LICENSE AND SUPPLY AGREEMENT

     This License and Supply Agreement ("Agreement"),  effective as of the 30th
day of June 1998, is by and between Japan Energy Corporation, a corporation duly
organized and existing under the laws of Japan and having its principal place of
business  at  10-1,  Toranomon  2-chome,   Minato-ku,   Tokyo  105-8407,   Japan
(hereinafter  referred  to  as  "JE"),  and  Agouron  Pharmaceuticals,  Inc.,  a
corporation  duly  organized  and  existing  under  the  laws  of the  State  of
California,  U.S.A.,  and having its principal  place of business at 10350 North
Torrey Pines Road, La Jolla,  California 92037, U.S.A.  (hereinafter referred to
as "Agouron").  JE and Agouron are sometimes  hereinafter  each referred to as a
Party (collectively "Parties") to this Agreement.

                          BACKGROUND

     JE possesses  technical  information  and know-how  pertaining to a certain
pharmaceutical compound designated JE-2147 and its related compounds that may be
useful  in  the  treatment  and  prevention  of  Human   Immunodeficiency  Virus
infections and other diseases.

     The Parties entered into a Confidentiality Agreement effective December 31,
1997  (the  "Confidentiality  Agreement")  and  a  Material  Transfer  Agreement
effective  December 31, 1997 (the "Material  Transfer  Agreement"),  pursuant to
which Agouron has undertaken certain evaluations of JE-2147.

     JE holds patents rights pertaining to JE-2147 and its related compounds.

     Agouron  desires to obtain a license  from JE to enable  Agouron to develop
and commercialize  Product (as hereinafter  defined) in certain countries of the
world,  and JE is  willing to grant  such  license  on the terms and  conditions
hereinafter  set forth.

     The Parties wish to cooperate under the terms of this Agreement to optimize
the development and commercialization of Product.

     The Parties also wish to confirm their arrangement  regarding the supply of
Compound by JE to Agouron and the supply of Product by Agouron to JE (both terms
as hereinafter defined).

     On June 30,  1998,  the parties  executed and  delivered to each other,  by
telefax,  a prior version of this  Agreement.  The parties now wish to supersede
such prior  version of this  Agreement  and to formally  enter into this revised
version of this Agreement.

     NOW, THEREFORE, in consideration of the premises, and the mutual covenants,
benefits and obligations set forth herein, the Parties agree as follows:
<PAGE>


                        ARTICLE I - DEFINITIONS

     When used in this  Agreement,  the following  terms shall have the meanings
set  out in this  Article  I.  Except  as  otherwise  explicitly  provided,  all
references to Articles and Sections  shall refer to the Articles and Sections of
this Agreement, and all references to Attachments,  Exhibits and Schedules shall
refer to the Attachments, Exhibits and Schedules to this Agreement, all of which
are incorporated herein by reference.

     Section 1.01 "Affiliate"  means any person, organization or entity that is,
directly or indirectly, controlling, controlled by, or under common control with
JE or  Agouron,  as the  case  may  be.  The  term  "control"  (including,  with
correlative meaning, the terms "controlled by" and "under common control with"),
as  used  with  respect  to  any  person,  organization  or  entity,  means  the
possession,  directly  or  indirectly,  of the  power to  direct,  or cause  the
direction  of, the  management  and  policies of such  person,  organization  or
entity,  whether through the ownership of voting  securities,  or by contract or
court  order or  otherwise.  The  ownership  of voting  securities  of a person,
organization  or entity shall not, in and of itself,  constitute  "control"  for
purposes  of this  definition,  unless  said  ownership  is of a majority of the
outstanding securities entitled to vote of such person,  organization or entity.
Affiliate shall also mean a limited partnership in which a subsidiary of Agouron
and/or JE is a general partner.

      Section 1.02      "Combination Product" means *



     Section 1.03  "Compound"  means the chemical compound known by the JE code
name JE-2147 ("JE-2147"), whose chemical structure is as follows:
                                                         *

                          (chemical structure)




The definition of Compound also means:  (i) *



     Section  1.04  "Compound  Supply Plan" means the supply plan under which JE
will provide  Compound to Agouron in accordance  with the  provisions of Section
4.04.

     Section 1.05      "Control," "Controlled" or "Controlling" means *




                                       2
<PAGE>



     Section 1.06      "Development Program" means *














      Section 1.07      "Development Program Patent Rights" means *


















        Section 1.08      "Development Program Technology" means *











                                       3
<PAGE>



     Section 1.09  "Dossier"  means the document that is filed with and approved
by a government or health authority for purposes of Registration, for example, a
Marketing Authorization Application.

     Section 1.10   "Effective Date" means June 30, 1998.

     Section  1.11  "EMEA"  means the  European  Agency  for the  Evaluation  of
Medicinal Products.

     Section 1.12   "FDA" means the United States Food and Drug Administration.

