<PAGE>

                                                                   EXHIBIT 10.18

[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]










                COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT

                                 By and Between

             HOECHST RESEARCH & TECHNOLOGY DEUTSCHLAND GMBH & CO KG

                                       and

                                  NANOGEN, INC.








                                December 3, 1998





<PAGE>




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
<C>                                                                         <C>
1.       Definitions.........................................................3
2.       Research Program....................................................7
3.       Payment.............................................................9
4.       Reports and Records................................................10
5.       Confidentiality and Non-disclosure.................................10
6.       Intellectual Property Licenses.....................................10
7.       Intellectual Property and Patent Rights............................11
8.       Term and Termination...............................................13
9.       Representations and Warranties.....................................14
10.      Disclaimers........................................................14
11.      Insurance..........................................................15
12.      Notices............................................................15
13.      Dispute Resolution.................................................16
14.      Miscellaneous......................................................16


EXHIBITS

Exhibit A         HR&T Patent Applications
Exhibit B         Nanogen Patent Applications
Exhibit C         Annual Budget
Exhibit D         Program Inventions
Exhibit E         Research Program
Exhibit F         CPR Procedures
</TABLE>


                                        2



<PAGE>



                COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT

         THIS COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT is dated as of
December 3, 1998 by and between HOECHST RESEARCH & TECHNOLOGY DEUTSCHLAND GMBH &
CO KG, a German company, having a place of business at D-65926 Frankfurt am
Main, Germany (hereinafter, "HR&T"), and NANOGEN, INC., a Delaware corporation,
having its principal office and place of business at 10398 Pacific Center Court,
San Diego, California 92121 (hereinafter, "Nanogen").

                              W I T N E S S E T H :

         WHEREAS, Nanogen has developed certain technology related to
electronically addressable microchip oligonucleotide arrays ("Arrays"),
including Nanogen's Automated Programmable Electronic Matrix ("APEX")
technology; and

         WHEREAS, HR&T has developed certain technology related to combinatorial
and/or modular nanotechnology, including its Exponential Library by Association
of Sublibraries ("ELIAS") and its pRNA (and related oligonucleotide analog)
technology; and

         WHEREAS, HR&T and Nanogen have previously entered into a Letter
Agreement dated December 4, 1997 (the "Letter Agreement"); and

         WHEREAS, in accordance with the terms of the Letter Agreement
(including the paragraphs under the headings "Purpose of Collaboration" and
"Agreement Field"), HR&T and Nanogen wish to perform certain research and
development activities as contemplated therein.

         NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, the parties hereby agree as follows:

         1.   DEFINITIONS. As used in this Agreement:

         1.1 "Agreement" shall mean this Agreement and any exhibits, appendices,
attachments or addenda hereto, and any renewals or extensions of this Agreement.

         1.2 "HR&T Intellectual Property" shall mean and include all patentable
and unpatentable inventions, ideas, discoveries, improvements, design rights,
semiconductor mask works, works of authorship, trade secrets, know-how and any
equivalents thereof which are in existence as of the Effective Date or
thereafter, as are necessary to make, have made, use or sell a Product and are
owned by HR&T, including, but not limited to, HR&T's ELIAS and pRNA technologies
disclosed in the HR&T patent applications set forth in Exhibit A hereto (amended
with each new HR&T patent application necessary to make, have made, use or sell
a Product).

         1.3 "HR&T Patent Rights" shall mean all patents and patent applications
owned by HR&T which are in existence as of the Effective Date or thereafter,
including the patent applications set forth in Exhibit A hereto (amended with
each new HR&T patent application necessary to make, have made, use or sell a
Product), and which contain a claim necessary to make, have made, use or sell a
Product, including all divisionals, continuations, continuations-in-part,
re-examinations, reissues, and all foreign equivalents of any of the foregoing
in whole or in part.


                                        3
<PAGE>

         1.4 "HR&T Program Inventions" shall mean all Program Inventions made or
conceived by employees or others acting solely on behalf of HR&T; PROVIDED,
however, that HR&T Program Inventions shall not include Program Inventions which
utilize both APEX and ELIAS and/or pRNA technology.

         1.5 "Effective Date" shall mean January 1, 1998.

         1.6 "Executive Committee" shall mean a committee which shall (i) be
responsible for overseeing the Research Management Committee, (ii) set strategic
goals under this Agreement and the Letter Agreement, (iii) approve annual
budgets for the Research Program (the annual budget for the first year and a
proposed annual budget for the second year of the Research Program are set forth
in Exhibit C hereto), (iv) set research milestones and (v) decide when
milestones have been completed. The Executive Committee shall consist of three
(3) members appointed by Nanogen and three (3) members appointed by HR&T. All
decisions of the Executive Committee must be by unanimous consent of all members
of the Executive Committee.

         1.7 "Joint Program Inventions" shall mean (i) all Program Inventions
made or conceived by employees or others acting on behalf of HR&T jointly with
employees or others acting on behalf of Nanogen and (ii) all Program Inventions
which utilize both APEX and ELIAS and/or pRNA technology.

         1.8 "Nanogen Intellectual Property" shall mean and include all
patentable and unpatentable inventions, ideas, discoveries, improvements, design
rights, semiconductor mask works, works of authorship, trade secrets, know-how
and any equivalents thereof which are in existence as of the Effective Date or
thereafter, are necessary to make, have made, use or sell a Product and are
owned by Nanogen, including, but not limited to, Nanogen's APEX technology
disclosed in the Nanogen patents and patent applications set forth in Exhibit B
hereto (amended with each new patent application necessary to make, have made,
use or sell a Product).

         1.9 "Nanogen Patent Rights" shall mean all patents and patent
applications owned by Nanogen which are in existence as of the Effective Date or
thereafter, including the patents and patent applications set forth in Exhibit B
hereto (amended with each new patent application necessary to make, have made,
use or sell a Product), and which contain a claim necessary to make, have made,
use or sell a Product, including all divisionals, continuations,
continuations-in-part, re-examinations, reissues, and all foreign equivalents of
any of the foregoing in whole or in part.

         1.10 "Nanogen Program Inventions" shall mean all Program Inventions
made or conceived by employees or others acting solely on behalf of Nanogen;
PROVIDED, however, that Nanogen Program Inventions shall not include Program
Inventions which utilize both APEX and ELIAS and/or pRNA technology.

         1.11 "Primary Filing Countries" shall mean the United States, Canada,
European Community Countries and Japan.

         1.12 "Products" shall mean products or applications utilizing jointly
developed technology incorporating both Nanogen's APEX technology as disclosed
in Exhibit B hereto and HR&T's ELIAS and/or pRNA technology as disclosed in
Exhibit A hereto.

