<PAGE>

                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by
and between Elitra Pharmaceuticals, a California corporation (the "Company"),
and Ed Baracchini, Ph.D. ("Executive"), effective as of the last day either
party executes this Agreement ("Effective Date"). The Company and Executive are
hereinafter collectively referred to as the "Parties," and may individually be
referred to as a "Party."

                                    RECITALS

         A.       The Company desires assurance of the association and services
of Executive in order to retain Executive's experience, skills, abilities,
background and knowledge, and is willing to engage Executive's services on the
terms and conditions set forth in this Agreement.

         B.       Executive desires to be in the employ of the Company and is
willing to accept such an employment on the terms and conditions set forth in
this Agreement.

                                    AGREEMENT

         In consideration of the foregoing premises and the mutual covenants
herein contained, and for other good and valuable consideration, the Parties,
intending to be legally bound, agree as follows:

1.       EMPLOYMENT.

         1.1      The Company hereby agrees to employ Executive, and Executive
hereby accepts employment by the Company, upon the terms and conditions set
forth in this Agreement.

         1.2      Executive shall have the title of Vice President, Business
Development of the Company and shall serve in such other capacity or capacities
as the Chief Executive Officer ("CEO") or the Board of Directors of the Company
may from time to time prescribe. Executive shall report to the Company's CEO.

         1.3      Executive shall have the normal responsibilities, duties and
authorities associated with the positions of Vice President, Business
Development, including, but not limited to, planning, directing and implementing
the Company's business development efforts. Executive shall participate as a
member of the management team in the formulation of the Company's annual plan
and strategic objectives; provided, however, that at all times during his
employment Executive shall be subject to the direction and policies from time to
time established by the Board.

         1.4      Unless the Parties otherwise agree in writing, prior to
Executive's termination in accordance with this Agreement, Executive shall
perform the services he is required to perform pursuant to this Agreement,
reporting to the Company's principal executive offices in San Diego, California;
provided, however, that the Company may from time to time require Executive to
travel temporarily to other locations in connection with the Company's business.


                                       1.
<PAGE>

2.       LOYAL AND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.

         2.1      During his employment by the Company, Executive shall devote
his full energies, interest, abilities and productive time to the proper and
efficient performance of his duties under this Agreement. The foregoing shall
not preclude Executive from engaging in civic, charitable or religious
activities which will not present any direct conflict of interest with the
Company or affect the performance of Executive's duties hereunder.

         2.2      During his employment by the Company, Executive shall not
engage in competition with the Company, either directly or indirectly, in any
manner or capacity, as adviser, principal, agent, partner, officer, director,
employee, member of any association or otherwise, in any phase of the business
of developing, manufacturing and marketing of products which are in the same
field of use or which otherwise directly compete with the products or proposed
products or methods of the Company.

         2.3      Ownership by Executive, as a passive investment, of less than
one percent (1%) of the outstanding shares of capital stock of any corporation
with one or more classes of its capital stock listed on a national securities
exchange or publicly traded in the over-the-counter market shall not constitute
a breach of this Section 2.

3.       COMPENSATION OF EXECUTIVE.

         3.1      The Company shall pay Executive a base salary of One Hundred
and Fifty Thousand Dollars ($150,000.00) per year ("Base Salary"), payable in
regular periodic payments in accordance with Company policy. Such salary shall
be prorated for any partial year of employment on the basis of a 365-day fiscal
year. Executive's Base Salary shall be subject to annual review and thereafter
Executive shall be entitled to such increase in Base Salary as the Board may
determine from time to time.

         3.2      All of Executive's compensation shall be subject to customary
withholding taxes and any other employment taxes as are commonly required to be
collected or withheld by the Company.

         3.3      Executive shall, in the discretion of the Board and in
accordance with Company policy, be entitled to participate in benefits under any
employee benefit plan or arrangement made available by the Company now or in the
future to its executives and key management employees, including four weeks of
paid time off.

         3.4      The Board shall, in its sole discretion, award to Executive an
annual bonus of up to twenty-five percent (25%) of Executive's Base Salary upon
Executive's completion of specific measurable goals as mutually agreed upon by
the Board and Executive within a reasonable period of time following the
Effective Date and thereafter within ninety (90) days of the commencement of
each fiscal year.