     Section 1.13   "Field" means *


     Section 1.14 "Initial Commercial Sale" means the first commercial sale of a
Product *



     Section  1.15 "JE  Territory"  means Japan,  Taiwan,  South Korea and North
Korea.

     Section 1.16 "JE Patent Rights" means: *






     Section 1.17 "JE Technology" means *








     Section 1.18 "Licensed  Territory" means all countries of the world, except
for Japan, Taiwan, South Korea and North Korea.

     Section 1.19 "MAA" means Marketing Authorization Application.



                                       4
<PAGE>


     Section 1.20 "Major  Market  European  Country"  means the United  Kingdom,
France, Germany, Spain or Italy.

     Section  1.21 "Net Sales"  means the gross  amount  invoiced for Product by
Agouron, its Affiliates and sublicensees to non-Affiliated third parties,  other
than separately itemized  transportation  costs, and sales taxes and other taxes
that are  directly  linked to and  included  in the gross  amount  invoiced,  as
computed on a product-by-product basis for the countries concerned, less: *







     Section 1.22 "New Drug  Application" or "NDA" means a new drug application,
product license application or comparable  regulatory submission to the FDA, the
EMEA or an equivalent  agency of a country in the  Territory  for  permission to
commence commercial sale of a Product.

     Section 1.23 "Patent Rights" means, collectively, *


     Section 1.24     "Product" means any *



     Section 1.25  "Registration"  means the official approval by the government
or health authority in a country (or  supra-national  organization,  such as the
European Agency for the Evaluation of Medicinal Products) that is required for a
Product to be offered for sale in such country, including such authorizations as
may be required for the production, importation, pricing, reimbursement and sale
of such  Product,  and for  subsequent  regulatory  filings for line  extensions
and/or additional indications of such Product.

     Section 1.26 "Territory" means *

     Section 1.27 "Trade  Dress" means any  materials  directly  supporting  the
commercialization  of a  Product,  including,  but not  limited  to,  packaging,
package inserts,  advertising or selling aids, brochures,  mailings and/or other
marketing or packaging materials.

     Section 1.28  "Trademark(s)"  means any  trademark  selected and owned by a
Party and  registered  (or applied  for) by such  Party,  its  Affiliate(s)  and
sublicensee(s)  in the  Territory  for use in  connection  with the marketing of
Products.  The  definition  of  Trademark(s)  shall not refer to trade  names or
designs such as logos used by a Party to designate the name of such Party.


                                       5
<PAGE>


     Section 1.29 "United  States" or "U.S." means the United States of America,
its territories,  possessions and protectorates (including Puerto Rico), and the
District of Columbia.

     Section 1.30 "Valid Claim" means a *




                        ARTICLE II - COMMERCIAL RIGHTS

     Section   2.01  License   Grants.   To  implement   the   development   and
commercialization of Compound and/or Products, the Parties, subject to the other
applicable  provisions of this  Agreement,  grant and accept the license  rights
provided below in this Article II.

     (a) Subject to the provisions of Section 2.01(c),  and Article V, JE grants
Agouron the exclusive right,  even as to JE (with right of sublicense),  to use,
offer for sale, sell and/or import in or into the Licensed  Territory,  Compound
and Products under  applicable JE Patent Rights and  Development  Program Patent
Rights, and using applicable JE Technology and Development Program Technology.

     (b) *















     (c) *










                                       6
<PAGE>





     (d) *





     (e) Agouron grants JE *




     (f) Agouron grants JE *









     (g) Agouron grants JE *











                                       7
<PAGE>






     (h) Subject to the provisions of Section 4.04, Agouron shall have *




     Subject to the provisions of Section 4.04, JE shall have a *











     (i) *












     (j) *








     (k) *







                                       8
<PAGE>





     (l) Agouron  agrees to use  reasonable  efforts to not sell  Product in the
Licensed  Territory to persons who it knows,  or has reason to know, will resell
and/or transfer such Product outside of the Licensed Territory.

     Section 2.02 Discontinuance of the Development Program

     (a) Agouron  shall,  in a timely manner,  use  reasonable  diligence in the
development  and  Registration  of a  Product  in  the  Field  in  the  Licensed
Territory.  Reasonable  diligence  means a commercially  reasonable  standard of
effort  based on the  commercial  potential  for such  Product  in the  Licensed
Territory.   Development   efforts   undertaken  by  Agouron's   Affiliates  and
sublicensees shall be attributed to Agouron. *













     (b) *
















                                       9
<PAGE>




     Section 2.03 Diligent Efforts to Market *


















           ARTICLE III - SHARING AND PROTECTION OF INTELLECTUAL PROPERTY

     Section 3.01 Patents.

