the terms therefore.

2.4  Exercise of OPTION for LICENSE - DOW may exercise its rights under Section
     2.1 by providing written notice to RBI of its election under Section 2.1
     (1) or (2) on or before the last day of the OPTION TERM.

ARTICLE 3 - OPTION PAYMENTS

3.1  Initial Payment for OPTION - Within fifteen (15) business days from the
     EFFECTIVE DATE, DOW shall pay RBI [*****].

3.2  Additional Payments during OPTION TERM - The further payments to RBI by DOW
     are tied to the achievement of milestone technical events in accord with
     Article 4. DOW shall be invoiced one (1) month prior to any payment due to
     RBI for each of these milestones. The payments for each milestone are:

     3.2.1  Milestone 1 - [*****] - [*****], if RBI is technically successful as
          defined in Article 4; plus [*****], if RBI accomplishes this Milestone
          1 in less than [*****] from the date of receipt by RBI of [*****] from
          DOW;

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<PAGE>

     3.2.2  Milestone 2 - [*****] - [*****], payable within [*****] of receipt
            by DOW of the ENZYME [*****] by DOW that RBI has provided DOW with
            [*****] (DOW shall use its reasonable good faith efforts to conclude
            such evaluation within [*****] the CANDIDATE [*****]); plus [*****],
            if RBI provides DOW with [*****] CANDIDATE ENZYMES and/or [*****]
            ENZYME [*****]; and

     3.2.3  Milestone 3 - [*****]

            (A)  [*****] payable within [*****] of receipt by DOW of the ENZYME
                 [*****] by DOW that RBI has provided DOW [*****]; plus

            (B)  [*****] payable within [*****] of receipt by DOW of the ENZYME
                 [*****] by DOW that RBI has provided DOW [*****] ENZYME (for
                 both (A) and (B) of this Section 3.2.3 DOW shall use its
                 reasonable good faith efforts to conclude such evaluations
                 [*****] of the ENZYMES), plus a bonus of -

                 (i)   [*****] if either of the criteria for (B) [*****] are met
                       within [*****] from the EFFECTIVE DATE, plus
                 (ii)  [*****] if the [*****] exceeds [*****], plus
                 (iii) [*****] if the [*****] exceeds [*****].

     It is agreed that if any of these milestones categories in Section 3.2 is
     surpassed by an ENZYME providing performance at a higher category that the
     payments for those surpassed categories will still be made.

     The [*****].

     These payments are tied to performance under the RESEARCH PLAN described in
     Article 4.

3.3  Payments to RBI - All payments under this Article 3 are to be made to:
     Recombinant BioCatalysis, Inc. and sent by wire transfer to:

                                               *Confidential Treatment Requested
<PAGE>

     Account Name: [*****].

ARTICLE 4 - ENZYME USE AND RESEARCH PLAN

4.1  RBI Obligations - RBI shall maintain sole physical control of the ENZYME
     which shall be treated as CONFIDENTIAL INFORMATION under the terms of
     Article 7 of this OPTION. RBI shall use any information provided to it by
     DOW solely to improve ENZYME in the FIELD. RBI shall provide a written
     report with a summary of the data to DOW on a quarterly basis or at a
     milestone achievement in accord with Section 4.3 in a quarter, whichever
     occurs first. (If clarification of a report is requested by DOW to more
     fully understand such report, then a meeting of respective personnel is
     permitted.) A final written report shall be provided of the results
     obtained by RBI on its improvement efforts for the ENZYME, including its
     sequence, within thirty (30) days at the end of the OPTION TERM or within
     thirty (30) days upon termination.

4.2  Development Efforts - During the OPTION TERM, RBI shall perform research
     activities to improve the ENZYME to achieve TARGET ACTIVITY in the FIELD in
     a diligent manner as specified in Article 3 and described in detail in a
     RESEARCH PLAN. Such improvement can be met by any manner acceptable to the
     Parties. The ENZYME is to be improved for commercial use in a manner agreed
     upon between the Parties. The RESEARCH PLAN may be amended by mutual,
     written consent of the Parties. However, either Party may terminate the
     research and this OPTION at any technical milestone specified in Section
     4.3 for any reason; but if RBI terminates, then DOW has thirty (30) days to
     notify RBI whether DOW desires either an exclusive or nonexclusive LICENSE
     in accord with Section 2.1 for the ENZYME until that termination. If DOW
     terminates the research and this OPTION and any of the milestones beyond
     Milestone 1 have been achieved and completed in accord with each milestone
     requirement in accordance with Section 4.3, then RBI shall have the rights
     described in Section 5.2.3.

4.3  Milestones -

     4.3.1  Milestone 1

            DOW completes preliminary [*****] and defines general parameters for
            the ENZYME, [*****]

            RBI develops of a suitable [*****].

     4.3.2  Milestone 2

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<PAGE>

            RBI [*****] ENZYME by [*****] to obtain CANDIDATE ENZYME, transfers
            to DOW the [*****] CANDIDATE ENZYMES and [*****] of each CANDIDATE
            ENZYME.

            DOW confirms [*****] CANDIDATE ENZYMES and evaluates their
            performance attributes [*****].

            (DOW and RBI scientists shall discuss the relationship between
            [*****] in performance of the [*****] CANDIDATE ENZYME and
            improvement in productivity of the CANDIDATE ENZYME as a supported
            catalyst. After such discussions, the Parties shall mutually agree
            on [*****] i.e. TARGET ACTIVITY, prior to starting Milestone 3.)

     4.3.3  Milestone 3

            (A)  RBI increases productivity as stated in Article 3 for [*****]
                 ENZYMES and transfers [*****] of all such ENZYMES to DOW
                 together with each ENZYME's [*****]. DOW confirms [*****]
                 ENZYMES and evaluates their performance attributes [*****]. If
                 [*****] ENZYME [*****], then part (B) below shall occur.

           (B)   RBI [*****]as stated in Article 3 for [*****] ENZYMES and
                 transfers [*****] of [*****] ENZYMES to DOW together with each
                 ENZYME's [*****]. DOW confirms [*****] ENZYMES and evaluates
                 their performance attributes [*****].

4.4  RESEARCH PLAN and Payments are tied - The events under Section 4.3 for
     performance under the RESEARCH PLAN are tied to payments under Article 3.

4.5  DOW Obligations - DOW shall provide the assay mentioned in Section 4.3.1,
     Milestone 1, analytical information or know-how, including evaluation of
     the modified ENZYME at DOW facilities, the identity of the gene for the
     host interaction desired, and the DNA sequence of the gene. All information
     supplied by DOW to RBI shall be treated as confidential under Article 7.