         3.5      Subject to approval of the Board of Directors, Executive will
be entitled to purchase 300,000 shares of the Company's Common Stock (the
"Shares") under the Company's 1998 Equity Incentive Plan (the "Plan"), at a
price per share equal to the fair market value of the Company's Common Stock on
the date of purchase. The Shares will vest over a four-year


                                       2.
<PAGE>

period (with any unvested Shares subject to a repurchase option in favor of the
Company), with twenty-five (25%) percent of such Shares vesting as of the first
anniversary of the Effective Date, and the remainder of the Shares vesting
monthly thereafter, such that all of the Shares will be fully vested as of the
fourth anniversary of the Effective Date.

         3.6      Executive shall be entitled to receive reimbursement of all
reasonable travel and other business expenses incurred by Executive in
performing Company services, including expenses related to travel, parking and
business meetings. Such expenses shall be accounted for in accordance with the
policies and procedures established by the Company.

4.       TERMINATION BY COMPANY. Executive's employment with the Company may be
terminated by the Company under the following conditions:

         4.1      TERMINATION ON DEATH OR DISABILITY. This Agreement shall
terminate without notice upon Executive's death or upon Executive's Major
Disability (as defined in Section 4.1.1) for a period of 120 consecutive days,
or for 180 days in the aggregate in any 365-day period.

                  4.1.1    The term "Major Disability" as used in this Agreement
shall mean the inability of Executive to properly perform the essential
functions of Executive's position by reason of any incapacity, physical or
mental, which the Board, based upon medical advice or an opinion provided by a
licensed physician acceptable to the Board and approved by the Executive, which
approval shall not be unreasonably withheld, determines to have incapacitated
Executive from properly performing such essential functions. Based upon such
medical advice or opinion, the determination of the Board shall be final and
binding and the date such determination is made shall be the date of such Major
Disability for purposes of this Agreement.

         4.2      TERMINATION FOR CAUSE. The Company may terminate Executive's
employment under this Agreement for cause ("Cause") by delivery of written
notice to Executive specifying the cause or causes relied upon for such
termination. Any notice of termination given pursuant to this Section 4.2 shall
effect termination as of the date specified in such notice or, in the event no
such date is specified, on the last day of the month in which such notice is
delivered or deemed delivered as provided in Section 11 below.

         Grounds for the Company to terminate Executive under this Agreement for
Cause shall be limited to the occurrence of any of the following events:

                  4.2.1    The willful failure, neglect or refusal by Executive
to perform his duties pursuant to Section 1.3 or Section 2.1, which failure is
not remedied within a reasonable period of time after written notice from the
Company.

                  4.2.2    Executive's engaging or in any manner participating
in any activity which is directly competitive with or intentionally injurious to
the Company or which violates any provision of Section 8 of this Agreement;

                  4.2.3    Executive's commission of any fraud against the
Company or use or appropriation for his personal use or benefit of any material
properties or funds of the Company not authorized by the Board to be so used or
appropriated; or Executive's conviction of any crime involving dishonesty or
moral turpitude.


                                       3.
<PAGE>

                  4.2.4    Conduct by the Executive which in the good faith and
reasonable determination of the Board demonstrates gross unfitness to serve in
Executive's position.

         4.3      TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment without cause ("Without Cause") upon delivery of written
notice to the Executive at any time, which shall specify the effective date of
termination at any time. Any notice of termination given pursuant to this
Section 4.3 shall effect termination as of the date specified in such notice or,
in the event no such date is specified, on the last day of the month on which
such notice is delivered or deemed deliverable as provided in Section 11 below.

5.       VOLUNTARY TERMINATION BY EXECUTIVE.

         5.1      Executive may terminate his employment voluntarily by giving
the Company ninety (90) days advance notice in writing, at which time the
provisions of Section 6.2 shall apply; provided, however, that the provisions of
Section 6.3 shall apply if Executive voluntarily terminates his employment as a
result of Constructive Termination (as defined in Section 7.3 hereof).