     (a) *



















                                       10
<PAGE>


     (b) *








     (c) *










     (d) *











     (e) *









                                       11
<PAGE>



     (f) *





     (g) *













     (h) *


















     (i) *




                                       12
<PAGE>



     (j) *









     (k) *






















     (l) *



     Section 3.02  Infringement  of Patents of Third  Parties.  Each Party,  its
Affiliates and sublicensees, and their respective employees and agents shall use
diligent efforts to avoid known 


                                       13
<PAGE>

infringement  of patents of any third party *



































          Section 3.03 Trademarks. *







                                       14
<PAGE>













          Section 3.04 Information Exchange. *











          Section 3.05 Confidentiality.  Except as otherwise expressly specified
     in this Agreement and except for the proper  exercise of any license rights
     granted or rights reserved under this Agreement,  JE and Agouron shall each
     keep in  confidence  and  shall  each use its  best  efforts  to cause  its
     respective Affiliates,  employees, directors, agents, consultants, clinical
     research  associates,  outside  contractors,   clinical  investigators  and
     sublicensees  to whom it is permitted to disclose  information  pursuant to
     the terms of this  Agreement to retain in confidence all  confidential  and
     proprietary information of the other Party, including the *



          Without limiting the foregoing, JE and Agouron shall each exercise the
     same  degree of  diligence  and care with  respect  to the  above-described
     information  as  it  exercises  with  respect  to  its  other   proprietary
     information.  Each Party  represents  to the other Party that it  maintains
     policies and procedures designed to prevent the unauthorized  disclosure of
     its proprietary data and information. *






                                       15
<PAGE>






          The preceding  obligations  of  confidentiality  shall be waived as to
     information  that the  Party  claiming  waiver  can  demonstrate,  based on
     written  records:  (i) was in the public  domain at the time of  disclosure
     hereunder;  (ii) comes into the public domain through no fault of the Party
     claiming waiver;  (iii) was known to the Party claiming waiver prior to its
     disclosure under this Agreement,  unless such information was obtained from
     the  other  Party  on  a  confidential   basis;  (iv)  is  disclosed  on  a
     non-confidential basis to the Party claiming waiver by a third party having
     a lawful right to make such disclosure on a non-confidential  basis; (v) is
     published  with the prior mutual  agreement  of the  Parties,  after having
     given consideration to appropriate  commercial factors; (vi) comes into the
     public domain through governmental publication of a patent application;  or
     (vii) is  required  to be  disclosed  to file a patent or other  regulatory
     application or to comply with applicable laws and regulations. *



          The  Parties  acknowledge  and  agree  that the  Parties'  rights  and
     obligations under the  Confidentiality  Agreement and the Material Transfer
     Agreement  between the Parties which were both  originally  entered into on
     December 22, 1997 are hereby  superseded by the  provisions of this Section
     3.05.

          Section  3.06  Publication.  JE  and  Agouron  each  acknowledges  the
     interests  of the other Party in  publishing  certain of the results of its
     development and Registration of a Product to obtain  recognition within the
     scientific community and to advance the state of scientific knowledge.  The
     Parties also  recognize  their mutual  interests in obtaining  valid patent
     protection for their drug products. Consequently, a Party, its employees or
     consultants wishing to make a publication shall *



















                                       16
<PAGE>










              ARTICLE IV - DEVELOPMENT AND COMMERCIALIZATION STRUCTURE

          Section 4.01  Coordination.  Coordination of the Parties'  development
     and  commercialization  efforts for  Compound  and Products in the Licensed
     Territory shall be carried out as specified in Sections 4.02 and 4.03.

          Section  4.02  Development  and   Registration;   Responsibility   for
     Development  Costs. JE and Agouron  acknowledge  their mutual  intention to
     cooperate in a commercially  reasonable manner in the timely development of
     Compound and Products in the  Territory.  The Parties  further  acknowledge
     their  mutual  willingness  to  discuss  ad  hoc  agreements  to  establish
     appropriate mechanisms for such cooperation.  Recognizing the importance of
     timely initiation of development activities,  however, JE and Agouron agree
     to the following  basic approach to development of Compound and Products in
     the Licensed Territory,  and to the conduct and funding of their respective
     development activities.

         (a)      *








          (b) The Parties  acknowledge  that it will be  necessary  to amend and
     update the Development Program as additional  information becomes available
     concerning the  prerequisites  necessary for Registration of Product in the
     Licensed Territory. *





                                       17
<PAGE>





          (c) As soon as possible  after the  execution of this  Agreement,  the
     Parties shall  promptly  reach  agreement on the basic terms under which JE
     will  manufacture  and supply  Compound  to  Agouron,  its  Affiliates  and
     sublicensees *



          (d) Agouron shall be responsible *







          (e) Agouron,* , shall be responsible  for submission of Dossiers for a
     Product to the regulatory  authorities in the Licensed Territory in pursuit
     of approvals to sell such Product and *


          All Dossiers for Product in the Licensed  Territory  shall be owned by
     and be in the name of Agouron.

         (f)      JE shall cooperate with Agouron to *




         (g)      JE will be responsible for *



         (h)      JE shall be responsible *



          (i) To the extent required to support Registrations of a Product (such
     as for  Investigational  New Drug Applications and New Drug  Applications),
     Agouron shall have

                                       18
<PAGE>


*





          (j) Each Party agrees to use its diligent  efforts in  responding in a
     timely manner, *






          (k) Agouron shall keep JE informed of its progress in the  development
     and Registration of Products. This information exchange shall include, *




















          (l) JE and Agouron shall each use qualified persons in the development
     activities of the Development Program.