                                        4
<PAGE>

         1.13 "Program Inventions" shall mean and include all patentable and
unpatentable inventions, ideas, discoveries, improvements, design rights,
semiconductor mask works, works of authorship, trade secrets, know-how and any
equivalents thereof, and any patent applications or patents based thereon, made
or conceived during and as a result of the Research Program, all of which shall
be identified in Exhibit D to this Agreement, which Exhibit shall be amended
from time to time as warranted.

         1.14(a) "Reimbursable Costs" shall mean all direct and indirect costs
incurred by Nanogen in performing its obligations under this Agreement, which
may include without limitation, as applicable:

               (i) salaries and wages,

               (ii) payroll taxes,

               (iii) contract labor,

               (iv) fringe benefits,

               (v) expenses incurred in occupying facilities (including
          leasehold improvements) and equipment-related expenses, excluding
          depreciation and amortization expenses,

               (vi) recruitment and relocation,

               (vii) communications expense,

               (viii) supplies,

               (ix) development and prototype materials,

               (x) freight and transportation,

               (xi) training and education,

               (xii) travel expenses,

               (xiii) data processing costs,

               (xiv) patent, trademark and license fees and filing, prosecution
          and maintenance expenses for Nanogen Intellectual Property as set
          forth in Exhibit B,

               (xv) insurance,

               (xvi) professional services,

               (xvii) depreciation and amortization of facilities (including
          leasehold improvements) and equipment,

               (xviii) a financing charge for capital acquisitions made by
          Nanogen for use in performing work under this Agreement,

               (xix) outside purchased services,


                                        5
<PAGE>

               (xx) sales and use taxes (including such taxes applicable to the
          acquisition, use, transfer or deemed transfer of property),

               (xxi) periodic lease and rental payments under capital or
          financing leases,

               (xxii) costs of applying for regulatory approvals on Products
          approved by the Executive Committee, and fees payable to governmental
          agencies, including the United States Food and Drug Administration
          (the "FDA") and comparable foreign regulatory authorities, including
          expenses resulting from generation of chemical, toxicological,
          microbiological and pharmacological data and techniques, clinical data
          and product formulations and specifications, and

               (xxiii) periodic and special reports, including reports to the
          Research Management Committee.

         (b) In determining Reimbursable Costs, Nanogen will employ the
following accounting policies:

               (i) General use capital equipment, facilities and leasehold
          improvements will be assigned an estimated economic useful life and
          salvage value, if any, and depreciation and amortization will be
          computed using the straight-line method. Depreciation and amortization
          will be allocated to Reimbursable Costs under this Agreement directly
          or through overhead rates applied to direct head count.

               (ii) Such capital equipment purchased pursuant to agreement
          between both parties for use in connection with this Agreement will be
          charged directly against the budget in the quarter the expense was
          incurred.

               (iii) Total facilities expenses of Nanogen, excluding leasehold
          improvement amortization allocated to specific functional areas and
          net of any sublease revenues, will be allocated to Reimbursable Costs
          under this Agreement based on the ratio of direct personnel engaged in
          work under this Agreement to the total Nanogen head count.

               (iv) General and administrative expenses of Nanogen will be
          allocated to this Agreement directly or based on the ratio of total
          Reimbursable Costs to total operating expenses of Nanogen, excluding
          (in both instances) general and administrative expenses subject to
          such allocation, as agreed between the Controllers of both parties, as
          agreed between the Controllers of both parties.

               (v) All other indirect expenses not covered in Paragraphs (i)
          through (iv) of this Paragraph 1.14(b) which are in support of the
          Research Program will be allocated to Reimbursable Costs under this
          Agreement through overhead rates applied to Nanogen direct head count,
          as agreed between the Controllers of both parties.

               (vi) Notwithstanding the foregoing, for purposes of this
          Agreement, Reimbursable Costs shall not include direct and indirect
          costs for start-up of commercial manufacturing, installation of
          commercial production lines and commercial product manufacturing
          operations. These costs shall be addressed in connection with the
          contemplated joint venture agreement between the parties.

                                        6
<PAGE>

         (c) The term "capital acquisition" as used herein shall mean that
portion of capital equipment, facilities, leasehold improvements or other
property, whenever acquired by Nanogen, which are capitalized on Nanogen's
accounting records and which are either: (i) purchased directly by Nanogen; (ii)
financed by Nanogen under a conditional sale contract; (iii) financed by Nanogen
through a secured loan; or (iv) assets constructed in-house by Nanogen. Assets
acquired under capital or financing leases will not be considered capital
acquisitions for purposes of this Paragraph.

         (d) With respect to capital acquisitions financed by Nanogen with
specific borrowing, the financing charge referred to above will be in the amount
and at the time of the actual financing costs incurred by Nanogen. With respect
to capital acquisitions not financed by Nanogen with specific borrowing, the
financing charge will be based on the prime lending rate in effect from time to
time at Citibank N.A., New York, New York, plus two (2) percentage points, to
the extent permitted by applicable law, applied to Nanogen's net book value.
"Net book value" is defined as the gross capital acquisition value excluding
capital acquisitions financed by Nanogen with specific borrowing, less related
accumulated depreciation and amortization. The financing charge for each billing
period will be prorated to the extent depreciation or amortization of the
capital acquisitions has been allocated to work other than work under this
Agreement during such period. The financing charge will be calculated monthly
based on the net book value at the end of the preceding fiscal month.

         1.15 "Research Management Committee" shall mean a committee which shall
be responsible for preparing the Research Program and supervising, managing and
monitoring the progress of the Research Program, for conducting marketing
studies and for facilitating the open exchange of information between the
parties. The Research Management Committee shall consist of two (2) employees of
HR&T and two (2) employees of Nanogen, at least one of whom from each company
shall be at the research director level (or equivalent) or higher. Decisions
that are not taken unanimously by the Research Management Committee are to be
referred to the Executive Committee for resolution.

         1.16 "Research Program" shall mean the cumulative endeavors of the
parties to produce Products in accordance with the specifications, timetables,
milestones, reports and deliverables, as set forth in Exhibit E hereto, as it
may be amended from time to time. The Research Program shall be divided into two
phases, the "Research Phase", which shall mean all research activities up to and
including the development of a prototype and the "Product Development Phase,
which shall mean all post-prototype development activities relating to the
development of Products, for commercialization."

         2. RESEARCH PROGRAM.

         2.1 Each of HR&T and Nanogen shall use reasonable efforts to perform
their respective activities in accordance with the Research Program. Subject to
the terms and conditions of this Agreement, HR&T and Nanogen are free to
independently develop, market and sell any products other than Products.

         2.2 Each of HR&T and Nanogen shall promptly notify the other party, in
writing, through the Research Management Committee, of the existence of any new
Program Inventions.