6.       COMPENSATION UPON TERMINATION.

         6.1      DEATH OR DISABILITY.

                  6.1.1    BY DEATH. Upon termination of Executive's employment
in the event of death, the Company shall pay to Executive's beneficiaries or his
estate, as the case may be, any Accrued Compensation. In addition, Executive's
beneficiaries or his estate, as the case may be, shall be entitled to the
accelerated vesting of one-half of all Shares or stock options held by Executive
which are unvested as of the date of Executive's death. The Company shall
thereafter have no further obligations to Executive under this Agreement. The
term "Accrued Compensation" as used in this Agreement shall mean, to the date of
the termination of Executive's employment with the Company, any accrued Base
Salary, any bonus compensation to the extent earned, any vested deferred
compensation (other than pension plan or profit-sharing plan benefits which will
be paid in accordance with the applicable plan), any benefits under any plans of
the Company in which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and any
appropriate business expenses incurred by Executive in connection with his
duties hereunder.

                  6.1.2    BY DISABILITY. Upon termination of Executive's
employment in the event of Major Disability, the Company shall pay to Executive
all Accrued Compensation, and shall continue to pay to Executive his Base Salary
until the earlier of (i) ninety (90) days following termination or (ii) the date
on which Executive is entitled to receive disability insurance payments under
the disability insurance policy maintained by the Company. The Company shall
thereafter have no further obligations to Executive under this Agreement.

         6.2      FOR CAUSE OR VOLUNTARY TERMINATION BY EXECUTIVE. If
Executive's employment shall be terminated by the Company for Cause or
voluntarily by Executive, the Company shall pay Executive his Accrued
Compensation and the Company shall thereafter have no further obligations to
Executive under this Agreement.


                                       4.
<PAGE>

         6.3      WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION. If Executive's
employment shall be terminated by the Company Without Cause or as a result of
Constructive Termination (as defined in Section 7.3 hereof) then upon
Executive's furnishing to the Company an executed waiver and release of claims
(a form of which is attached hereto as Exhibit A), Executive shall be entitled
to the following: (i) continuation of Executive's base salary for six months
from the date of termination with such base salary continuation to be at the
rate of Executive's then current base salary in effect as of the date of
termination, subject to standard deductions and withholdings, (ii) in the event
the Shares or any stock options held by Executive have not yet vested in their
entirety, the vesting of the Shares or options shall be accelerated such that
the number of Shares or options vested shall equal the number of Shares or
options that would have vested if the Executive had remained an employee for an
additional six months, (iii) continuation of Executive's (and if applicable,
Executive's dependents') participation in any group health insurance plan or
plans maintained by the Company for six months from the date of termination
under COBRA, (iv) if employment terminates during the second half of the
Company's fiscal year, a lump-sum payment equal to a pro rata portion of the
Executive's actual annual cash bonus for the preceding year, based on the number
of completed months of Executive's employment in the year of termination,
subject to standard deductions and withholdings, and (v) all Accrued
Compensation.

         6.4      NO MITIGATION. Executive shall not be required to mitigate the
amount of any payment contemplated by this Section 6 (whether by seeking new
employment or in any other manner).

7.       CHANGE IN CONTROL.

         7.1      A "Change in Control" of the Company shall be deemed to have
occurred if and when:

                           (a)      The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less than 50% of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of voting equities of the Company immediately prior to such
transactions;

                           (b)      The Company sells all or substantially all
of its assets to any other corporation or other legal person and thereafter,
less than 50% of the combined voting power of the then-outstanding voting
securities of the acquiring or consolidated entity are held in the aggregate by
the holders of voting securities of the Company immediately prior to such sale;

                           (c)      There is a report filed after the date of
this Agreement on Schedule 13D or Schedule 14D-1 (or any successor schedule,
form or report), each as promulgated pursuant to the Securities and Exchange Act
of 1934 (the "Exchange Act"), disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become
the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act)
representing 50% or more of the combined voting power of the then-outstanding
voting securities of the Company;


                                       5.
<PAGE>

                           (d)      The Company shall file a report with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Item 1 of Form 8-X thereunder or Item 5(f) of Schedule 14A
thereunder (or any successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will or may occur
in the future pursuant to any then-existing contract or transaction; or

                           (e)      During any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors of
the Company cease for any reason to constitute at least a majority thereof
unless the election to the nomination for election by the Company's shareholders
of each director of the Company first elected during such period was approved by
a vote of at least two-thirds of the directors of the Company then still in
office who were directors of the Company at the beginning of such period.