ARTICLE 5 - LICENSE TERMS

The following terms are contemplated by the Parties to be included in a LICENSE
if, by no later than the end of the OPTION TERM, DOW exercises its right to such
LICENSE.

                                               *Confidential Treatment Requested
<PAGE>

5.1  Exercise Payment - Upon exercise of the right to a LICENSE, a payment shall
     be due to RIBI depending upon whether DOW elects rights under Section 2.1
     (1) or (2) as follows. If DOW elects Section 2.1 (1) for an exclusive
     LICENSE, then a one time fee of Two Hundred Thousand Dollars (US$200,000)
     Dollars is payable within thirty (30) days from exercise of the exclusive
     LICENSE but no sooner than December 1, 1998. If DOW elects Section 2.1(2)
     for a non-exclusive LICENSE, then terms shall be negotiated using
     reasonable good faith efforts by the Parties by January 31, 1999.

5.2  Exercise for LICENSE - The OPTION TERM shall be for the term of the
     Research Plan, including any mutually agreed upon extensions. At present
     both Parties agree that the OPTION TERM for an exclusive LICENSE shall run
     from the EFFECTIVE DATE until December 1, 1998 and for a nonexclusive
     LICENSE until January 31, 1999. In addition, DOW has eighteen (18) months
     from its receipt by DOW to evaluate the TECHNOLOGY and improved ENZYME
     provided by RBI before execution of the LICENSE.

     5.2.1  By the end of the OPTION TERM, DOW, at its sole discretion, may
            negotiate an exclusive LICENSE to the ENZYME and gene coding for the
            ENZYME in the FIELD from RBI, or purchase the ENZYME or immobilized
            ENZYME from RBI or an alternate supplier in accord with Section 5.3.
            Upon execution of the LICENSE, manufacturing licenses and terms of
            sale for any ENZYME shall be on commercially reasonable terms,
            mutually agreed upon, and shall include, without limitation,
            royalties and minimum payments (as negotiated by the Parties in good
            faith taking into account the value created by the respective
            contributions of the Parties, e.g., monetary, scientific and capital
            contributions). If DOW exercises the OPTION for a nonexclusive
            LICENSE, RBI shall also have the non-exclusive right to make, have
            made, use, sell, import, and have sold ENZYME for the FIELD in the
            TERRITORY under the PATENTS, JOINT PATENTS and TECHNOLOGY.

     5.2.2  In the event that the ENZYME is improved and DOW has had eighteen
            (18) months from the time the TECHNOLOGY and improved ENZYME was
            delivered to DOW in accord with Milestone 3(B) of Section 3.2.3 to
            test it, and DOW then provides written notice to RBI in accord with
            Section 12.1 of DOW's lack of interest in commercial use of the
            improved ENZYME provided by RBI, then, RBI shall have the rights
            described in Section 5.2.3.

     5.2.3  RBI Rights - Under the circumstances described in Sections 4.2 and
            5.2.2 and in the event that RBI terminates the OPTION in accord with
            Section 10.2 upon material breach by DOW, DOW shall have no LICENSE
            (but shall have the right for internal research use of ENZYME,
            TECHNOLOGY, PATENTS and JOINT PATENTS) and RBI shall have all
            commercial rights to make, have made, use, sell, import and have
            sold ENZYME for the FIELD in the TERRITORY under the PATENTS, JOINT
            PATENTS and TECHNOLOGY by notifying DOW in writing in accord with
            Section 12.1 and making the following payments (at RBI's sole
            option):

<PAGE>

            (A)  RBI shall pay DOW as a [****] fee for DOW's total investment in
                 the ENZYME (which fee shall be computed from the time of such
                 request by RBI, but in no event would be less than [****] Such
                 payment would be due to DOW within thirty (30) days from
                 invoice by DOW; or

            (B)  RBI agrees to pay to DOW reasonable royalty and payments for
                 all income received from RBI's commercialization or sale of the
                 TECHNOLOGY or PATENTS using the ENZYME. Such payments shall be
                 negotiated as an agreement by the Parties using their good
                 faith efforts.

RBI must elect between (A) and (B) within one hundred and eighty (180) days from
DOW's written notification of lack of interest and convey their election in
writing to DOW in accord with Section 12.1.

Any payments to DOW under this Section 5.2.3 shall be made to. The Dow Chemical
Company, and be sent by wire transfer to:

[*****].

5.3  Supply of ENZYME - In the event that the ENZYME is improved and is of
     further interest to DOW and DOW exercises its rights to a LICENSE under
     Section 2.1, then DOW shall have [****] from the time the improved ENZYME
     is delivered in a practicable form to DOW in accord with Milestone 3(B)
     under Section 4.3.3 (B) to provide written notice under Section 12.1 to RBI
     of DOW's intent to either:

     (A)   have RBI supply the improved ENZYME commercially to DOW. If this
           course is mutually agreed upon then a commercial agreement shall be
           negotiated using reasonable good faith efforts by the Parties; or

     (B)   inform RBI that DOW will use an alternate supplier (not RBI) for the
           improved ENZYME. RBI agrees to provide to a qualified third party
           under appropriate, reasonable licensing terms for the industry, the
           information and rights required to supply the ENZYME to DOW; or

     (C)   If DOW does not desire any commercial supply of the improved ENZYME,
           then refer to Section 5.2.2.

5.4  DOW Evaluation - DOW has the right, during the OPTION TERM and the [*****]
     evaluation period, for its purposes of evaluation only, to produce
     sufficient ENZYME for its needs.

                                               *Confidential Treatment Requested
<PAGE>

5.5  Other terms - Other customary and negotiated terms are expected to be
     included in the LICENSE and are permitted.

ARTICLE 6 - PATENT RIGHTS

6.1  RBI to Maintain PATENTS - Any improvements to the ENZYME made by RBI during
     this OPTION TERM shall belong to RBI, if within the claimed scope of any
     PATENT. DOW shall be informed of all such PATENTS and be provided with a
     copy thereof, and provided with their publication numbers or patent numbers
     and each country where filing was done. If requested by DOW, a completed
     file wrapper for a given application or patent shall be provided to DOW. An
     annual status of the concerned PATENTS shall be provided to DOW until all
     have issued or are abandoned. If DOW exercises its rights for a LICENSE,
     then rights to any PATENTS shall be granted in the LICENSE for the FIELD
     for the TERRITORY. If RBI obtains rights under Section 5.2.3, then such
     rights shall include rights to any PATENTS for the FIELD for the TERRITORY.