         2.3 The Research Management Committee shall meet from time to time, but
at least once every three (3) months during the term of this Agreement,
alternating between the

                                        7
<PAGE>

headquarters of HR&T and Nanogen or at a mutually agreed location, to: (a)
review progress and ongoing resource allocation and budgeting matters of the
Research Program; (b) amend the Research Program as agreed by the parties; (c)
disclose Program Inventions which have not previously been disclosed in
accordance with Paragraph 2.2; and (d) review the status of patent filings with
respect to Program Inventions and, if necessary in view of such review, propose
amendments to Appendix A of this Agreement. All decisions taken by the Research
Management Committee must be by unanimous consent of all the members of the
Research Management Committee. In order to facilitate the disclosure of Program
Inventions and the review of the status of patent filings with respect to
Program Inventions, patent attorneys for HR&T and Nanogen may participate in all
such meetings.

         2.4 Within five (5) business days following each meeting pursuant to
Paragraph 2.3, the Research Management Committee shall cause to be prepared a
written summary of such meeting, which summary shall include, at a minimum: (a)
a list of all Program Inventions which have come into existence since the
Effective Date or since the previous meeting, whichever is applicable; (b) all
patent filings with respect to Program Inventions since the Effective Date or
since the previous meeting, whichever is applicable; and (c) a report regarding
the progress of the Research Program, which shall include the tracking of the
Research Program to budget and a report on any material budgetary implications
for changes to the Research Program. Such written summary shall be provided to
the Executive Committee.

         2.5 The Executive Committee shall meet from time to time, but at least
once every three (3) months during the term of this Agreement, alternating
between the headquarters of HR&T and Nanogen, a mutually agreed location or by
telephonic or video conference, to: (a) receive a report on the progress of the
Research Program by the Research Management Committee; (b) review the strategic
goals pursuant to the Letter Agreement and this Agreement; (c) approve annual
budgets under the Research Program and review the progress of the Research
Program against the budget; (d) establish, review and revise milestones where
appropriate, and (e) determine the level of progress toward achievement of
milestones and determine milestone completion. Within five (5) business days
after each meeting, the Executive Committee shall cause minutes to be prepared
and distributed to each party accurately documenting such meeting.

         2.6 Nanogen and HR&T may, upon reasonable notice during normal business
hours, (a) consult informally, during such visits and by telephone, with
personnel of the other party performing work on the Research Program, and (b)
with the other party's prior approval, which approval shall not be unreasonably
withheld, visit the sites of any tests or experiments being conducted by such
other party in connection with the Research Program, but only to the extent in
each case as such trials or other experiments relate to the Research Program. On
such visits an employee of the host company conducting the research or
development activities shall accompany the employee(s) of the visiting party. If
requested by the visiting party, the other party shall cause appropriate
individuals working on the Research Program to be available for meetings at the
location of the facilities where such individuals are employed at times
reasonably convenient to the party responding to such request. All information
revealed to representatives of the HR&T and Nanogen during the visits and
consultations provided for in this Paragraph 2.5 shall be treated as
confidential information in accordance with Paragraph 5 of this Agreement.

                                        8
<PAGE>

         3. PAYMENT.

         3.1 HR&T shall pay all of its own research and development costs and
shall pay *** of Nanogen's Reimbursable Costs incurred in performing its
obligations under this Agreement (the "Fee"). Nanogen's Reimbursable Costs
shall not exceed *** per year per full time equivalent researchers and staff
assigned to the Research Program. Neither party makes any warranty that these
costs and fees will be sufficient to complete the Research Program. The Fee
shall be payable by HR&T to Nanogen as follows:

         (a) The initial annual budget and a proposed budget for the second year
of the Research Program are attached as Exhibit C. Annually thereafter during
the term hereof, the Research Management Committee shall develop a budget for
the Research Program, including anticipated quarterly expenditures by each
party. The Research Management Committee shall submit each such subsequent
budget to the Executive Committee for its review and approval at least
forty-five (45) days prior to commencement of the next annual period. The
Executive Committee shall review such budget and inform the Research Management
Committee of its determination with respect to same within thirty (30) days
following its receipt of same. If the budget is not approved, the Research
Management Committee shall confer with the Executive Committee to attempt to
develop a mutually acceptable budget. If the Executive Committee cannot resolve
the dispute, then such dispute shall be resolved in accordance with the
provisions of Paragraph 13 hereof.

         (b) The Fee shall be payable to Nanogen in quarterly installments
commencing on January 1, 1998. Each quarterly installment shall be due not later
than five (5) business days following the first day of each quarter. Should a
major positive balance arise due to underuse of the budget, this will be
balanced with the fourth quarter payment in each year. All installments shall be
based upon an estimate of the Reimbursable Costs expected to be incurred by
Nanogen during its next quarterly period beginning on such date, up to a maximum
of Nanogen's budgeted amount for such quarter. Such estimate shall be set forth
in an invoice prepared by Nanogen in reasonable detail, signed by a duly
authorized officer of Nanogen and submitted to the Research Management Committee
at least twenty (20) days prior to the beginning of the quarterly period with
respect to which such payment is to be made. Each such invoice shall be due and
payable in full by HR&T prior to the beginning of such quarterly period.
Beginning with the second invoice under this Agreement, such invoice shall
include a reconciliation and adjustment for the period covered by the preceding
invoice to reflect any difference between actual Reimbursable Costs incurred by
Nanogen and estimated Reimbursable Costs for such period, up to a maximum of
Nanogen's budgeted amount for such quarter. Any amounts in excess of the
budgeted amount shall be subject to the review and approval of the Executive
Committee.

         3.2 If HR&T fails to make prompt and timely payment, Nanogen may give
written notice thereof, and unless HR&T within fifteen (15) days following
receipt of such notice makes such payment, Nanogen may at any time thereafter
until HR&T makes such payment suspend the research and development services
under this Agreement on written notice to HR&T.

         3.3 In the event Nanogen, in course of its research under this
Agreement, is required to lease equipment which Nanogen would ordinarily not
otherwise be required to lease, and HR&T agrees to such lease, HR&T will be
responsible for such lease payments.

---------------
*** Confidential material redacted and separately filed with the Commission.

                                        9
<PAGE>

         4. REPORTS AND RECORDS.

         4.1 Nanogen and HR&T shall provide to the Research Management Committee
within forty-five (45) days following the end of each quarterly period beginning
with the end of the first period on March 31, 1998, a report in such reasonable
detail as the Research Management Committee may request setting forth:

         (a) the Reimbursable Costs incurred by Nanogen and the costs incurred
by HR&T in performing its obligations under the Research Program during such
period;

         (b) the work performed by such party during such period; and

         (c) the status of the research and development of the Products at the
end of the period.