         7.2      If within eighteen (18) months following the occurrence of a
Change in Control Executive is terminated Without Cause or a Constructive
Termination (as defined in Section 7.3 hereof) occurs, then upon Executive's
furnishing to the Company an executed waiver and release of claims (a form of
which is attached hereto as Exhibit A), Executive shall receive the following:
(i) a lump sum payment equal to Executive's base salary for six months at the
rate of Executive's then current base salary in effect as of the date of
termination, subject to standard deductions and withholdings, (ii) accelerated
vesting of any unvested Shares or stock options held by Executive, (iii)
continuation of Executive's (and if applicable, Executive's dependents')
participation in any group health insurance plan or plans maintained by the
Company for six months from the date of termination under COBRA, (iv) if
employment terminates during the second half of the Company's fiscal year, a
lump-sum payment equal to a pro rata portion of the Executive's actual annual
cash bonus for the preceding year, based on the number of completed months of
Executive's employment in the year of termination, subject to standard
deductions and withholdings, and (v) all Accrued Compensation.

         7.3      For the purposes of this Agreement, a "Constructive
Termination" shall be deemed to have occurred upon any of the following events
without Executive's written consent:

                           (a)      the assignment to Executive of any duties or
responsibilities which result in any material diminution or adverse change of
Executive's position, status or circumstances of employment; or any removal of
Executive from or any failure to re-elect Executive to any of such positions,
except in connection with termination of his employment for death, disability,
retirement, fraud misappropriation, embezzlement (or any other occurrence which
constitutes Cause, as defined in Section 4.2 herein) or any other voluntary
termination of employment by Executive;

                           (b)      a selective reduction by the Company in
Executive's annual Base Salary by greater than five percent (5%);

                           (c)      a relocation of Executive, or the Company's
principal executive offices if Executive's principal office is at such offices,
to a location more than forty (40) miles from the location at which Executive is
then performing his duties, except for an opportunity to relocate which is
accepted by Executive in writing;


                                       6.
<PAGE>

                           (d)      any material breach by the Company of any
provisions of this Agreement; or

                           (e)      any failure by the Company to obtain the
assumption of this Agreement by any successor or assigns of the Company.

         7.4      NO MITIGATION. Executive shall not be required to mitigate the
amount of any payment contemplated by this Section 7 (whether by seeking new
employment or in any other manner).

         7.5      CERTAIN REDUCTIONS IN PAYMENTS.

                  7.5.1    In the event that any payment received or to be
received by Executive pursuant to this Agreement ("Payment") would (i)
constitute a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section 7.5.1 subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then, subject to the provisions of Section 7.5.2 hereof, such
Payment shall be reduced to the largest amount which Executive, in his
discretion, determines would result in no portion of the Payment being subject
to the Excise Tax. The determination by Executive of any required reduction
pursuant to this Section 7.5.1 shall be conclusive and binding upon the Company.
The Company shall reduce a Payment in accordance with this Section 7.5.1 only
upon written notice by Executive indicating the amount of such reduction, if
any. If the Internal Revenue Service (the "IRS") determines that a Payment is
subject to the Excise Tax, then Section 7.5.2 hereof shall apply, and the
enforcement of Section 7.5.2 shall be the exclusive remedy to the Company for a
failure by Executive to reduce the Payment so that no portion thereof is subject
to the Excise Tax.

                  7.5.2    If, notwithstanding any reduction described in
Section 7.5.1 hereof (or in the absence of any such reduction), the IRS
determines that Executive is liable for the Excise Tax as a result of the
receipt of a Payment, then Executive shall be obligated to pay back to the
Company, within 30 days after final IRS determination, an amount of the Payment
equal to the "Repayment Amount." The Repayment Amount with respect to a Payment
shall be the smallest such amount, if any, as shall be required to be paid to
the Company so that Executive's net proceeds with respect to any Payment (after
taking into account the payment of the Excise Tax imposed on such Payment) shall
be maximized. Notwithstanding the foregoing, the Repayment Amount with respect
to a Payment shall be zero if a Repayment Amount of more than zero would not
eliminate the Excise Tax imposed on such Payment. If the Excise Tax is not
eliminated pursuant to this Section 7.5.2, Executive shall pay the Excise Tax.