6.2  Notice of Patent Lapse - RBI shall advise DOW of the grant, lapse,
     nullification, revocation, surrender, or invalidation of any of the PATENTS
     at the annual update of the PATENT listing for Appendix C.

6.3  JOINT PATENTS - Although unlikely to occur, in those instances where joint
     inventions between DOW and RBI result in a patentable invention, then DOW
     and RBI shall mutually determine, using their good faith efforts, whether
     the patent application has joint ownership and joint claim structure, and
     which Party should prosecute the patent application and pay the annuities.
     Both Parties shall elect any countries in which filing shall be done. If
     DOW exercises its rights for a LICENSE, then rights to any JOINT PATENTS
     shall be granted in the LICENSE for the FIELD for the TERRITORY. If RBI
     obtains rights under Section 5.2.3, then such rights shall include rights
     to JOINT PATENTS for the FIELD for the TERRITORY.

6.4  TECHNOLOGY - TECHNOLOGY developed during the OPTION TERM or known as of the
     LETTER OF INTENT by either Party shall remain that Party's property. Any
     use by one Party of the other's TECHNOLOGY shall be under the
     confidentiality provisions of Article 7.

6.5  DOW Patents - No rights are granted by DOW to RBI to use any DOW
     intellectual property rights including patents (such as sole DOW patents),
     trade secrets, confidential information and computer programs, except in
     providing the contemplated services under the RESEARCH PLAN. If Section
     5.2.3 pertains, then rights to commercial use of the JOINT PATENTS and
     ENZYME are granted by DOW to RBI.

ARTICLE 7 - CONFIDENTIALITY

7.1  Each Party shall use good faith efforts to retain in confidence and not
     disclose to any third party each other's CONFIDENTIAL INFORMATION.  Such
     "good faith efforts" shall mean the same degree of care, but no less than a
     reasonable degree of care, as the receiving Party uses to protect its own
     CONFIDENTIAL INFORMATION of a like nature. This obligation shall be
     effective from August 29, 1996 upon the SIGNATURE

<PAGE>

     DATE and shall cease five (5) years from termination of this OPTION. This
     OPTION shall supersede the CDA upon the SIGNATURE DATE.

7.2  Excepted from the obligation of confidentiality under Section 7.1 is that
     information which:

     (a)   is available, or becomes available, to the general public without
           fault of the receiving Party; or

     (b)   is obtained by the receiving Party without an obligation of
           confidence from a third party (other than a governmental agency) who
           is rightfully in possession of such information and is under no
           obligation of confidentiality to the disclosing Party concerning such
           information; or

     (c)   is released from confidentiality in writing by the disclosing Party;
           or

     (d)   is permitted to be disclosed by Section 7.4.

For the purpose of Section 7.1, a specific CONFIDENTIAL INFORMATION shall not be
deemed to be within the foregoing exceptions merely because it is embraced by
more general information in the public domain, or in the possession of the
receiving Party. In addition, any combination of features shall not be deemed to
be within the foregoing exceptions merely because individual features are in the
public domain or in the possession of the receiving Party, but only if the
combination itself and its principle of operation and process to make it are in
the public domain or in the possession of the receiving Party.

7.3  Notwithstanding the provisions of Section 7.1, if the receiving Party
     becomes legally compelled to disclose any of the disclosing Party's
     CONFIDENTIAL INFORMATION, the receiving Party shall promptly advise the
     disclosing Party of such required disclosure in order that the disclosing
     Party may seek a protective order or such other remedy as the disclosing
     Party may consider appropriate in the circumstances. The receiving Party
     shall disclose only that portion of the CONFIDENTIAL INFORMATION which it
     is legally required to disclose. Such a disclosure shall not release the
     receiving Party with respect to the CONFIDENTIAL INFORMATION so disclosed
     except to the extent of permitting the required disclosure. In addition,
     the receiving Party may disclose CONFIDENTIAL INFORMATION of the disclosing
     Party to the extent such disclosure is reasonably necessary in connection
     with the filing or prosecution of JOINT PATENTS. If DOW CONFIDENTIAL
     INFORMATION is reasonably necessary to be disclosed in connection with the
     filing or prosecution of PATENTS, then DOW's prior written consent must be
     obtained in accord with Section 12.1.

7.4  Disclosure to AFFILIATES - RBI or DOW may disclose CONFIDENTIAL INFORMATION
     to its AFFILIATES, and consultants as may be necessary to exercise the
     rights granted hereunder, but only under conditions of confidentiality at
     least as stringent as those set out in Sections 7.1, 7.2 and 7.3.

7.5  Document Return - In the event of termination of this OPTION under Article
     10, without exercise of a LICENSE, then:

<PAGE>

     (a)   RBI will cease its use of the ENZYMES in accord with Section 10.3,

     and

     (b)   each Party will cease its use of all CONFIDENTIAL INFORMATION of the
           other Party provided hereunder and, on the disclosing Party's
           request, within sixty (60) days either return all such CONFIDENTIAL
           INFORMATION, including any copies thereof, ENZYMES in whatever media
           or form, or will promptly destroy the same and certify such
           destruction to the disclosing Party.

     Notwithstanding the above, a Party may retain one copy of any CONFIDENTIAL
INFORMATION of the other Party in its legal files, but shall return or destroy
any DOW samples of ENZYME or ENZYME provided by the other Party.  The foregoing
provisions shall not apply to RBI to the extent it exercises its rights under
Section 5.2.3.

ARTICLE 8 - U.S. EXPORT CONTROL AND GOVERNMENT LICENSES

8.1  Compliance - Both Parties agree to comply, at their expense, with all
     necessary United States governmental regulations with respect to export of
     ENZYMES and TECHNOLOGY in the TERRITORY. Both Parties agree to not export
     or re-export any ENZYME or TECHNOLOGY received from the other or the direct
     products of such TECHNOLOGY to any prohibited country listed in the U.S.
     Export Administration Regulations unless properly authorized by the U.S.
     Government. Each Party shall be responsible for the acts of its AFFILIATES,
     contractors, and consultants and assumes all liability if it or its
     AFFILIATES, fails to obtain any of the necessary licenses or commits any
     violations of the United States Export Laws or Regulations (15 C.F.R.
     (S)700 et seq.). Each Party shall indemnify the other for its acts and for
     any breach of compliance.