          (m) All  work in  connection  with  the  development  of  Compound  or
     Products,  to the extent required by applicable laws or regulations,  shall
     be  conducted  in  accordance   with  Good   Laboratory   Practices,   Good
     Manufacturing  Practices  and Good  Clinical  Practices,  as such  rules of
     practice  are amended  from time to time.  Each Party in the conduct of its
     activities  shall comply with all applicable laws, rules and regulations of
     each  jurisdiction   within  the  Territory 

                                       19
<PAGE>

     that are applicable to the  development,  testing,  manufacture,  labeling,
     packaging,  storage,  marketing,  distribution,  sale,  promotion  and
     import or export of  Product.distribution,  sale, promotion and import
     or export of Product.


          (n) *



          Section 4.03 Marketing.  * JE and Agouron agree to the following basic
     approach to the marketing of Products in the Licensed Territory, and to the
     conduct  of  their  marketing  activities  in  their  respective  marketing
     territories.

         (a)      Agouron shall be responsible for *






         (b)      *




          (c) Agouron  shall keep JE informed of  Agouron's  current and planned
     marketing activities in the Licensed Territory. *

          JE shall keep Agouron informed of JE's marketing  activities in the JE
     Territory. *











          (d) Unless prohibited by law or regulation, the labeling for a Product
     in the countries in the Licensed Territory shall *

                                       20
<PAGE>




         (e)      *





          (f) Agouron and JE shall each use  qualified  persons in its marketing
     activities for a Product in its respective marketing territories.

          (g) Agouron shall be responsible for responding, in a timely manner, *















          (h) Each Party, its Affiliates and sublicensees, agrees throughout the
     duration of this Agreement to notify the other Party immediately in English
     of *













                                       21
<PAGE>









          (i) Each Party further agrees to immediately notify the other Party of
     any information *





          The information to be provided hereunder shall be provided in English.

          (j) Without  limiting the foregoing,  it is also  understood that each
     Party may notify its Affiliates or sublicensees of *

          Section  4.04  Supply  of  Compound.  It is  anticipated  that  timely
     development  of Compound  and/or a Product will require the  manufacture of
     significant  amounts  of  the  Compound,   and  that  successful  worldwide
     commercialization  of a Product will  require  annual  production  of large
     quantities of the Compound.

          (a) In accordance  with the provisions of Section 4.04,  Agouron shall
     purchase  from JE,  and JE shall  timely  deliver  Compound  for use in the
     development  and  Registration  activities  for  Compound  and/or  Product,
     including using Compound to make Product to be used in clinical studies and
     trials and for special license sales. *

















                                       22
<PAGE>





















          (b) In accordance  with the provisions of Section 4.04,  Agouron shall
     purchase  from JE, and JE shall timely  deliver  Compound for use in making
     the  finished  dosage  form(s)  of  Product  to be  sold  in  the  Licensed
     Territory, *


          (c) JE shall  maintain  books of account  and  complete  and  accurate
     records of all of its FBMCC of procuring and/or producing such Compound *












          (d) *







                                       23
<PAGE>







          (e) *


          (i)


          (ii)





          (iii)


                                       24
<PAGE>

                                                                                
          (iv) Sale and delivery of Compound  will be subject to an  agreed-upon
form of purchase order being issuedby Agouron and accepted by JE. *

                                                                                




          (v) *








          (vi) *











          (vii) *



          (f) *








                                       25
<PAGE>
 
               (i) *



               (ii) *

          (g) *















          Section 4.05 Supply of Product. The details for manufacturing  Product
     will be determined after the execution of this Agreement,  according to the
     following conditions:

          (a) Agouron shall be responsible for manufacturing Product.

          (b) *










          (c) *


                                       26
<PAGE>




          (d) *










         











          (e) *

                 (i)      *






                  (ii)     *







                                       27
<PAGE>



                  (iii)    *





                  (iv)     *










                  (v)      *




         (f)      *




         (g)      *












                                       28
<PAGE>




       (h)      *













                     ARTICLE V - ADVANCE PAYMENTS AND ROYALTIES

         Section 5.01      Advanced Payments and Royalties.