8.       CONFIDENTIAL INFORMATION; NONSOLICITATION.

         8.1      Executive recognizes that his employment with the Company will
involve contact with information of substantial value to the Company, which is
not old and generally known in the trade, and which gives the Company an
advantage over its competitors who do not know or use it, including but not
limited to, methods, techniques, designs, drawings, processes, inventions,
developments, equipment, prototypes, sales and customer information, and
business and financial information relating to the business, products, practices
and techniques of the


                                       7.
<PAGE>

Company (hereinafter referred to as "Confidential Information"). Executive will
at all times regard and preserve as confidential such Confidential Information
obtained by Executive from whatever source and will not, either during his
employment with the Company or thereafter, publish or disclose any part of such
Confidential Information in any manner at any time, or use the same except on
behalf of the Company, without the prior written consent of the Company. As a
condition of this Agreement, Executive agrees to execute and be bound by the
Employee Proprietary Information and Inventions Agreement, attached hereto as
Exhibit B.

         8.2      While employed by the Company and for one (1) year thereafter,
Executive agrees that, in order to protect the Company's confidential and
proprietary information from unauthorized use, Executive will not, either
directly or through others, solicit or attempt to solicit (i) any employee,
consultant or independent contractor of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or business entity; or (ii)
the business of any customer, vendor or distributor of the Company which, at the
time of termination or one (1) year immediately prior thereto, was listed on the
Company's customer, vendor or distributor list.

9.       SUCCESSORS. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.

10.      ASSIGNMENT AND BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of Executive and Executive's heirs, executors, personal
representatives, assigns, administrators and legal representatives. Because of
the unique and personal nature of Executive's duties under this Agreement,
neither this Agreement nor any rights or obligations under this Agreement shall
be assignable by Executive. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors, assigns and legal
representatives.

11.      NOTICES. All notices or demands of any kind required or permitted to be
given by the Company or Executive under this Agreement shall be given in writing
and shall be personally delivered (and receipted for) or mailed by certified
mail, return receipt requested, postage prepaid, addressed as follows:

         If to the Company:                 Elitra Pharmaceuticals
                                            3510 Dunhill Street, Suite A
                                            San Diego, California 92121

         With a copy to:                    Frederick T. Muto, Esq.
                                            Cooley Godward LLP
                                            4365 Executive Drive, Suite 1100
                                            San Diego, California 92121


                                       8.
<PAGE>

         If to Executive:                   Ed Baracchini, Ph.D.
                                            5163 Greenwillow Lane
                                            San Diego, California 92130

Any such written notice shall be deemed received when personally delivered or
three (3) days after its deposit in the United States mail as specified above.
Either Party may change its address for notices by giving notice to the other
Party in the manner specified in this section.

12.      CHOICE OF LAW. This Agreement shall be construed and interpreted in
accordance with the laws of the State of California, without regard to the
conflict of laws provision thereof.

13.      INTEGRATION. This Agreement contains the complete, final and exclusive
agreement of the Parties relating to the subject matter of this Agreement, and
supersedes all prior oral and written employment agreements or arrangements
between the Parties.

14.      AMENDMENT. This Agreement cannot be amended or modified except by a
written agreement signed by Executive and the Company.

15.      WAIVER. No term, covenant or condition of this Agreement or any breach
thereof shall be deemed waived, except with the written consent of the Party
against whom the wavier in claimed, and any waiver or any such term, covenant,
condition or breach shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other term, covenant, condition or breach.

16.      SEVERABILITY. The finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this Agreement
shall not render any other provision of this Agreement unenforceable, invalid or
illegal. Such court shall have the authority to modify or replace the invalid or
unenforceable term or provision with a valid and enforceable term or provision
which most accurately represents the Parties' intention with respect to the
invalid or unenforceable term or provision.

17.      INTERPRETATION; CONSTRUCTION. The headings set forth in this Agreement
are for convenience of reference only and shall not be used in interpreting this
Agreement. This Agreement has been drafted by legal counsel representing the
Company, but Executive has been encouraged, and has consulted with, his own
independent counsel and tax advisors with respect to the terms of this
Agreement. The Parties acknowledge that each Party and its counsel has reviewed
and revised, or had an opportunity to review and revise, this Agreement, and the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting Party shall not be employed in the interpretation
of this Agreement.