         4.2 Nanogen shall keep and maintain, in accordance with generally
accepted accounting principles and practices, proper and complete records and
books of account documenting all Reimbursable Costs. Each party agrees to permit
either nationally recognized certified public accountants or Controllers from
the other party to verify on a once annually basis the Reimbursable Costs or
costs billed or incurred pursuant to this Agreement; and Nanogen shall provide
annually a certification by nationally recognized certified public accountants
or its internal Controller as to Reimbursable Costs billed to HR&T in that year.
HR&T will keep confidential, and will not disclose to any third party, except
such disclosures as may be required by law, without the prior written consent of
Nanogen, information in statements delivered to HR&T or obtained by HR&T through
access of its independent certified public accounting firm or Controller to the
books and records of Nanogen. HR&T shall provide similar access and similar
certifications to Nanogen regarding its costs incurred under the Research
Program and Nanogen shall similarly keep such information confidential.

         5. CONFIDENTIALITY AND NON-DISCLOSURE. That certain Mutual Confidential
Disclosure Agreement effective as of February 20, 1997 between HR&T and Nanogen,
as amended (the "Confidentiality Agreement"), shall remain in full force and
effect.

         6. INTELLECTUAL PROPERTY LICENSES.

         6.1 (a) HR&T hereby grants solely during the term of this Agreement
to Nanogen, a worldwide, royalty-free, nonexclusive license in and to HR&T
Intellectual Property and HR&T Patent Rights, solely to use in research and
development activities pursuant to the Research Program under this Agreement.

         (b) HR&T recognizes that Nanogen has conducted considerable research
and development activities in connection with its permeation layer technology
and has protected certain of its advancements with intellectual property. HR&T
is willing, as part of this Agreement, to conduct additional research activities
directed toward Nanogen's permeation layer. To the extent HR&T invents any new
inventions or any improvements to Nanogen's inventions relating to permeation
layers with utility on Nanogen's Arrays which would constitute HR&T Intellectual
Property or HR&T Patent Rights or HR&T Program Inventions, HR&T will grant to
Nanogen a worldwide, royalty-free license to practice such intellectual property
(without the right to sublicense unless it applies to a Nanogen product).
Nanogen will be licensed to practice such intellectual property in connection
with any of its other joint venture arrangements

                                       10
<PAGE>

or corporate collaborations subject to a 2% of net sales royalty payable to any
joint venture or other joint relationship involving Nanogen and HR&T.

         (c) Nanogen hereby grants solely during the term of this Agreement, to
HR&T, a worldwide, royalty-free, nonexclusive license in and to Nanogen
Intellectual Property and Nanogen Patent Rights, solely to use in research and
development activities pursuant to the Research Program under this Agreement.

         6.2 Except as provided therein, the licenses granted in accordance with
Paragraphs 6.1(a) and (b) do not include a right to grant sublicenses.

         6.3 In the event that any substantial and continuing infringement of
any of the HR&T Patent Rights or Nanogen Patent Rights licensed hereunder comes
to the attention of either party hereto, such party shall promptly notify the
Executive Committee, which Committee will determine an appropriate action in
accordance with its authority.

         7. INTELLECTUAL PROPERTY AND PATENT RIGHTS.

         7.1 During the term of this Agreement, the entire right, title and
interest in all Program Inventions shall be owned jointly by HR&T and Nanogen
and may be used only as they mutually agree.

         7.2 Each party hereto promptly shall disclose to the other party the
making, conception or reduction to practice of Program Inventions by employees
or others acting on behalf of such party. Each of Nanogen and HR&T hereby
represents and warrants that all employees and others acting on its respective
behalf in performing its obligations under this Agreement shall be obligated
under a binding written agreement to assign to it, or as it shall direct, all
Program Inventions made or developed by such employees or others.

         7.3 Promptly following any disclosure of Program Inventions pursuant to
Paragraph 2.2 and Paragraph 7.2, the Research Management Committee, in
consultation with patent attorneys for HR&T and Nanogen, shall discuss and
determine, in good faith, whether patent applications should be prepared and
filed for such disclosed Program Inventions.

         7.4 If patent applications are to be prepared and filed pursuant to
Paragraph 7.3, then the Research Management Committee shall discuss and
determine, in good faith, for each of such Program Inventions, which of the
parties shall be responsible for the preparation, filing, prosecution and
maintenance of such patent applications in the Primary Filing Countries. Each of
such patent applications shall become part of the Program Inventions, and
Exhibit D shall be amended accordingly to evidence such Program Inventions.

         7.5 (a) If the Research Management Committee determines that a
particular patent application be filed in a country or countries in addition
to the Primary Filing Countries, then the Research Management Committee shall
determine which party shall be responsible for the filing, prosecution and
maintenance of such patent application, and such patent application shall be
part of the Program Inventions.

         (b) If the Research Management Committee determines not to file a
particular patent application in a country or countries in addition to the
Primary Filing Countries, either party, alone, after written waiver by the other
party, may file such particular patent application in such country or countries
and shall pay, without right to reimbursement thereof, all costs and expenses

                                       11
<PAGE>

for filing, prosecution and maintenance of patent application filed in such
country or countries, and notwithstanding the provisions of Paragraph 6.1, that
party shall own, exclusively, all right, title and interest in such patent
application.

         (c) If the other party of Paragraph 7.5(b) does not provide such
written waiver, then any such particular patent application shall be treated as
if the Research Management Committee had made a declaration to file the
particular patent application in a country or countries in addition to the
Primary Filing Countries in accordance with Paragraph 7.5(a).

         7.6 Each party shall keep the Research Management Committee currently
informed of the filing and progress of all material aspects of the prosecution
of all such patent applications and of the issuance of patents, and shall
consult with the Research Management Committee concerning any decisions which
would affect the scope of any issued claims and other prosecutorial details,
including the potential abandonment of any application.

         7.7 Upon request, each party shall execute and deliver to the other
party all descriptions, applications, assignments and other documents and
instruments as are necessary or proper to carry out the provisions of Paragraphs
7.1, 7.2, 7.3, 7.4, 7.5 and 7.6 without further compensation, except as
otherwise provided in Paragraph 1.15, and the parties shall cooperate with and
assist each other or their nominees in all reasonable ways and at all reasonable
times, including, but not limited to, testifying in all legal proceedings,
signing all lawful papers and in general performing all lawful acts reasonable,
necessary or proper, to aid the other party in obtaining, maintaining, defending
and enforcing all lawful patent, copyright, trade secret, know-how and the like
in the Primary Filing Countries and elsewhere.