          (a)  Subject  to the terms and  conditions  of this  Agreement  and in
     consideration  for the  rights  granted to  Agouron  under this  Agreement,
     Agouron shall make the following one-time-only payments to JE:


 <TABLE>
<CAPTION>
                                                                                 PAYMENT
                          MILESTONE EVENT                                     (U.S. Dollars)
<S>                                                                            <C>                                <C>

 (i)  Within thirty (30)days of execution of this Agreement
      (actually paid July 17,  1998)                                           $6,000,000

 (ii) Within thirty (30) days of the earlier of: (1) the first completion
      of a Phase I Clinical Study for any Product;
      or (2) September 30, 2000*                                               $3,000,000

 (iii)Within thirty (30) days of the earlier of: (1)
      the first completion of a Pilot Phase II Study
      for any Product; or (2) December 31, 2000*                               $3,000,000

 (iv) Within thirty (30) days of first U.S. NDA or
      EMEA filing for any Product                                              $6,000,000


 (v)  Within thirty (30) days of first U.S. NDA
      approval for any Product                                                 $3,000,000

 (vi) Within thirty (30) days of the first European Commission
      approval for any Product (but not before receipt
      of pricing approval for such Product in
      at least one (1) Major Market European Country)                          $5,000,000

      TOTAL PAYMENTS:                                                         $26,000,000
         *    *

</TABLE>

                                       29
<PAGE>








*











         (b)      *





          (c) The Parties agree that the  calculation of the amount of royalties
     due shall be subject to and in accordance with the following provisions:

                  (i)      *




                  (ii)     *










                  (iii)    *







                                       30
<PAGE>






                  (iv)     *





                  (v)      *









                  (vi)     *











                  (vii)    *









                  (viii)   *




                                       31
<PAGE>























         Section 5.02      General Licensing Terms.

         (a)      *








          (b) The Parties  agree that the  accounting  and payment of  royalties
     shall comply with the following terms and conditions:

                  (i)      *




                  (ii)     *







                                       32
<PAGE>







                  (iii)    *











          (iv) Agouron shall maintain and cause its Affiliates and  sublicensees
     to maintain books of account and complete and accurate  records  pertaining
     to the sale or other disposition of Products and of the royalties and other
     amounts payable under this Agreement in sufficient detail to *






















                                       33
<PAGE>



         (c)      *





         (d)      *



         Section 5.03      Foreign Currency.

          (a) Net Sales and any milestone and royalty amounts shall be stated in
     United States dollars.  Remittal of milestone  payments and royalties shall
     be made in United States dollars. *






         (b)      *


















                         ARTICLE VI - TERM AND TERMINATION

         Section 6.01      Termination for Breach  *




                                       34
<PAGE>














         Section 6.02      Termination by Agouron.

         (a)      *

















         (b)      *












                                       35
<PAGE>

         (c)      *



          Section 6.03 Termination by Mutual  Agreement.  The Parties may at any
     time  terminate  this  Agreement,  in part or in its  entirety,  by  mutual
     written agreement.

          Section 6.04 Termination Upon  Bankruptcy..  In the event that a Party
     is  subject  to  any  proceeding  under  the  bankruptcy  laws,   including
     appointment of a receiver,  trustee,  liquidator or other  custodian of its
     business  or  substantially  all of its  assets,  and such  proceeding,  if
     involuntary,  is not dismissed or discharged within one hundred fifty (150)
     days  after  such  proceeding  is  instituted,  or  upon  the  liquidation,
     dissolution,  or winding up of its business,  then this  Agreement,  at the
     election of the other Party,  shall be terminated in its entirety for cause
     upon a notice in writing of at least  fifteen  (15) days from the Party who
     is not bankrupt or insolvent.

          Section 6.05 Disposition of Inventory In the event of the cancellation
     or  termination  of any  license  rights  with  respect to a  Product,  the
     inventory  of  such  Product  may  be  sold  for  up  to *  after  date  of
     cancellation or termination,  provided the required  payments,  if any, are
     paid thereon.

         Section 6.06      Effect of Termination.  *










                    ARTICLE VII - WARRANTIES AND COVENANTS;
                   INDEMNITIES; INSURANCE; DISPUTE RESOLUTION

         Section 7.01      Warranties and Covenants.

          (a) Each Party  represents and warrants to the other Party that it has
     the legal power,  authority  and right to enter into this  Agreement and to
     perform all of its respective  obligations set forth herein,  including the
     attachments hereto.


                                       36
<PAGE>


          (b) JE  acknowledges  and  represents  that  the  patents  and  patent
     applications  listed  in  Schedule  2  are  the  only  patents  and  patent
     applications included within the JE Patent Rights that are jointly owned by
     JE and a third  party,  and that such patents and patent  applications  are
     only subject to the  conditions and  restrictions  noted on Schedule 2 and,
     except as otherwise noted on Schedule 2, that the license of such JE Patent
     Rights to Agouron  under the terms of this  Agreement  do not  require  the
     consent of such joint owner. *

          (c) JE represents  and warrants that, as of the date this Agreement is
     executed,  it was not aware of the existence of any patent  applications or
     patents owned and Controlled by a third party covering  Compound that might
     materially  prevent  the  Parties  from  commercializing  Compound  in  the
     Licensed  Territory,  except for the patent  application listed in Schedule
     7.01(c).