8.2  Licenses and Clearances - Both Parties agree to obtain all necessary
     licenses or clearances, at its expense, and to comply with all applicable
     regulations of agencies in the TERRITORY.

ARTICLE 9 - WARRANTY, DISCLAIMER, GUARANTEE

9.1  Belief of Accuracy - Each Party represent that ENZYME, TECHNOLOGY and any
     other CONFIDENTIAL INFORMATION transferred or provided to the other Party
     hereunder are believed to be accurate and complete as of their current
     status on the EFFECTIVE DATE and that each Party's interpretations and
     conclusions drawn therefrom were made in good faith and in the exercise of
     its scientific judgment as of the dates of the documents contained therein.
     However, neither Party warrants or represents that such information is or
     will be sufficient to market ENZYME or to commercially produce ENZYME, or
     to commercialize ENZYME in the TERRITORY or that DOW or RBI shall be free
     to practice or sell any ENZYME.

9.2  DOW Representation - DOW will be solely relying on its own evaluation of
     ENZYME, TECHNOLOGY and the other CONFIDENTIAL INFORMATION transferred or
     provided to it hereunder and on its own scientific expertise in using the
     same in its development and evaluation of ENZYME.

<PAGE>

9.3  Validity, Non-Infringement - No warranty is provided that the manufacture,
     use and sale of ENZYME falls outside the scope of third party patents or
     the industrial property rights of a third party.

9.4  Disclaimer of Warranties as to PATENTS - RBI makes no representation that
     the inventions covered in any PATENTS are patentable or that the PATENTS
     are or will be valid or enforceable, nor does RBI warrant or represent that
     the exercise of the rights hereunder is free from infringement of patent
     rights of third parties.

ARTICLE 10 - TERM AND TERMINATION

10.1 Term - Unless terminated under the provisions of this Article 10, this
     OPTION shall continue in effect until the end of the OPTION TERM, unless
     mutually agreed upon in writing by the Parties to be extended.

10.2 Termination for Breach - In the event of a material breach by either DOW or
     RBI of any of the obligations contained in this OPTION, the other Party
     shall be entitled to terminate this OPTION by notice in writing under
     Section 12.1, provided that such notice shall specify the breach or
     breaches. If the said breach or breaches are capable of remedy, the Party
     committing such breach or breaches shall be entitled to a period of sixty
     (60) days from the delivery of such notice in which to remedy or to
     undertake to remedy the same. In the case the defaulting Party shall fail
     to remedy the breach or to undertake to remedy the breach to the
     satisfaction of the injured Party, the injured Party shall have the right
     to cancel this OPTION in whole or only terminate those rights and
     obligations relating to the particular breach by simple notification to the
     Party in default. Failure of a Party to exercise its rights under this
     Section 10.2 shall not be construed as a waiver as to future breaches
     whether or not they are similar.

10.3 Termination by RBI or DOW - Either Party may terminate this OPTION at the
     end of any Milestone in Section 4.3 by written notice to the other. Each
     will disclose to the other its reasons for any such termination. Upon such
     termination, both Parties shall refrain from further use of CONFIDENTIAL
     INFORMATION received from the other Party, including ENZYME, except that
     this provision shall not apply to RBI if it exercises its rights under
     Section 5.2.3.

10.4 Termination by DOW - DOW shall have the further right to terminate this
     OPTION immediately on written notice to RBI if:

     (a)   RBI shall cease to carry on business or shall go into liquidation or
           a receiver shall be appointed to RBI's assets; or

     (b)   RBI shall become bankrupt or insolvent or unable to meet any of its
           performance obligations; or

     (c)   RBI fails to conduct testing on the ENZYMES for more than sixty (60)
           days from any Milestone.

10.5 On Termination - DOW shall, upon termination of this OPTION under Article
     10:

<PAGE>

     (a)   pay to RBI all payments due or accrued at the termination date within
           thirty (30) days after termination; and

     (b)   make no further use of, or permit any use by any third party of any
           kind of any and all ENZYMES disclosed hereunder by RBI, and make no
           further use of the surviving PATENTS in the FIELD.

10.6 Survival of Certain Obligations - On termination of this OPTION: the
     obligations of confidentiality set forth in Article 7 shall survive for the
     time stated therein; payments due under Article 3 shall survive for the
     terms specified; and Export Control compliance set forth in Article 8 shall
     survive indefinitely.

ARTICLE 11 - FORCE MAJEURE

11.1 Event of Force Majeure - In the event that performance under this OPTION,
     or any obligation hereunder, is hindered, delayed or prevented by reason of
     acts of God, strikes, lockouts, labor troubles, intervention of any
     governmental authority, fire, riots, insurrections, invasions, war or other
     reason of similar nature beyond the reasonable control of the Party and are
     without its fault or negligence, then performance of that act shall be
     excused for the period of the delay and the period for the performance of
     that act shall be extended for an equivalent period.

11.2 Notification. Upon occurrence of an event of force majeure, the affected
     Party shall promptly notify the other Party in writing, setting forth the
     nature of the occurrence, its expected duration and how that Party's
     performance is affected. The affected Party shall resume the performance of
     its obligations as soon as practicable after the force majeure event
     ceases.

ARTICLE 12 - NOTICES

12.1 Official -Any notice, request or communication specifically provided for
     or permitted to be given under this OPTION must be in writing and may be
     delivered by hand delivery, courier service, or electronic transmission
     such as telex, facsimile, or telegram, and shall be deemed effective as of
     the time of actual delivery thereof to the addressee. For purposes of
     notice the addresses of the Parties shall be as follows:

     DOW:
               The Dow Chemical Company
               2030 Dow Center
               Midland, Michigan
               48674
               USA

               Attention:  William Dowd
                           Director
                           Biocatalysis Laboratory

               [*****]

                                               *Confidential Treatment Requested
<PAGE>

     with a copy to:
               The Dow Chemical Company
               Patent Department
               1790 Building, Washington Street
               Midland, Michigan 48674
               USA
               Attention:  Karen L. Kimble, JD
                           Senior Counsel

               [*****]
     RBI:
               Recombinant BioCatalysis, Inc.
               10665 Sorrento Valley Road
               San Diego, CA 92121
               USA
               Attention:  Donald C. Garaventi
                           President

               [*****]

12.2 For purposes of scientific reporting, the Parties designate as their
     respective principle contacts:

     DOW:
               The Dow Chemical Company
               Building 1707
               Washington Street
               Midland, MI 48674
               USA

               Attention:  Joseph Affholter, PhD
                           Research Leader

               [*****]

     RBI:
               Recombinant BioCatalysis, Inc.
               10665 Sorrento Valley Road
               San Diego, CA 92121
               USA

               Attention:  Dan Robertson, PhD
                           Director of Enzymologys

                                               *Confidential Treatment Requested
<PAGE>

               [*****]

12.3 Each Party may change its address and its representative for notice by the
     giving of notice thereof in the manner provided in Section 12.1.