         7.8 Except as otherwise provided in this Agreement, under no
circumstances shall either party, as a result of this Agreement, obtain any
ownership interest or other right in any technology, know-how, trade secrets,
patents, pending patent applications or products of the other party,
including items owned, controlled or developed by the other, or transferred
by the other to such party at any time pursuant to this Agreement. Upon
termination of this Agreement unless otherwise provided in another agreement
between HR&T and Nanogen, (i) all HR&T Program Inventions, Nanogen Program
Inventions and Joint Program Inventions, which consist solely of improvements
to HR&T Intellectual Property, shall be the sole property of HR&T, (ii) all
Nanogen Program Inventions, HR&T Program Inventions and Joint Program
Inventions, which consist solely of improvements to  Nanogen Intellectual
Property, shall be the sole property of Nanogen, and (iii) Nanogen, at its
option, shall have the right for 120 days after the date of termination of
this Agreement to negotiate with HR&T to enter into a license for HR&T's
rights to any Program Invention not included within the provisions of clause
(i) or (ii) above. If Nanogen chooses to exercise such option, HR&T and
Nanogen shall negotiate in good faith to enter into a license for such
Program Invention or Inventions. Any such license shall provide that Nanogen
will pay a reasonable royalty to HR&T for the license rights to such Program
Invention or Inventions. In determining what is a reasonable royalty rate,
HR&T's relative contribution to such program Invention or Inventions shall be
taken into account. It is understood and agreed by the parties hereto that
this Agreement does not grant to either party any license or other right,
other than the licenses granted in Paragraph 6.1, the assignments granted in
Paragraph 7.1 and the licenses granted in Paragraph 7.8.

         7.9 (a) During the term of this Agreement, Nanogen and HR&T each
acknowledge each other's interest in publishing certain of its results to
obtain recognition within the scientific community and to advance the state
of scientific knowledge. Each party also recognizes the mutual interest in
obtaining valid patent protection and protecting business interests.
Consequently, each party, its employees or consultants wishing to make a
publication (including any oral disclosure made without obligation of
confidentiality) relating to work performed by such party as part of the
Research Program (the "Publishing Party") shall transmit to the Research
Management Committee a copy of the proposed written publication at least
forty-five (45) days prior to submission for publication, or an outline of
such oral disclosure at least fifteen (15) days prior to presentation. The
Research Management Committee shall have the right (i) to propose
modifications to the publication for patent reasons and (ii) to request a
reasonable delay in publication in order to protect patentable information.

         (b) If the Research Management Committee requests such a delay, the
Publishing Party shall delay submission or presentation of the publication for a
period of ninety (90) days to enable patent applications protecting each party's
rights in such information to be filed in

                                       12
<PAGE>

accordance with this Article 7. Upon the expiration of forty-five (45) days, in
the case of proposed written disclosures, or fifteen (15) days, in the case of
proposed oral disclosures, from transmission to the Research Management
Committee, the Publishing Party shall be free to proceed with the written
publication or the presentation, respectively, unless the Research Management
Committee has requested the delay described above.

         8. TERM AND TERMINATION.

         The R&D Collaboration between Nanogen and HR&T shall continue on its
terms for a guaranteed period of three (3) years from its effective date of
January 1, 1998.

         8.4 All records required to be maintained pursuant to Paragraph 4.2
shall be retained for a period of at least five (5) years following the
termination of this Agreement.

         9. REPRESENTATIONS AND WARRANTIES.

         9.1 HR&T hereby represents and warrants to Nanogen that it has full
authority and power to enter into this Agreement, that it has secured any and
all necessary approvals, permits or consents deemed necessary or advisable for
the consummation of the transactions contemplated hereby and that, upon
execution by HR&T and Nanogen, this Agreement shall immediately be a valid and
binding obligation of HR&T, enforceable in accordance with its terms.

         9.2 Nanogen hereby represents and warrants to HR&T that it has full
authority and power to enter into this Agreement, that it has secured any and
all necessary approvals, permits or consents deemed necessary or advisable for
the consummation of the transactions contemplated hereby and that, upon
execution by HR&T and Nanogen, this Agreement shall immediately be a valid and
binding obligation of Nanogen enforceable in accordance with its

                                       13
<PAGE>

terms and that the execution, delivery and performance of its obligations under
this Agreement will not cause Nanogen to breach or violate any agreement between
Nanogen and Becton, Dickinson and Company and its affiliated entities.

         9.3 HR&T hereby represents and warrants to Nanogen that: (a) it is the
owner of the entire right, title and interest to the HR&T Intellectual Property
and HR&T Patent Rights, and (b) to HR&T's knowledge, the HR&T Patent Rights or
the HR&T Intellectual Property has not infringed, and is not now infringing, any
valid third party rights and HR&T has not received any notice of infringement
from any third party respecting the HR&T Patent Rights or the HR&T Intellectual
Property.

         9.4 Nanogen hereby represents and warrants to HR&T that: (a) it is the
owner of the entire right, title and interest to the Nanogen Intellectual
Property and the Nanogen Patent Rights and (b) to Nanogen's knowledge, the
Nanogen Patent Rights or the Nanogen Intellectual Property has not infringed,
and is not now infringing, any valid third party rights and Nanogen has not
received any notice of infringement from any third party respecting the Nanogen
Patent Rights or the Nanogen Intellectual Property.

         10. DISCLAIMERS. THE PARTIES EACH HEREBY DISCLAIM ANY AND ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THEIR
RESPECTIVE RESEARCH AND DEVELOPMENT EFFORTS HEREUNDER, INCLUDING, WITHOUT
LIMITATION, (A) WHETHER ANY PRODUCT CAN BE SUCCESSFULLY DEVELOPED BY EITHER OF
THE PARTIES, (B) WHETHER THE PRODUCTS AS DEVELOPED BY EITHER OF THE PARTIES
HEREUNDER CAN BE COMMERCIALLY MARKETED, (C) THE ACCURACY, PERFORMANCE, UTILITY,
RELIABILITY, TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS,
MERCHANTABILITY OR SUITABILITY FOR ANY PARTICULAR PURPOSE WHATSOEVER OF ANY
PRODUCT, AND (D) WHETHER ANY PRODUCTS MANUFACTURED WILL NOT INFRINGE ANY
THIRD-PARTY PATENT, COPYRIGHT OR SIMILAR RIGHT.

         11. INSURANCE. The parties shall each, at all times during the term of
this Agreement, carry and maintain such insurance as each believes to be
commercially reasonable against risks from actions contemplated under this
Agreement. Such insurance shall be with insurers of recognized responsibility
and may be carried under blanket policies maintained by each of the parties.

         12. NOTICES. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally, by facsimile (upon
receipt of appropriate written

                                       14

<PAGE>

confirmation) or sent by registered or certified mail, return receipt requested,
or by overnight courier service, postage prepaid as follows:

         If to Nanogen:

         Nanogen, Inc.
         10398 Pacific Center Court
         San Diego, California 92121
Attn:    Chief Executive Officer
         Facsimile - (619) 546-7717

         with a copy to:

         Nanogen, Inc.
         10398 Pacific Center Court
         San Diego, California  92121
         Attn:  General Counsel
         Facsimile - (619) 546-7717

         and if to HR&T:

         Hoechst Research & Technology Deutschland GmbH & Co KG
         D-65926 Frankfurt am Main
         Attn:  President
         Facsimile - 011-49-69-309-588

         with a copy to:


or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so received (in case of personal delivery, facsimile or overnight
courier service delivery) or upon refusal to accept delivery thereof.