          (d) JE represents and warrants that: (i) it has the right to grant the
     licenses  set forth in Article  II; and (ii) there are no suits,  claims or
     proceedings  pending in any court or by or before any governmental  body or
     agency with  respect to the JE Patent  Rights or JE  Technology  that would
     materially  interfere  with the  ability of Agouron to fully  exercise  the
     licenses  granted  to it under  this  Agreement,  including  the  exclusive
     license rights under Section 2.01(a).  Agouron represents that, to the best
     of its knowledge, it does not have any know-how, trade secret, experimental
     data, formula, expert opinion, experimental procedure or other confidential
     and/or  proprietary  information   specifically  concerning  the  Compound,
     intermediates thereof, or a Product that was developed or acquired by or on
     behalf of  Agouron  before the  Effective  Date of this  Agreement  that is
     necessary for either:  (i)  the  formulation  (including  sustained-release
     formulations),  manufacture,  use and/or  application of Product;  or (ii)
     obtaining  Registration  of  Product,   including,   but  not  limited  to,
     information  and data  arising  out of  pre-clinical  and  clinical  trials
     involving Product and all NDA applications for Product,  and which is under
     the Control of Agouron.

          (e) Each Party  covenants  that it shall not commit any act or fail to
     take any action that, in any significant way, would be in conflict with its
     material obligations under this Agreement and the attachments hereto.

          (f) Each Party  promises to comply in all material  respects  with the
     terms of the  licenses  granted  to it under this  Agreement,  and with all
     federal, state, local and foreign laws, rules and regulations applicable to
     the development, manufacture,  distribution, import and export, and sale of
     pharmaceutical products pursuant to this Agreement.

          (g) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,  EACH OF
     THE PARTIES MAKES NO WARRANTIES,  EXPRESSED OR IMPLIED,  OF MERCHANTABILITY
     OR FITNESS FOR A PARTICULAR  PURPOSE OF ANY SUBJECT MATTER  INCLUDED WITHIN
     THE  CLAIMS OF THE PATENT  RIGHTS,  INCLUDING  THE  COMPOUND.  THE  PARTIES
     UNDERSTAND AND AGREE THAT  DEVELOPMENT  AND  COMMERCIALIZATION  OF COMPOUND
     AND/OR PRODUCTS WILL INVOLVE APPROVAL BY REGULATORY  AUTHORITIES,  AND THAT
     NO  PARTY IS  GUARANTEEING  THE  SAFETY  OR  EFFICACY  OF  COMPOUND  AND/OR
     PRODUCTS,  



                                       37
<PAGE>

    OR THAT  COMPOUND  AND/OR  PRODUCTS  WILL  RECEIVE THE  REQUIRED APPROVALS.


         Section 7.02      Indemnities; Insurance.


          (a) Agouron shall  indemnify and hold harmless JE and its  Affiliates,
     employees,  and agents (a "JE Indemnified  Party") from and against any and
     all liabilities,  losses, damages, costs, or expenses (including reasonable
     investigative  and  attorneys'  fees)  which the JE  Indemnified  Party may
     incur, suffer or be required to pay resulting from or arising in connection
     with any product  liability or other  claims  (other than claims for patent
     infringement)  arising  from the use by any person of any  Product,  to the
     extent such product  liability or other claim  results from the  negligent,
     reckless  or   intentional   misconduct  of  Agouron,   its  Affiliates  or
     sublicensees,  or their respective  employees and agents,  or on account of
     Agouron's  failure to fulfill its  obligations or  undertakings  under this
     Agreement; provided, however, that in no event shall Agouron be liable to a
     JE Indemnified Party for any indirect, incidental, special or consequential
     damages, including loss of revenues or profits from sales of Products.

          (b) JE shall  indemnify and hold harmless  Agouron and its Affiliates,
     employees, and agents (an "Agouron Indemnified Party") from and against any
     and  all  liabilities,  losses,  damages,  costs,  or  expenses  (including
     reasonable  investigative and attorneys' fees) that the Agouron Indemnified
     Party may incur, suffer or be required to pay, resulting from or arising in
     connection  with any product  liability or other claims  (other than claims
     for patent infringement) arising from the use by any person of any Product,
     to the extent  such  product  liability  or other  claim  results  from the
     negligent,  reckless or  intentional  misconduct  of JE, its  Affiliates or
     sublicensees,  or their respective  employees and agents,  or on account of
     JE's  failure  to  fulfill  its  obligations  or  undertakings  under  this
     Agreement;  provided,  however,  that in no event  shall JE be liable to an
     Agouron  Indemnified  Party  for  any  indirect,   incidental,  special  or
     consequential damages,  including loss of revenues or profits from sales of
     Products.

          (c) To the extent that a product  liability or other claim (other than
     a claim for patent  infringement)  results from the negligent,  reckless or
     intentional   misconduct  of  more  than  one  Party,   their   Affiliates,
     sublicensees,  or their respective  employees and agents, the Parties agree
     to share in an equitable manner such liabilities,  losses,  damages, costs,
     or expenses in  proportion  to the  relative  fault of each of the Parties,
     their Affiliates, sublicensees, or their respective employees and agents.