ARTICLE 13 - ASSIGNMENT

13.1 Assignment - Neither Party to this OPTION shall assign or sublicense any
     rights hereunder without the prior written consent of the other Party, such
     consent not to be unreasonably withheld. It being agreed, however, that
     without such consent being required from RBI, DOW may assign to its
     AFFILIATES, but RBI must be notified in writing in accord with Section
     12.1.

13.2 Consolidation, Reorganization or Merger - Should RBI be consolidated,
     reorganized or merged with another entity, this OPTION and all rights and
     obligations arising under this OPTION may be assigned to the successor
     entity or the assignee of all or substantially all of RBI's business and
     assets without DOW's prior written consent. However, RBI shall promptly
     notify DOW prior to such action in accord with Section 12.1.

Effect on Successors and Assignees - This OPTION shall inure to the benefit of
and be binding upon such successors and permitted assignees.

ARTICLE 14 - LIABILITY

14.1 DOW Liability to RBI - Neither DOW, any of its AFFILIATES, nor the
     respective agents, servants, officers, directors, and employees of each
     shall be liable to RBI, or RBI's employees, directors, officers, agents or
     legal heirs, for any personal injury, death, or property damage that occurs
     while RBI is performing under this OPTION, except to the extent such
     injury, death, or property damage is caused by the sole negligence of DOW.

14.2 RBI Liability to DOW - Neither RBI, any of its subsidiaries, nor the
     respective agents, servants, officers, directors, and employees of each
     shall be liable to DOW, or DOW's employees, directors, officers, agents or
     legal heirs, for any personal injury, death, or property damage that occurs
     while DOW is performing under the OPTION, except to the extent such injury,
     death, or property damage is caused by the sole negligence of RBI.

14.3 Safety by RBI - RBI personnel agree to observe the same safety and other
     rules required of DOW employees while RBI is on premises owned, operated,
     leased or under the control of DOW.

14.4 Safety by DOW - DOW personnel agree to observe the same safety and other
     rules required of RBI employees while LOW is on premises owned, operated,
     leased or under the control of RBI.

ARTICLE 15 - MISCELLANEOUS PROVISIONS

                                               *Confidential Treatment Requested
<PAGE>

15.1 Amendments - This OPTION may be amended only in writing executed by both
     Parties.

15.2 Disputes - Both Parties shall make good faith efforts to resolve any
     questions concerning construction and performance under this OPTION

15.3 Entirety of Agreement - This OPTION sets forth the entire agreement and
     understanding between the Parties hereto with respect to ENZYME for its
     evaluation in the TERRITORY for use in the FIELD. This OPTION shall be
     deemed to be in compliance with the LETTER OF INTENT and should any
     differences exist, this OPTION shall control.

15.4 Severability - If any term or provision under this OPTION is deemed
     invalid under the laws by a United States court of competent jurisdiction,
     the invalidity shall not invalidate the whole OPTION but it shall be
     construed as if not containing that particular term or provision for that
     particular country or jurisdiction and the rights and obligations of the
     Parties shall be construed and enforced accordingly. The Parties shall
     negotiate in good faith a substitute provision as an addendum to this
     OPTION for that particular country or jurisdiction in compliance with the
     law to as nearly as possible retain the Parties intent in legally valid
     language.

15.5 Waivers, Cumulative Remedies - A waiver by either Party of any term or
     condition of this OPTION in any one instance shall not be deemed construed
     to be a waiver of such term or condition for any similar instance in the
     future or of any subsequent breach hereof. All rights, remedies,
     undertakings, obligations and agreements contained in this OPTION shall be
     cumulative and none of them shall be a limitation of any other remedy,
     right, undertaking, obligation or agreement of either Party.

15.6 Publicity - Neither DOW nor RBI shall make the financial terms of this
     OPTION public, except as required by law. In the event that a filing of a
     copy of this OPTION with the US Securities and Exchange Commission is
     required, then RBI shall seek confidential treatment of information
     considered confidential by DOW. Any press release or publicity of this
     OPTION shall be reviewed and approved by both Parties prior to any release.

15.7 Choice of Law - This OPTION shall be governed by the laws of the State of
     Michigan, excepting its conflict of laws principles, in all respects of
     validity, construction and performance; except that all questions
     concerning the construction, validity, coverage or infringement of PATENTS
     or JOINT PATENTS shall be decided in accordance with the patent law of the
     country where the PATENT or JOINT PATENT was granted.

15.8 Headings - Headings in this OPTION are included herein for ease of
     reference and shall not affect the meaning of the provisions of this
     OPTION, nor shall they have any other legal effect.

15.9 Cooperation - RBI and DOW shall use good faith efforts to cooperate with
     respect to any issues that concern the development of the ENZYME under this
     OPTION.

<PAGE>

15.10 RBI's Status - RBI's status hereunder is that of an independent
      contractor, and not that of an agent of DOW. As such RBI is responsible of
      all Income Tax withholding and the payment of any other appropriate taxes
      on all payments to RBI by DOW.

IN WITNESS WHEREOF, the Parties have duly executed duplicate originals of this
OPTION by their appropriate authorized representative. Such OPTION may be
subject to management and/or Board approval by each Party. Separate signature
pages are acceptable in facsimile form and shall be accepted in lieu of original
signatures, provided each Party receives a dated, signed, legible facsimile
indicating the signator for the other Party. Upon the SIGNATURE DATE, this
OPTION shall be effective as of the EFFECTIVE DATE. If requested by either
Party, duplicate originals, bearing the same date as the facsimile signature or
in lieu of facsimile signatures may be provided.

THE DOW CHEMICAL COMPANY                RECOMBINANT BIOCATALYSIS, INC.

By:__________________________________   By:___________________________________
Name:  R.J. Pangborn                    Name:     T.J. Bruggeman
Title: Vice President                   Title:    CEO
       Central & New Businesses R & D

Date:________________________________   Date:_________________________________

<PAGE>

                                  APPENDIX A

May 27, 1997

Donald C. Garaventi
President
Recombinant BioCatalysis, Inc.
10665 Sorrento Valley Road
San Diego, CA 92121
USA

LETTER OF INTENT

Dear Mr. Garaventi:

The purpose of this Letter of Intent is to summarize the present arrangements
and intent between The Dow Chemical Company ("DOW") and Recombinant BioCatalysis
Inc. ("RBI") for use of an enzyme provided by DOW. The Parties intend to
negotiate an option agreement ("Option") encompassing this intent.