         13. DISPUTE RESOLUTION. Every reasonable effort will be made by the
parties hereto to resolve disputes arising hereunder with litigation as a last
resort. Any dispute arising out of or relating to this Agreement which is not
resolved by the Executive Committee or is not within the purview of the
Executive Committee shall be submitted to the Chief Executive Officer of Nanogen
and the President of HR&T for resolution. If those officers cannot resolve the
dispute with twenty (20) days of submission of such dispute, then within ten
(10) days thereafter, either party may, but shall not be obligated to, initiate
nonbinding mediation of the controversy or claim under the Center for Public
Resources Model ADR Procedures for Mediation of Business Disputes attached
hereto as Exhibit F (the "CPR Procedures"). Once the mediation is initiated by
one party, the other party agrees to participate in and conduct mediation in
accordance with the CPR Procedures in good faith and not to pursue other
remedies while such mediation is proceeding. If neither party initiates
mediation within ten (10) days of the officers referenced above failing to
resolve the dispute, or if the dispute has not been resolved by such mediation
within sixty (60) days following initiation of mediation, either party may
pursue all available remedies. All applicable statutes of limitations and
defenses based upon the passage of time

                                       15
<PAGE>

shall be tolled while the negotiation and mediation procedures set forth in this
Paragraph 13 are pending. The parties will take such action, if any, as may be
reasonably be required to effectuate such tolling. Notwithstanding the
foregoing, the remedy at law for any breach of the provisions of this Agreement
may be inadequate, and, accordingly, an aggrieved party seeking equitable relief
or remedies for such a breach shall have the right and is hereby granted the
privilege, in addition to all other remedies at law or in equity, to proceed
directly in a court of competent jurisdiction to seek temporary or preliminary
equitable relief. Each party shall pay its own costs incurred in attempting to
resolve a dispute pursuant to the mediation procedures set forth in this
Paragraph 13 without the right to recover such costs from the other party and
shall share equally the cost of mediation.

         14. MISCELLANEOUS.

         14.1 This Agreement and the Confidentiality Agreement together
constitute the entire understanding among the parties with respect to the
subject matter hereof and supersede and replace all prior agreements,
understandings, writings and discussions between the parties relating to said
subject matter. However, it is the understanding of both parties that the terms
laid down for a joint venture or other joint arrangement in the Letter Agreement
shall survive until a definitive agreement for such an arrangement has been
reached.

         14.2 This Agreement may be amended only by a written instrument
executed by the parties hereto. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect its rights
at a later time to enforce the same. No waiver by any party of any condition or
term in any one or more instances shall be construed as a further or continuing
waiver of such condition or term or any other condition or term.

         14.3 The terms and provisions contained in this Agreement are for the
sole benefit of the parties and their successors and assigns, and they shall not
be construed as conferring and are not intended to confer any rights on any
other persons.

         14.4 Any delays in or failure of performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God; acts, regulations, or laws
of any government; strikes or other considered acts of workers; fires; floods;
explosions; riots; wars; rebellion; and sabotage; and any time for performance
hereunder shall be extended by the actual time of delay caused by such
occurrence.

         14.5 This Agreement shall not be assignable by either party, nor shall
any of its obligations hereunder be delegated to a third party, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. In the event that the other party does not
respond to a request from a party for consent to an assignment or delegation
within fifteen (15) days following written notice requesting such consent, such
party's shall be deemed to be granted. In addition, a condition to any
assignment or delegation hereunder shall be that the successor in interest
expressly agrees in writing to assume the assigning or delegating party's
obligations hereunder. All of the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
permitted successors and assigns. No such assignment shall release the assigning
party from its obligations hereunder. Notwithstanding the foregoing, the consent
of the other party shall not be required in connection with a merger involving
either HR&T or Nanogen or with respect to an assignment of this

                                       16
<PAGE>

Agreement in connection with, as the case may be, the acquisition, sale of all
or substantially all of the assets of HR&T or Nanogen, or a change of control or
similar transaction.

         14.6 If any provision(s) of this Agreement are or become invalid, or
are ruled illegal by any court of competent jurisdiction, or are deemed
unenforceable under then current applicable law from time to time in effect
during the term hereof, it is the intention of the parties hereto that the
remainder of this Agreement shall not be affected thereby. It is further the
intention of the parties that in lieu of each such provision which is invalid,
illegal, or unenforceable, there be substituted or added as part of this
Agreement, a provision which shall be as similar as possible in economic and
business objectives as intended by the parties to such invalid, illegal, or
unenforceable provision, but which shall be valid, legal, and enforceable, and
shall be mutually agreed by the parties.

         14.7 This Agreement shall be governed by and construed in accordance
with the laws of the State of California without regard to its choice of laws
principles. This Agreement shall be construed and interpreted without
application of any principle or rule to the effect that ambiguities are to be
construed against the party responsible for drafting the agreement. The headings
contained herein are for reference purposes only and shall not in any way affect
the meaning of this Agreement.

         14.8 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one instrument.

                                       17
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement through
duly authorized representatives as of the Effective Date.

NANOGEN, INC.                                     HOECHST RESEARCH &
                                                  TECHNOLOGY DEUTSCHLAND
                                                  GMBH & CO KG
By /s/ HOWARD C. BIRNDORF                         By /s/ DR. REINER HENNIG
   -------------------------------------             --------------------------
         Howard C. Birndorf                              President
   Chairman and Chief Executive Officer
                                                  By /s/ DR. HANS-ULLRICH HAPPE
                                                     --------------------------
                                                    Research Operation Director


                                       18
<PAGE>
                                    EXHIBIT A

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                 NANOGEN APEX APPLICATIONS
-----------------------------------------------------------------------------------------------------------------
                          TITLE                                     APPLICATION NO.                        DATE
---------------------------------------------------------- ----------------------------------- ------------------
<S>                                                        <C>                                 <C>
Active Programmable Electronic Devices for Molecular       USP 5,605,662                       Issued: 02/25/97
Biological Analysis and Diagnostics       (203/218)
---------------------------------------------------------- ----------------------------------- ------------------
Methods for Electronic Stringency Control for Molecular    SN: 08/271,882                      Filed: 07/07/94
Biological Analysis and Diagnostics.      (207/263)
---------------------------------------------------------- ----------------------------------- ------------------
Molecular Biological Diagnostic Systems Including          USP 5,632,957                       Issued: 05/27/97
Electrodes                                (209/062)
---------------------------------------------------------- ----------------------------------- ------------------
Apparatus and Methods for Active Programmable Matrix       SN: 08/534,454                      Filed: 09/27/95
Devices                                   (216/054)
---------------------------------------------------------- ----------------------------------- ------------------
***                                                        ***                                 ***
---------------------------------------------------------- ----------------------------------- ------------------
Methods for Electronic Synthesis of Polymers               SN: 08/725,976                      Filed: 10/04/96
(222/211)