          (d) Unless the Parties agree otherwise, all other liabilities, losses,
     damages,  costs,  or  expenses  (including  reasonable   investigative  and
     attorneys' fees) under this Section 7.02 relating to or involving a Product
     in a country, except as provided by the terms of Sections 7.02(a),  (b) and
     (c),  shall be the  responsibility  of the Party  marketing such Product in
     such country.  The Party  marketing a Product in a country shall  indemnify
     the  non-marketing  Party  in such  country  from and  against  any and all
     liabilities,  losses,  damages,  costs, or expenses  (including  reasonable
     investigative  and  attorneys'  fees)  which such  non-marketing  Party may
     incur, suffer or be required to pay resulting from or arising in connection
     with any product  liability or other  claims  (other than claims for patent
     infringement)  arising  from the use by any person of such  Product in

                                       38
<PAGE>

     such country. Section 3.02 sets forth the Parties' liability obligations 
     arising from claims for patent infringement.


          (e) The  aforesaid  obligations  of the  indemnifying  Party  shall be
     subject to the indemnified Party fulfilling the following obligations:

          (i) The indemnified  Party shall fully cooperate with the indemnifying
     Party in the defense of any claims,  actions,  etc., which defense shall be
     controlled by the indemnifying Party.

          (ii)  The  indemnified  Party  shall  not,  except  at its  own  cost,
     voluntarily make any payment or incur any expense with respect to any claim
     or suit without the prior written consent of the indemnifying  Party, which
     consent such Party shall not be required to give.

          (iii) The  indemnified  Party  shall  notify  the  indemnifying  Party
     promptly after receipt of a notice of the commencement of any litigation or
     threat thereof that may reasonably lead to a claim for indemnification.

          (f) The  Parties  agree to  maintain  appropriate  amounts  of product
     liability  insurance  coverage  and to have the other Party  included as an
     additional insured on such policies.

          Section 7.03 Dispute  Resolution.  In the event of any  controversy or
     claim arising out of or relating to any provision of this  Agreement or any
     term or condition  hereof, or the performance by a Party of its obligations
     hereunder,  the  Parties  shall try to settle  their  differences  amicably
     between  themselves.  If the  representatives  of the Parties are unable to
     reach  agreement  on any such  issue,  the  issue  shall be  submitted  for
     consideration, in the case of Agouron, to a designee of its Chief Executive
     Officer and, in the case of JE, to a designee of its  Managing  Director of
     Pharmaceuticals and Biobusiness  Division.  If such designees are unable to
     agree,  then the issue shall be  resolved,  in the case of Agouron,  by its
     Chief Executive Officer and, in the case of JE, by its Managing Director of
     Pharmaceuticals  and Biobusiness  Division.  Any unresolved  issues arising
     between the Parties  relating to,  arising out of, or in any way  connected
     with this Agreement or any term or condition  hereof, or the performance by
     a Party of its obligations  hereunder,  whether before or after termination
     of this Agreement, except as otherwise provided in this Agreement, shall be
     finally resolved by binding  arbitration.  Whenever a Party shall decide to
     institute  arbitration  proceedings,  it shall give written  notice to that
     effect to the other Party.  The Party giving such notice shall refrain from
     instituting  the  arbitration  proceedings  for a period of sixty (60) days
     following such notice.  If JE is the Party initiating the arbitration,  the
     arbitration shall be held in San Diego, California,  according to the rules
     of the American  Arbitration  Association  ("AAA"). If Agouron is the Party
     initiating the arbitration,  the arbitration shall be held in Tokyo, Japan,
     according  to the rules of the  Japan  Commercial  Arbitration  Association
     "JCAA").  The  arbitration  shall  be  conducted  by a  single  arbitrator
     mutually  chosen by the Parties.  If the Parties cannot agree upon a single
     arbitrator   within  fifteen  (15)  days  after  the   institution  of  the
     arbitration proceeding,  then the arbitration shall be conducted by a panel
     of three  arbitrators  appointed in accordance  with applicable AAA or JCAA
    

                                       39
<PAGE>

     rules;  provided,  however,  that each Party shall, within thirty (30) days
     after  the  institution  of  the  arbitration   proceedings,   appoint  one
     arbitrator  with  the  third  arbitrator  being  chosen  by the  other  two
     arbitrators. If only one Party appoints an arbitrator, then such arbitrator
     shall be entitled to act as the sole arbitrator to resolve the controversy.
     Any arbitration  hereunder shall be conducted in the English  language,  to
     the maximum  extent  possible.  All  arbitrator(s)  eligible to conduct the
     arbitration must agree to render their opinion(s)  within  thirty (30) days
     of  the  final  arbitration  hearing.  The  arbitrator(s)  shall  have  the
     authority  to grant  injunctive  relief  and  specific  performance  and to
     allocate  between the Parties the costs of  arbitration  in such  equitable
     manner as he/she determines;  provided, however, that each Party shall bear
     its own costs and attorneys' and witness' fees.  Notwithstanding  the terms
     of this Section 7.03, a Party shall also have the right to obtain, prior to
     the arbitrator(s) rendering the arbitration decision, provisional remedies,
     including  injunctive relief or specific  performance,  from a court having
     jurisdiction  thereof.  The arbitrator(s) shall, upon the request of either
     Party,  issue a written  opinion of the findings of fact and conclusions of
     law and  shall  deliver  a copy to each of the  Parties.  Decisions  of the
     arbitrator(s) shall be final and binding on all of the Parties. Judgment on
     the award so  rendered  may be  entered  in any court  having  jurisdiction
     thereof.