RBI and DOW shall negotiate in good faith to result in an Option having at least
the following terms and conditions:

1.   Option Territory - The Option shall be for the world.

2.   Permitted Use by RBI - RBI shall use any information provided to it by DOW
     solely to improve an enzyme identified by DOW for use in recycle process or
     with a reaction coproduct produced by DOW [*****]. [This enzyme and any
     improvements thereto (e.g., where the productivity of the enzyme is
     increased and/or where the product inhibition is lowered) are referred to
     as "Enzyme".]

3.   Option Grant - The Option, if DOW requests an exclusive grant for the Field
     to make, have made, use, sell, import and have sold the Enzyme for the
     Field in the Territory, shall include the patents and technology on the
     Enzyme in the Field subject to the terms of the Option and any
     manufacturing license agreement. The fee for this exclusive Option is a one
     time fee of [*****] payable no sooner than December 1, 1998.

If DOW requests a non-exclusive grant for the Field to make, have made, use,
sell, import and have sold the Enzyme for the Field in the Territory, including
the patents and technology on the Enzyme In the Field, then the terms shall be
negotiated using reasonable good faith efforts by the Parties by January 31,
1999.

In either event the Option shall be executed by the Parties no later than
December 1, 1998 if exclusive or January 31, 1999 if non-exclusive.

                                               *Confidential Treatment Requested

                                       1.
<PAGE>

4.   Option Term - The Option term shall be for the term of the research plan
     ("Plan"), including any mutually agreed upon extensions ("Term"). At
     present both Parties agree that the Term for an exclusive license shall run
     from the letterhead date of this Letter of Intent until December 1, 1998
     and for a nonexclusive until January 31, 1999. By the end of the Term DOW,
     at its sole discretion, may negotiate an exclusive license to the Enzyme
     and gene coding for the Enzyme in the Field from RBI, or purchase the
     Enzyme or immobilized Enzyme from RBI or an alternate supplier in accord
     with Paragraph 8. Upon exercise of the license, manufacturing licenses and
     terms of sale for any Enzyme shall be on commercially reasonable terms,
     mutually agreed upon, and shall include, without limitation, royalties and
     minimum payments.

In the event that the Enzyme is improved and DOW has had [*****] from the time
the technology and improved Enzyme is delivered to DOW in accord with Milestone
3(B) to test it, and DOW then provides written notice to RBI of DOW's lack of
interest in commercial use of the improved Enzyme provided by RBI, then, at
RBI's sole option, either:

(a)  RBI shall pay DOW as a one time fee for DOW's total investment in the
     Enzyme (which fee shall be computed from the time of such request by RBI,
     but in no event would be less than [*****]). Such payment would be due to
     DOW within thirty (30) days from invoice by DOW; or
(b)  RBI agrees to pay to DOW reasonable royalty and payments for all income
     received from RBI's commercialization or sale of the technology or patents
     using the Enzyme. Such payments shall be negotiated as an agreement by the
     Parties using good faith efforts.

RBI must elect between (a) and (b) within [*****] from DOW's written
notification of lack of interest and convey their election in writing to DOW.

DOW has the right, during the Term and the eighteen (18) month evaluation
period, for purposes of evaluation only, to produce sufficient Enzyme for its
needs.

5.   Payments - Within fifteen (15) days from execution of the Option DOW shall
     pay RBI [*****]. For subsequent payments DOW shall be invoiced one (1)
     month prior to any payment due to RBI. The further payments are tied to
     achievement of milestone technical events.  The technical events for each
     milestone payment are described in Paragraph 6. The payments for each
     milestone are:

Milestone 1 - [*****]

[*****] if RBI is technically successful as defined in Paragraph 6; plus [*****]
if RBI accomplishes this Milestone 1 in less than [*****] days from the date on
which RBI receives the assay from DOW;

Milestone 2 - Productivity Calibration Definitions for Milestone 2:

"Candidate Enzymes" are those which meet the criteria of exhibiting initial
hydrolysis rates (Vmax) significantly higher than the wild type (wt) recombinant
enzyme toward a [*****].

                                               *Confidential Treatment Requested

                                       2.
<PAGE>

Kinetically, a Candidate Enzyme that is significantly
higher is characterized as having a Vmax [*****].

"Evolved Enzymes" are those which meet the criteria of exhibiting [*****].

Payments for Milestone2:

[*****] payable within thirty (30) days of receipt by DOW of the Enzyme
sequences and validation by DOW that RBI has provided DOW with at least [*****]:
and

Milestone 3 - Productivity Enhancement Definitions for Milestone 3:

"Improved Enzymes" are those which meet the criteria of, exhibiting at least;
plus [****] if RBI provides DOW with at least [*****].

"Productivity Enzymes" are those which meet the criteria of exhibiting at least
[*****].

"Target Activity" refers to the Milestone 3 improvement target for the initial
hydrolysis rate (Target Vmax) toward a [*****]. It is determined at the
conclusion of Milestone 2 and projected from the Milestone 2 data to be
sufficient for a commercial catalyst. It is defined in terms of fold-improvement
over the wild-type (wt) recombinant Enzyme activity under [*****].

Payments for Milestone 3:

(A) [*****] payable within thirty (30) days of receipt by DOW of the Enzyme
sequence and validation by DOW that RBI has provided DOW with at least [*****]
plus (B) [*****] payable within thirty (30) days of receipt by DOW of the Enzyme
sequence and validation by DOW that RBI has provided DOW with at least [*****]

                                               *Confidential Treatment Requested

                                       3.
<PAGE>

[****]

(i)   [*****]

(ii)  [*****]

(iii) [*****]

[*****]

[*****]

These payments are tied to performance under the Plan described in Paragraph 6.

6.   Plan - During the Term, RBI shall perform research activities to improve
     the Enzyme to achieve Target Activity in the Field in a diligent manner as
     specified in Paragraph 5 and described in detail in a protocol attached to
     the Option. Such improvement can be met by any manner acceptable to the
     Parties. The Enzyme is to be improved for commercial use in a manner agreed
     upon between the Parties. The protocol may be amended by written consent of
     the Parties. However, either Party may terminate the research and the
     Option at any technical milestone specified below for any reason; but if
     RBI terminates, then DOW has thirty (30) days to notify RBI whether DOW
     desires either an exclusive or non-exclusive license for the Enzyme until
     that termination.