---------------------------------------------------------- ----------------------------------- ------------------
***                                                        ***                                 ***
---------------------------------------------------------- ----------------------------------- ------------------
Methods for Electronic Perturbation Analysis of            SN: 08/855,058                      Filed: 05/14/97
Biological Materials                      (224/175)
---------------------------------------------------------- ----------------------------------- ------------------
***                                                        ***                                 ***
---------------------------------------------------------- ----------------------------------- ------------------
Self-Addressable Self-Assembling Microelectronic           Not Yet Received                    Filed: 12/05/97
Integrated Systems, Component Devices, Mechanisms,
Methods and Procedures for Molecular Biological Analysis
and Diagnostics                           (227/194)
---------------------------------------------------------- ----------------------------------- ------------------
</TABLE>

  *** Confidential material redacted and separately filed with the Commission.

                                       19
<PAGE>

                                    EXHIBIT B

                 C.R.&T'S "ELIAS" AND "pRNA" PATENT APPLICATIONS

                                       ***



















  *** Confidential material redacted and separately filed with the Commission.

                                       20
<PAGE>

                                    EXHIBIT C

                             TOTAL PROGRAM (YEAR 1)

         Personnel of Hoechst *** Nanogen ***
         Materials of Hoechst *** Nanogen ***





























  *** Confidential material redacted and separately filed with the Commission.

                                       21
<PAGE>

                                 MATERIAL COSTS

         TDM/PROJECT YEAR:


         SYNTHESIS

         Equipment (Synthesizer. . .)     ***      (Depreciation over *** Years)
         Analytics                        ***
         Chemicals                        ***
                                          ---

         Total                            ***

         PERMEATION LAYER

         Equipment (Spin Coater. . .)     ***      (Depreciation over *** Years)
         Materials (Chemicals)            ***
                                          ---

         Total                            ***

         DIRECT READ-OUT

         Equipment                        ***
                                          ---

         TOTAL                            *** (***TUS$)



  *** Confidential material redacted and separately filed with the Commission.

                                       22
<PAGE>

                                EXHIBIT C (CR&T)

                                    PERSONNEL

                           TASK                                    HEADCOUNT

SYNTHESIS
         PhD, Organic Chemists                                        ***
         Postdocs, Lab Technicians                                    ***

PERMEATION LAYER
         PhD's, Organic Chemist
         Physicist                                                    ***
         PhD (Japan)                                                  ***
         Postdocs, Lab Technicians                                    ***

DIRECT ELECTRONIC READ-OUT                                            ***
         PhD's (Japan)
         Lab Technicians                                              ***
         PhD Biophysical-Chemist                                      ***

PROGRAM MANAGEMENT                                                    ***

Total Headcount                                                       ***



                                       23
<PAGE>

                                     SHEET 1

                               EXHIBIT C (NANOGEN)

                                PERSONNEL/NANOGEN

                   TASK                YEAR 1                       YEAR 2
                   ----                ------                       ------
CHIP                                    ***                           ***
         Process engineer               ***                           ***
         Software engineer              ***                           ***
         Test engineer                  ***                           ***
         Test Tech                      ***                           ***
         Packaging Engineer             ***                           ***
         Packaging Tech                 ***                           ***

INSTRUMENT                              ***                           ***
         Electrical engineer            ***                           ***
         Software engineer              ***                           ***
         Mechanical engineer            ***                           ***

PERMEATION LAYER
         Chemical engineer              ***                           ***

ASSAY DEVELOPMENT
         Physical chemist               ***                           ***
         Biochemist                     ***                           ***

PROGRAM MANAGEMENT                      ***                           ***
         Program manager                ***                           ***

TOTAL HEADCOUNT                         ***                           ***

---------------
*** Confidential material redacted and separately filed with the Commission.

                                       24
<PAGE>

                                     SHEET 1

                             MATERIALS COSTS/NANOGEN

                        TASK           YEAR 1                          YEAR 2
                        ----           ------                          ------
CHIP
         Design                         $***                            $***
         Masks                          $***                            $***
         Wafer fab                      $***                            $***
         Test                           $***                            $***
         Packaging                      $***                            $***
              TOTAL                     $***                            $***

INSTRUMENTS
         Read-out                       $***
         Probe placement                                                $***
              TOTAL                     $***                            $***

PERMEATION LAYER/CHEMISTRY              $***
         Perm Layer
         Attachment Chem
              TOTAL                     $***                            $***
ASSAY                                   $***                            $***
         Reagents                       $***                            $***
              TOTAL PROGRAM             $***                            $***


--------
*** Confidential material redacted and separately filed with the Commission.

                                       25
<PAGE>

                                    EXHIBIT D
                               PROGRAM INVENTIONS

                                      None.



<PAGE>


                                    EXHIBIT E
                                RESEARCH PROGRAM

                                      None.



<PAGE>


                                    EXHIBIT F
                                 CPR PROCEDURES

                                CPR LEGAL PROGRAM


                      TO DEVELOP ALTERNATIVES TO LITIGATION


                                                            MODEL ADR PROCEDURES


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


                                                  MEDIATION OF BUSINESS DISPUTES
                                                                  (Revised 1991)









                        CENTER FOR PUBLIC RESOURCES, INC.
   Madison Avenue New York, NY 10017-3122 Tel (212) 949-6490 Fax (212) 949-8859

<PAGE>

I.   THE MODEL PROCEDURE


A.   Proposing Mediation


     Any party to a business dispute may unilaterally initiate a mediation
process by contacting the other party or parties, orally or in writing, and
suggesting the use of a neutral mediator to mediate efforts to arrive at a
resolution. If the parties have made a contractual commitment to mediate
disputes between them, or if they have subscribed to the CPR Corporate Policy
Statement on Alternatives to Litigation, that commitment or policy will be
invoked.


B.   Selecting the Mediator


     Once the parties have agreed in principle to a mediation process, or at
least to seriously consider mediation, they will discuss the selection of a
mediator. Any party may suggest one or more candidates, or they may request a
neutral organization, such as CPR, to propose candidates. The mediator must be
selected by agreement of all parties.


     Any candidate for the role of mediator shall promptly disclose to the
parties any circumstances known to him or her which would cause reasonable doubt
regarding the candidate's impartiality. Each party shall promptly disclose any
such circumstances to the other party or parties. These disclosure obligations
shall be continuing until the mediation is concluded. If any such circumstances
have been disclosed, before or after the individual's appointment as mediator,
the individual shall not serve, unless all parties agree.