18.      REPRESENTATIONS AND WARRANTIES. Executive represents and warrants that,
to the best of Executive's knowledge, he is not restricted or prohibited,
contractually or otherwise, from entering into and performing each of the terms
and covenants contained in this Agreement, and that his execution and
performance of this Agreement will not violate or breach any other agreements
between Executive and any other person or entity.

19.      COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, all of which together shall contribute one
and the same instrument.


                                       9.
<PAGE>

         IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.

                                              THE COMPANY:

                                              ELITRA PHARMACEUTICALS



                                              By:  /s/ Harry Hixson
                                                   -----------------------------
                                                   Harry Hixson, Ph.D.
                                                   Chief Executive Officer


                                              EXECUTIVE:



                                                   /s/ Ed Baracchini
                                              ----------------------------------
                                                   Ed Baracchini, Ph.D.

                                              Dated:  8/2/99


                                      10.
<PAGE>

                                    EXHIBIT A

                          RELEASE AND WAIVER OF CLAIMS

         In exchange for payment to me of amounts pursuant to Section 6.3 or
Section 7.2 (and for the other benefits provided therein) of my Employment
Agreement (the "Agreement"), to which this form is attached, I hereby furnish
Elitra Pharmaceuticals (the "Company") with the following release and waiver.

         I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns and affiliates,
of and from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every kind
and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising at any time prior to and
including my employment termination date with respect to any claims relating to
my employment and the termination of my employment, including but not limited
to, claims pursuant to any federal, state or local law relating to employment,
including, but not limited to, discrimination claims, claims under the
California Fair Employment and Housing Act, and the Federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"), or claims for wrongful
termination, breach of the covenant of good faith, contract claims, tort claims,
and wage or benefit claims, including but not limited to, claims for salary,
bonuses, commissions, stock, stock options, vacation pay, fringe benefits,
severance pay or any form of compensation (other than the obligations under
Section 6.3 of the Agreement).

         I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.

         I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this waiver and release is knowing and
voluntary, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee of
the Company. I further acknowledge that I have been advised, as required by the
Older Workers Benefit Protection Act, that: (a) the waiver and release granted
herein does not relate to claims which may arise after this agreement is
executed; (b) I have the right to consult with an attorney prior to executing
this agreement (although I may choose voluntarily not to do so); (c) I have
twenty-one (21) days from the date I receive this agreement, in which to
consider this agreement (although I may choose voluntarily to execute this
agreement earlier); (d) I have seven (7) days following the execution of this
agreement to revoke my consent to the agreement; and (e) this agreement shall
not be effective until the seven (7) day revocation period has expired.

Date:
      ------------------                     -----------------------------------
                                             Ed Baracchini, Ph.D.


                                      11.
<PAGE>

                                    EXHIBIT B

            EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
<PAGE>

                             ELITRA PHARMACEUTICALS

                        EMPLOYEE PROPRIETARY INFORMATION
                            AND INVENTIONS AGREEMENT

                  In consideration of my employment or continued employment by
ELITRA PHARMACEUTICALS (the "Company"), and the compensation now and hereafter
paid to me, I hereby agree as follows:

                  1.       NONDISCLOSURE

         1.1      RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times
during my employment and thereafter, I will hold in strictest confidence and
will not disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

         1.2      PROPRIETARY INFORMATION. The term "PROPRIETARY INFORMATION"
shall mean any and all confidential and/or proprietary knowledge, data or
information of the Company. By way of illustration but not limitation,
"PROPRIETARY INFORMATION" includes tangible and intangible information relating
to antibodies and other biological materials, cell lines, samples of assay
components, media and/or cell lines and procedures and formulations for
producing any such assay components, media and/or cell lines, formulations,
products, processes, know-how, designs, formulas, methods, developmental or
experimental work, clinical data, improvements, discoveries, plans for research,
new products, marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers, and
information regarding the skills and compensation of other employees of the
Company. Notwithstanding the foregoing, it is understood that, at all such
times, I am free to use information which is generally known in the trade or
industry, which is not gained as result of a breach of this Agreement, and my
own, skill, knowledge, know-how and experience to whatever extent and in
whichever way I wish.

