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a x , t~. July 7, 1978 Mr. Ar jay Asiller -.i Dean = Graduate School ot..Buaiaess :., Stanford vaiaersity ~ Stanford, -94305 , l+:. n; Dear Arjays A . . i.i..,~ i ti,~e er ! e £F t .~: ~ > r. ,. xt

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. ;~. ^ ~ , i t s .r txt. ..6. >GY ss ,, ~ F ~ , ~ .. .~. . ,. .~~ .. ~ .,. _ ` s ~.. Mr. Arjay Miller July 7, 1978 Page 3 -~. ctorodis over .v . ., _ „•,. : . . p g , will produce peptides. Biologically active human peptides, ed only in the past few years, represent one of ~ YY V . „ , p i ' Cetus is in a unique position to take advantagetiof-' m ~N fly ~~fj~f~='~,•Y`•~~Y Within the past year, twoof our corporate, c;iexits have~~ach purchased'~ i r h l 20% i i ~o h c he es . approx mate of the equ y ty n Cetus. ~n t ases, t pu c as r . '^A7 3 f ~ were entirely arms length'and independento£~any cla.en t -relationshiptJ + ent-relationship Y: : , . 1 ' ` V r"~~. y`*T with Cetus.. The Standard Oil Cot tifIndiaMay~investment involved pur ` chases from Cetus and also from siiareholders; National Distillers and ? ~`, Chemical Corporation purchased s~ock froaa shareholders. Both companies w I have Board representation and.case the relationship is exceed-: 3~n each' ingly cordial. In each case_`fhe intent was to monitor the development . t % J1i`S , >- , ;rs of what we all perceive ta••be an~, explosive growth opportunity over w .,r the next twent ears Y y y ' 4 a~~~QJV`. ~ ~- r QV s,K ~4~ .~C~ ~ As part of the Standard Oil._purchase agreement, that company obtained the right of first opportunit'p,~ at a pre-agreed upon price to purchase , the next $9,00O,OOa;of stock sold by the company.. Cetus in return '' :~esY +:;~ ~ received a"Put."4~We can put $5,000,000 to them (which funds are ear '~ n , y'marked for propri tary Cetus research) and Standard Oil has thirty days in which to respond;"yes'k or "no." Two months ago our Board decided {r_~ unanimously (Standard 0i1 abstaining) that it was in the best interest f' Ct tk'~thirdtthld Stdd Oil oeuso see, < major corporae parner souanar '- ~t""3ra ~ ° This Standard did one month a ever refuse a"Put: " o th for a !4 .c, , g , us ir: Q O. . a K f w 3~ period of 180-°daystiwe are free to raise this money elsewhere.: In point . " o fact, Standa=d~was quite willing to provide the additional funds and, f indeed, is,`stil],.iailling to provide these funds._ „ However, the terms ° 'ir ! :~k b' e have, in, our opinion, two undesirable new conditions ahat they,; requ not coverec~ i:n their original purchase agreement: (1) that the cash be ~: ,~ .% f''~ ~, ; provided on_ry when Cetus' working capital dipped below $1, 000, 000 rather ,,kthan up front, (2) that Standard purchase some stock from Cetus found- ing management and in addition have the right of first opportunity, at,': ~. market, on any subsequent sale of founding management stock. This ?.:+ Q offer still stands. Another reason we refused is because we would prefer to get yet another corporate partner. Therefore, we seized the opportunity to take advantage of_their qualified "yes" answer. Our relationship with St ndard continues t b f i dl d i d d" ~ y a o e a r en y one an ,, n ee .~. A"{ the most exciting areas in medicine today. Almost monthly, new and. interesting peptides are being discovered in various academic centers ,~ throughout the world. The problem is that these compounds cannot be synthesized chemically. However, here our recombinant DNA technology. ''can be useful, and within the next eighteen months, Cetus will be in a' p p ~ttltrY ~ i 4~h' igeY they appear to be the master control molecules excreted by the brain ' y rO= T.~ l ~^ Peptides have been discovered that relieve pain, promote sleep,, relieve ~ s position to rapidly produce large amounts of virtually any human peptide ~ of interest: These com ounds are of extreme otential value in that examples In short this is an ex losive new frontier in medicine an our search for funds elsewhere has their blessing. / '4`~`anxiety, temporarily reverse schizophrenic behavior, to name some 4-

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t, . milling industry. Specifically, a biologically-produaed enzyme made M . t . ~.. ~ . Mr. Arjay Miller July 7, 1978 "' Page 4 I'm writing to you because of your close personal relationship with many chief executive officers. Your judgment can be of great value to us. X You understand Cetus and you have watched us grow over the past seven years. What we need now is an introduction to the type of individual ":. who can grasp the importance of our fundamental message and who is in a position to be able to act. That message is very simple. Biology has ts"h "k , made incredible strides in the past ten years. It has reached the point w of practical, comnercial application to industries that heretofore have never utilized biology as a tool. There are going to be and, indeed, have already been major dislocations in basic industries because of biological innovation. A most striking example would be the loss by the °: sugar indus ~ }''F try of 30% of the industrial sweetener market to the corn wet 0 0 41t possible the conversion of corn starch to high fructose corn syrup. This' syrup has now becosae a major sweetener for,use by the~-likes of~ Coca-Cola, Pepsi Cola, the candy.and baking industries,~etc.;`Cetus +own process for producing propylene and/or ethylene'oxide~and glycol,"if successfully casmercialized, could have a~major impact on an existing ,' 2.5 billion dollar a year U.S. industry.sG `Gy: As Standard of Indiana and National Distillers have already dersonstrated, there are senior executives who can;appreciaterthat a revolution, based ~ : ~,. on biology, is beginning. Surely you must know a few individuals, fi~ - c to make a formal presentation~'and',to provide them with the detailed ~^ %t r''° , information necessary_'io make:'an ~investment decision. ` preferably in the oil, chem alsor: food industries (the areas in which we will have our greatest-iapact)t;that you feel would be interested at least learning more about our,, ixompany. . If so, we would be delighted ; y I am enclosing two additional items for your consideration: . . .. . . ~.. . .. .. 1. Analysis of Shareholdings, which details three possible investment. ' ~ v V•t y scenarios, and; J ~ t ~ : {• ~gQJ 9 2, A Note.to Prospective Investor(s), which outlines our view as to - ,_ I why a major~corporation should consider an investment in Cetus. R~MW ~~~~, . .. .. ,,,. ,. :. S; Your help in,this matter would be very much appreciated. Needless to say, I-Iook ~i~rward to discussing this with you in greater detail. Cordially;o ° ' . . ..~,i. e . ' CE'P[JS CORPORATION : geter J. Farley ` President "; 4 PJF/lmb . : Ericlosuress 1 j . ~ , . " . - . ~. ~" . .. Y4 4;. i

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