     The mediator's compensation rate will be determined before appointment.
Such compensation, and any other costs of the process, will be shared equally by
the parties, unless they otherwise agree. If a party withdraws but the procedure
continues, the withdrawing party will not be responsible for any costs incurred
after its withdrawal. Before appointment the mediator will assure the parties of
his or her availability to conduct the proceeding expeditiously.


C.   Groundrules of Proceeding


     Once a mediator has been selected and has agreed to serve, the
representatives of the parties will meet jointly with the mediator to discuss
the following groundrules and any different or additional groundrules the
mediator or a party wishes to propose as to the manner in which the process is
to be conducted.


     1. The process is voluntary and non-binding.


     2. Each party may withdraw at any time after attending the first session
and prior to execution of a written settlement agreement.


     3. The mediator shall be neutral and impartial.


     4. The mediator controls the procedural aspects of the mediation. The
parties will cooperate fully with the mediator.


     (a) The mediator is free to meet and communicate separately with each
party.


     (b) The mediator will decide when to hold joint meetings with the parties
and when to hold separate meetings. The mediator will fix the time and place of
each session and the agenda, in consultation with the parties. There shall be no
stenographic record of any meeting. Formal rules of evidence will not apply.


     (c) The mediator may request that there be no direct communication between
the parties or between their attorneys without the concurrence of the mediator.


     5. Each party may be represented by more than one person, e.g. a business
executive and an attorney. Participation of a business executive is to be
particularly encouraged. The mediator may limit the number of persons
representing each party. At least one representative of each party will be
authorized to negotiate a settlement of the dispute.


     6. The process will be conducted expeditiously. Each representative will
make every effort to be available for meetings.


     7. The mediator will not transmit information received from any party to
another party or any third party unless authorized to do so by the party
transmitting the information.


     8. The entire process is confidential. The parties and the mediator will
not disclose information regarding the process, including settlement terms, to
third parties, unless the parties otherwise agree. The process shall be treated
as a compromise negotiation for purposes of the Federal Rules of Evidence and
state rules of evidence.

<PAGE>

     9. The parties will refrain from pursuing administrative and/or judicial
remedies during the mediation process, insofar as they can do so without
prejudicing their legal rights.


     10. Unless all parties and the mediator otherwise agree in writing,


     (a) the mediator will be disqualified as a witness, consultant or expert in
any pending or future investigation, action or proceeding relating to the
subject matter of the mediation (including any investigation, action or
proceeding which involves persons not party to this mediation); and


     (b) the mediator and any documents and information in the mediator's
possession will not be subpoenaed in any such investigation, action or
proceeding, and all parties will oppose any effort to have the mediator and
documents subpoenaed.


     11. If the dispute goes into arbitration, the mediator shall not serve as
an arbitrator, unless the parties and the mediator otherwise agree in writing.


     12. The mediator, if a lawyer, may freely express views to the parties on
the legal issues of the dispute.


     13. The mediator may obtain assistance and independent expert advice with
the agreement of and at the expense of the parties. The disclosures required by
the Second paragraph of Section II.B shall apply to independent experts.


     14. Neither CPR nor the mediator shall be liable for any act or omission in
connection with the mediation.


     15. The mediator may withdraw at any time by written notice to the parties
(i) for overriding personal reasons, (ii) if the mediator believes that a party
is not acting in good faith, or (iii) if the mediator concludes that further
mediation efforts would not be useful.


     16. At the inception of the mediation process, each party and
representative will agree in writing to all provisions of this Model Procedure,
as modified by agreement of the parties. A model Submission Agreement is
attached hereto as Appendix B.


D. Presentation to the Mediator


     Upon entering into mediation each party will submit to the mediator a
statement summarizing the background and present status of the dispute and such
other material and information as it deems necessary to familiarize the mediator
with the dispute. Submissions may be made in writing and orally. The parties may
agree to submit jointly certain records and other materials.


     The mediator may request any party to provide clarification and additional
information. The mediator may raise legal questions and arguments and may
request any party's attorney to brief legal issues.


     The mediator may request each party, separately or at a joint meeting, to
present its case informally to the mediator.


     The parties are encouraged to exchange written statements and other
materials they submit to the mediator. Such an exchange is likely to further
each party's understanding of the other party's viewpoint. Except as the parties
otherwise agree, the mediator shall keep confidential any submitted written
materials or information. The parties and their representatives are not entitled
to receive or review any such materials or information submitted to the mediator
by another party or representative, without the concurrence of the latter. At
the conclusion of the mediation process, upon request of a party the mediator
will return to that party all written materials and information which that party
had provided to the mediator.


E. Exchange of Information


     If any party has a substantial need for documents or other material in
the possession of another party, the parties shall attempt to agree on the
exchange of requested documents or other material. Should they fail to agree,
either party may request a joint meeting with the mediator who shall assist
the parties in reaching agreement. At the conclusion of the mediation
process, upon the request of a party which provided documents or other
material to one or more other parties, the recipients shall return the same
to the originating party without retaining copies thereof.


F.   Negotiation of Terms


     The mediator may promote settlement in any manner the mediator believes is
appropriate. Once the mediator is familiar with the case, the mediator will hold
discussions with the parties' representatives. The mediator will decide when to
hold joint meetings and when to meet or confer separately with each party.


     The parties are expected to initiate proposals for settlement unless, by
prior agreement, they expect the mediator to be the first to propose the terms
of settlement. Each party or the mediator shall provide a rationale for any
settlement terms proposed.

<PAGE>

     If the parties fail to develop mutually acceptable settlement terms, before
terminating the procedure the mediator may submit to the. parties a final
settlement proposal which the mediator considers fair and equitable to all
parties. The parties will carefully consider the mediator's proposal and, at the
request of the mediator, will discuss the proposal with the mediator. If a party
does not accept the final proposal, it shall advise the mediator of the specific
reasons why the proposal is unacceptable.


     Efforts to reach a settlement will continue until (a) a written settlement
is reached, or (b) the mediator concludes and informs the parties that further
efforts would not be useful, or (c) one of the parties or the mediator withdraws
from the process; provided that if there are more than two parties, the
remaining parties may elect to continue following the withdrawal of a party.


G. Settlement


     If a settlement is reached, the mediator, or a representative of a party,
will draft a written settlement document incorporating all settlement terms,
including mutual general releases from all liability which may relate to the
subject matter of the dispute. This draft will be circulated among the parties
amended as necessary, and formally executed.


     If litigation is pending, the settlement may provide that the parties will
arrange for dismissal of the case promptly upon execution of the settlement
agreement. The parties also may request the court to enter the settlement
agreement as a consent judgment.