         1.3      THIRD PARTY INFORMATION. I understand, in addition, that the
Company has received and in the future will receive from third parties
confidential or proprietary information ("THIRD PARTY INFORMATION") subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. During the term of my
employment and thereafter, I will hold Third Party Information in the strictest
confidence and will not disclose to anyone (other than Company personnel who
need to know such information in connection with their work for the Company) or
use, except in connection with my work for the Company, Third Party Information
unless expressly authorized by an officer of the Company in writing.

         1.4      NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS.
During my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.

2.       ASSIGNMENT OF INVENTIONS.

         2.1      PROPRIETARY RIGHTS. The term "PROPRIETARY RIGHTS" shall mean
all trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.

         2.2      PRIOR INVENTIONS. Inventions, if any, patented or unpatented,
which I made prior to the commencement of my employment with the Company are
excluded from the scope of this Agreement. To preclude any possible uncertainty,
I have set forth on EXHIBIT B (Previous Inventions) attached hereto a complete
list of all Inventions that I have, alone or jointly with others, conceived,
developed or reduced to practice or caused to be conceived, developed or


                                      13.
<PAGE>

reduced to practice prior to the commencement of my employment with the Company,
that I consider to be my property or the property of third parties and that I
wish to have excluded from the scope of this Agreement (collectively referred to
as "PRIOR INVENTIONS"). If disclosure of any such Prior Invention would cause me
to violate any prior confidentiality agreement, I understand that I am not to
list such Prior Inventions in EXHIBIT B but am only to disclose a cursory name
for each such invention, a listing of the party(ies) to whom it belongs and the
fact that full disclosure as to such inventions has not been made for that
reason. A space is provided on EXHIBIT B for such purpose. If no such disclosure
is attached, I represent that there are no Prior Inventions. If, in the course
of my employment with the Company, I incorporate a Prior Invention into a
Company product, process or machine, the Company is hereby granted and shall
have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license
(with rights to sublicense through multiple tiers of sublicensees) to make, have
made, modify, use and sell such Prior Invention. Notwithstanding the foregoing,
I agree that I will not incorporate, or permit to be incorporated, Prior
Inventions in any Company Inventions without the Company's prior written
consent.

         2.3      ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4, and 2.6, I
hereby assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "COMPANY INVENTIONS."

         2.4      NONASSIGNABLE INVENTIONS. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under Section 2870
of the California Labor Code (hereinafter "SECTION 2870"). I have reviewed the
notification on EXHIBIT A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

         2.5      OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.

         2.6      GOVERNMENT OR THIRD PARTY. I also agree to assign all my
right, title and interest in and to any particular Company Invention to a third
party, including without limitation the United States, as directed by the
Company.

         2.7      WORKS FOR HIRE. I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of my employment and which are protectable by copyright are "works made for
hire," pursuant to United States Copyright Act (17 U.S.C., Section 101).

         2.8      ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company
in every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company's request on such assistance.


                                       14.
<PAGE>

In the event the Company is unable for any reason, after reasonable effort, to
secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.

3.       RECORDS. I agree to keep and maintain adequate and current records (in
the form of notes, sketches, drawings and in any other form that may be required
by the Company) of all Proprietary Information developed by me and all
Inventions made by me during the period of my employment at the Company, which
records shall be available to and remain the sole property of the Company at all
times.

4.       ADDITIONAL ACTIVITIES. I agree that during the period of my employment
by the Company I will not, without the Company's express written consent, engage
in any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (l) year after the date
of termination of my employment by the Company I will not induce any employee of
the Company to leave the employ of the Company.

5.       NO CONFLICTING OBLIGATION. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.

6.       RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement.

7.       LEGAL AND EQUITABLE REMEDIES. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.

8.       NOTICES. Any notices required or permitted hereunder shall be given to
the appropriate party at the address specified below or at such other address as
the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.

9.       NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of
the Company, I hereby consent to the notification of my new employer of my
rights and obligations under this Agreement.

10.      GENERAL PROVISIONS.

         10.1     GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This
Agreement will be governed by and construed according to the laws of the State
of California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in San Diego County, California for any lawsuit filed there against me
by Company arising from or related to this Agreement.

         10.2     SEVERABILITY. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration,


                                      15.
<PAGE>

geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.