     .     Milestone 1 = [*****].

     .     Milestone 2 = [*****].

                                       4.
<PAGE>

           [****]

     .     Milestone 3 = [*****].

     (B)   RBI increases productivity as stated in Paragraph 5 for Productivity
           Enzymes and transfers as UCA [*****] DOW confirms [****].

These events for performance under the Plan are tied to payments under Paragraph
5.

7.   Patents - Any improvements to the Enzyme made by RBI during the Option
     shall belong to RBI, if within the claimed scope of an issued RBI patent or
     pending patent application. DOW shall be informed of all such patents or
     pending applications and be provided with a copy thereof, and provided with
     their publication numbers or patent numbers and each country where filing
     was done. If requested by DOW, a completed file wrapper for a given
     application or patent shall be provided to DOW. An annual status of the
     concerned patents shall be provided to DOW until all have issued or are
     abandoned.

Although unlikely to occur, in any instance where a Joint patent between DOW and
RBI results in a patentable invention, then DOW and RBI shall mutually
determine, using good faith efforts, whether DOW or RBI shall file and prosecute
the patent application and pay the annuities. If DOW exercises its Option for
exclusive rights for the joint patent shall be granted in the Option to DOW for
the Field for the Territory.

Know-how developed under the Option or known as of the Letter of Intent by
either Party shall remain that Party's property. Any use by one Party of the
other's know-how shall be under the confidentiality provisions of Paragraph 14.

8.   [*****] - In the event that the Enzyme is improved and is of further
     interest to DOW and DOW exercises its Option, then DOW shall have [*****]
     from the time the improved Enzyme is delivered in a practicable form to DOW
     in accord with Milestone 3(B) to provide by written notice to RBI of DOW's
     intent to either:

                                               *Confidential Treatment Requested

                                       5.
<PAGE>

(a)  [*****].  If this course is mutually agreed upon then a commercial
     agreement shall be negotiated using reasonable good faith efforts by the
     Parties;
or

(b)  inform RBI that DOW will use an alternate supplier (not RBI) for the
     improved Enzyme. RBI agrees to provide to a qualified third party under
     appropriate, reasonable licensing terms for the industry, the information
     and rights required to supply the Enzyme to DOW.

If DOW does not desire any commercial supply of the improved Enzyme, then refer
to Paragraph 4.

9.   RBI Obligations - RBI shall provide a written report with a summary of the
     data to DOW on a quarterly basis or at a milestone achievement in a
     quarter, whichever occurs first. (If clarification of a report is requested
     by DOW to more fully understand such report, then a meeting of respective
     personnel permitted.) A final written report shall be provided of the
     results obtained by RBI on its improvement efforts for the Enzyme,
     including its sequence, within thirty (30) days at the end of the Term or
     within thirty (30) days upon termination, and [*****].

10.  DOW Obligations - DOW shall provide the [*****].

11.  Safety - RBI personnel agree to observe the same safety and other rules
     required of DOW employees while RBI is on premises owned, operated, leased
     or under the control of DOW.

     DOW personnel agree to observe the same safety and other rules required of
     RBI employees while DOW is on premises owned, operated, leased or under the
     control of RB1.

12.  Liability - Neither DOW, any of its subsidiaries, nor the respective
     agents, servants, and employees of each shall be liable to RBI or RBI's
     employees, directors, agents or legal heirs, for any personal injury,
     death, or property damage that occurs while RBI is performing under the
     Option, except to the extent such injury, death, or property damage is
     caused by the sole negligence of Dow.

     Neither RBI, any of its subsidiaries, nor the respective agents, servants,
     and employees of each shall be liable to DOW, or DOW's employees,
     directors, agents or legal heirs, for any personal injury, death, or
     property damage that occurs while DOW is performing under the Option,
     except to the extent such injury, death, or property damage is caused by
     the sole negligence of RBI.

                                               *Confidential Treatment Requested

                                       6.
<PAGE>

13.  RBI's Status - RBI's status hereunder is that of an independent contractor,
     and not that of an agent of DOW. As such RBI is responsible of all Income
     Tax withholding and the payment of any other appropriate taxes on all
     payment to RBI by DOW.

14.  Confidentiality - The Parties agree to maintain confidential all
     discussions and information obtained from the other regarding the Enzyme,
     the Field, business information of RBI or DOW since August 29, 1996, and to
     maintain confidential any discussions on terms for the Option, except for
     information:

(a)  which was known to RBI prior to receipt or development hereunder;

(b)  which is, or without fault of RBI becomes, generally known to the public;
     or

(c)  which is acquired by RBI, without an obligation of confidence, from a third
     party having a legal right to make such disclosure.

     No rights are granted by DOW to RBI to use any DOW intellectual property
     rights including patents, trade secrets, confidential information and
     computer programs, except in providing the contemplated Plan services. Each
     Party's obligations for confidentiality shall cease five (5) years from
     termination of this Letter of Intent or Option, which ever time is later.
     Confidentiality terms and conditions shall also be included and continued
     in the Option.

15.  Publicity - Neither DOW nor RBI shall make public the financial terms of
     this Letter of Intent. Any press release or publicity concerning this
     Letter of Intent shall be reviewed and approved by both Parties prior to
     any release.

16.  Entire Agreement - This Letter of Intent document contains the entire
     agreement between the Parties and supersedes all preexisting agreements
     between them respecting its subject matter. Modification of this Letter of
     Intent shall only be binding if made in writing and signed by both Parties.

17.  Choice of Law - This Agreement shall be subject to the laws of the State of
     Michigan, excepting its conflict of laws provisions.

18.  Other Items - Other customary terms and conditions in the Option are also
     expected and modifications of this Letter of Intent that form a part of the
     Option are permitted.

     Upon signature by both Parties, the letterhead date is the effective date
     for this Letter of Intent.  This Letter of Intent shall be void ab initio
     if not signed by both Parties no later than June 16, 1997. The negotiations
     for the Option shall then begin, using good faith efforts, to complete the
     Option no later than forty-five (45) days from this letterhead date. Such
     Option is subject to management and/or Board approval by each Party, which
     shall be secured by each Party prior to exercise of and/or signing the
     Option, if required. Should the Parties fail to reach agreement for the
     Option by that date, then either the date may be extended by mutual written
     consent or the negotiations may be terminated.