         10.3     SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.

         10.4     SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.

         10.5     EMPLOYMENT. I agree and understand that nothing in this
Agreement shall confer any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with my right or the Company's
right to terminate my employment at any time, with or without cause.

         10.6     WAIVER. No waiver by the Company of any breach of this
Agreement shall be a waiver of any preceding or succeeding breach. No waiver by
the Company of any right under this Agreement shall be construed as a waiver of
any other right. The Company shall not be required to give notice to enforce
strict adherence to all terms of this Agreement.

         10.7     ADVICE OF COUNSEL. I acknowledge that, in executing this
Agreement, I have had the opportunity to seek the advice of independent legal
counsel, and I have read and understood all of the terms and provisions of this
Agreement. This Agreement shall not be construed against any party by reason of
the drafting or preparation hereof.

         10.8     ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2
of this Agreement shall apply to any time during which I was previously
employed, or am in the future employed, by the Company as a consultant if no
other agreement governs nondisclosure and assignment of inventions during such
period. This Agreement is the final, complete and exclusive agreement of the
parties with respect to the subject matter hereof and supersedes and merges all
prior discussions between us. No modification of or amendment to this Agreement,
nor any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.

        This Agreement shall be effective as of the first day of my employment
with the Company, namely:
----------------------.

        I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.

Dated:
        -----------

/s/ Ed Baracchini, Ph.D.
--------------------------------------------
(SIGNATURE)


--------------------------------------------
ED BARACCHINI, PH.D.


ACCEPTED AND AGREED TO:

ELITRA PHARMACEUTICALS


By: /s/ Harry F. Hixson, Jr., Ph.D.
   -----------------------------------------

Title: President, CEO
      --------------------------------------

--------------------------------------------
(Address)

--------------------------------------------

Dated: August 30, 2000
       ---------------


                                      16.
<PAGE>

                                    EXHIBIT A

                         LIMITED EXCLUSION NOTIFICATION


         THIS IS TO NOTIFY you in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between you and the Company does not
require you to assign or offer to assign to the Company any invention that you
developed entirely on your own time without using the Company's equipment,
supplies, facilities or trade secret information except for those inventions
that either:

                  1.       Relate at the time of conception or reduction to
         practice of the invention to the Company's business, or actual or
         demonstrably anticipated research or development of the Company;

                  2.       Result from any work performed by you for the
         Company.

         To the extent a provision in the foregoing Agreement purports to
require you to assign an invention otherwise excluded from the preceding
paragraph, the provision is against the public policy of this state and is
unenforceable.

         This limited exclusion does not apply to any patent or invention
covered by a contract between the Company and the United States or any of its
agencies requiring full title to such patent or invention to be in the United
States.

         I ACKNOWLEDGE RECEIPT of a copy of this notification.

                                  By: /s/ Ed Baracchini, Ph.D.
                                     -------------------------------------------
                                            ED BARACCHINI, PH.D.

                                  Date:
                                       -----------------------------------------
WITNESSED BY:


--------------------------------
(PRINTED NAME OF REPRESENTATIVE)


                                      A-1.
<PAGE>

                                    EXHIBIT B

TO:     ELITRA PHARMACEUTICALS

FROM:   ED BARACCHINI, PH.D.

        /s/ Ed Baracchini, Ph.D.
        ------------------------

DATE:
     -----------------------------

SUBJECT:       Previous Inventions

1.       Except as listed in Section 2 below, the following is a complete list
                  of all inventions or improvements relevant to the subject
                  matter of my employment by Elitra Pharmaceuticals (the
                  "Company") that have been made or conceived or first reduced
                  to practice by me alone or jointly with others prior to my
                  engagement by the Company:

        /X/       No inventions or improvements.

        / /       See below:

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------

/ /     Additional sheets attached.

         2.       Due to a prior confidentiality agreement, I cannot complete
the disclosure under Section 1 above with respect to inventions or improvements
                           generally listed below, the proprietary rights and
                           duty of confidentiality with respect to which I owe
                           to the following party(ies):

         INVENTION OR IMPROVEMENT   PARTY(IES)        RELATIONSHIP

1.
         ------------------------   ---------------   --------------------------
2.
         ------------------------   ---------------   --------------------------
3.
         ------------------------   ---------------   --------------------------

/ /     Additional sheets attached.

                                       1.