                                       7.
<PAGE>

Sincerely,

Fred P. Carson
Vice President
Research and Development

AGREED TO AND ACCEPTED BY:
Recombinant BioCatalysis Inc.

_______________________________
Donald G. Garaventi
President

Date________________

                                       8.
<PAGE>

                       This Appendix is blank as of the

                     SIGNATURE DATE.  Additions during the

                           OPTION TERM are possible.

                                       1.
<PAGE>

                       This Appendix is blank as of the

                     SIGNATURE DATE.  Additions during the

                           OPTION TERM are possible.

                                      1.
<PAGE>

                                  APPENDIX D

                     [DOW PARTNERSHIP PROJECT SPREADSHEET]

                                       1.
<PAGE>

                                  APPENDIX E

CONFIDENTIALITY AGREEMENT                                       August 27, 1996

In order to protect certain proprietary, confidential information (Information)
which may be exchanged between them, The Dow Chemical Company (DOW), having an
address of:  Patent Department, P.O. Box 1967, 1790 Building, Midland, Michigan
48641-1967, Attn:  Karen L. Kimble; and Recombinant Biocatalysis, Inc., Elmwood
Court Two, 512 Elmwood Avenue, Sharon Hill, PA  19079-1005 (RBI), and together
hereafter called the Parties, agree that:

1.  The effective date of this Agreement is August 27, 1996.
2.  The Discloser(s) of Information is (are):  Both Parties.
3.  The Recipient(s) of Information is (are):  Both Parties.

4.  The Information disclosed under this Agreement is: any and all information
    including but not limited to, data, know-how, any and all subject matter
    (whether patentable or not) pertaining to the Parties research, inventions,
    development, materials, technology, businesses plans, processes, protocols,
    enzymes, expression systems, the commercial applications of enzymes which
    the parties consider to be of value, and all information generated by RBI as
    a result of carrying out the purpose set forth in paragraph 5.

5.  The purpose for disclosing Information is to see if RBI's proprietary
    technology might be used to improve performance of Dow proprietary [****]
    enzymes, or if RBI's proprietary collection of enzymes contains any enzymes
    of commercial interest to DOW, or if RBI and DOW should enter into a
    relationship to identify novel enzymes of commercial interest to DOW.

6.  This Agreement covers only Information disclosed between Effective Date and
    August 27, 1997. Recipient's obligations shall expire on August 27, 1999.

7.  Recipient agrees to maintain Information in confidence and not disclose
    Information to any third party except as expressly provided in this
    Agreement. Recipient will not use Information except as provided for in
    Paragraph 5. Recipient shall use the same degree of care, but no less than a
    reasonable degree of care, as the Recipient uses to protect its own
    confidential information of a like nature to prevent disclosure of
    Information to third parties. Third parties include all governmental patent
    offices.

8.  Recipient's obligations will apply only to Information that is: (a)
    disclosed in tangible form clearly identified as confidential at the time of
    disclosure; (b) disclosed initially in non-tangible form and identified as
    confidential at the time of disclosure and, within thirty (30) days of the
    initial disclosure, is summarized and designated as confidential in writing
    and delivered to Recipient; or (c) generated by Recipient as set forth in
    Paragraph 4.

                                               *Confidential Treatment Requested

                                      1.
<PAGE>

9.   Recipient has no obligation with respect to any Information disclosed
     hereunder which: (a) was in Recipient's possession before receipt from
     Discloser; (b) is or becomes a matter of general public knowledge through
     no fault of Recipient; (c) is rightfully received by Recipient from a third
     party without an obligation of confidence; (d) is disclosed by Discloser to
     a third party without an obligation of confidence on the third party; (e)
     is independently developed by Recipient's representatives who have not had
     access to such Information; or (f) is disclosed without obligation of
     confidence under operation of law, governmental regulation, or court order,
     provided Recipient first gives Discloser notice and uses all reasonable
     effort to secure confidential protection of such Information. Specific
     confidential Information shall not be considered to fall within the above
     exceptions merely because it is within the scope of more general
     information within an exception. A combination of features shall not be
     considered to fall within the above exceptions unless the combination
     itself, including its principles of operation, are within the exceptions.

10.  All Information shall be provided at the sole discretion of Discloser. With
     respect to Information, DISCLOSER MAKES NO WARRANTIES OF ACCURACY,
     RELIABILITY, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PURPOSE.
     INFORMATION IS PROVIDED ON AN "AS-IS" BASIS AND DISCLOSER EXPRESSLY
     DISCLAIMS ANY WARRANTIES WITH RESPECT TO THE INFORMATION. Discloser shall
     not be liable for any consequential, punitive, exemplary or incidental
     damages arising out of the evaluation or use of Information by Recipient.

11.  Neither Party transfers any rights in Information. No rights are granted
     under any intellectual property rights of either Party. This Agreement does
     not create any other obligations, including agency or partnership
     obligations, between the parties. This Agreement does not constitute an
     offer to sell Information. Results obtained by Recipient upon evaluation of
     Information shall be disclosed to Discloser. Copyrights on reports of
     results transferred to Discloser generated by Recipient based on the
     evaluation of Information shall be owned by Discloser.

12.  Recipient will not knowingly export or reexport any Information or software
     received from Discloser or the direct products of such Information or
     software to any country or entity or for any use prohibited by the U.S.
     Export Administration Regulations unless properly authorized by the U.S.
     Government.

13.  The parties may disclose Information received from Discloser to their
     Affiliates, consultants or third-party contractors on a need-to-know basis,
     subject to confidentiality terms consistent with this Agreement. The
     Parties warrant that their Affiliates, consultants or third-party
     contractors will comply with the terms of this Agreement. Affiliates means
     companies wherein either Party owns or controls, directly or indirectly,
     greater than fifty percent of the equity interest of the company or in
     which a Party has management control.

14.  This Agreement can only be changed by a written document signed by all
     parties. The terms of this Agreement shall become effective upon the
     Effective Date when executed
                                      2.
<PAGE>

       by all parties. This Agreement shall become voidable upon written notice
       by DOW in the event it is not executed by all parties within 120 days of
       the date first written above. This Agreement shall be governed according
       to the laws of the State of Michigan. The parties have caused this
       Agreement to be executed in duplicate and this Agreement may be signed in
       separate counterparts.

THE DOW CHEMICAL COMPANY  RECOMBINANT BIOCATALYSIS, INC.

By: ___________________________       By: _____________________________

Name: _________________________       Name: ___________________________

Title: ________________________       Title: __________________________

Date: _________________________       Date: ___________________________

                                      3.

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