                        ARTICLE VIII - DISCLOSURE OF AGREEMENT

               Section 8.01  Disclosure of Agreement  Except as agreed to by the
          Parties,  and as  required  for  the  performance  of its  obligations
          hereunder, neither JE nor Agouron shall release any information to any
          third party with respect to any of the terms of this Agreement without
          the prior written consent of the other Party,  which consent shall not
          unreasonably  be  withheld.  This  prohibition  includes,  but  is not
          limited to, press releases,  educational  and scientific  conferences,
          promotional  materials  and  discussions  with the media.  The Parties
          shall jointly prepare and release a public announcement  regarding the
          existence of this Agreement. If a Party determines that it is required
          by law,  including  securities  laws  and  regulations  pertaining  to
          publicly traded companies,  to release  information to any third party
          regarding the terms of this Agreement, it shall notify the other Party
          of this fact prior to  releasing  the  information.  The notice to the
          other Party shall  include the text of the  information  proposed  for
          release.  The other  Party  shall  have the  right to confer  with the
          notifying  Party  regarding the necessity for the  disclosure  and the
          text of the information  proposed for release, but the notifying Party
          shall have the  discretion  to  release  the  information  as it deems
          necessary to fulfill its requirements under law.  Notwithstanding  the
          preceding,  JE and Agouron  shall each have the right to disclose  the
          terms of this  Agreement to persons it proposes to enter into business
          relationships with, if such persons are subject to confidentiality and
          use obligations equivalent to those applicable to the disclosing Party
          hereunder.

                       ARTICLE IX - GENERAL PROVISIONS

               Section  9.01 No  Implied  Licenses  Only  the  licenses  granted
          pursuant to the express terms of this Agreement  shall be of any legal
          force and effect. No license rights shall be created by implication or
          estoppel.

                                       40
<PAGE>

               Section  9.02 No Waiver Any  failure  by a Party to  enforce  any
          right which it may have  hereunder in any instance shall not be deemed
          to waive any right  which it or the other  Party may have in any other
          instance  with respect to any provision of this  Agreement,  including
          the provision which such Party has failed to enforce.

               Section 9.03 Severability; Government Acts. In the event that any
          provision  of  this  Agreement  is  judicially,   or  by  a  competent
          authority,  determined to be unenforceable,  in part or in whole, with
          regard to any or all of the countries in the Territory,  the remaining
          provisions or portions of this Agreement shall be valid and binding to
          the  fullest  extent  possible,  and the  Parties  shall  endeavor  to
          negotiate  additional terms, as feasible,  in a timely manner so as to
          fully  effectuate  the original  intent of the Parties,  to the extent
          possible,  in the  applicable  countries.  In the event  that any act,
          regulation, directive, or law of a country, including its departments,
          agencies  or courts  should make  impossible  or  prohibit,  restrain,
          modify or limit any material act or  obligation  of a Party under this
          Agreement,  and if any Party to this Agreement is materially adversely
          affected thereby, the Parties shall attempt in good faith to negotiate
          a  lawful  and   enforceable   modification  to  this  Agreement  that
          substantially  eliminates the material adverse effect;  provided that,
          failing any  agreement  in that  regard,  the Party who is  materially
          adversely  affected shall have the right, at its option, to suspend or
          terminate this Agreement as to such country.

               Section 9.04 Ambiguities.  Ambiguities, if any, in this Agreement
          shall not be construed against any Party,  irrespective of which Party
          may be deemed to have authored the ambiguous provision.

               Section  9.05  Notification  and  Governmental  Approvals.  After
          execution of this Agreement,  to the extent required by law,  Agouron,
          after  consultation with JE, shall notify the appropriate  authorities
          in the Licensed Territory about the terms of this Agreement; JE, after
          consultation with Agouron, shall notify the appropriate authorities in
          the JE  Territory  about the terms of this  Agreement.  JE and Agouron
          shall  obtain  any  government  approval(s)  required  to enable  this
          Agreement to become  effective,  or to enable any payment hereunder to
          be  made,  or  any  other  obligation  hereunder  to  be  observed  or
          performed.  Third-party  costs  and  expenses  incurred  in  notifying
          governmental  authorities or obtaining  governmental approval shall be
          shared  equally  between the Parties.  Each Party shall keep the other
          Party  informed  of  its  progress  in  notifying  such   governmental
          authorities  and  obtaining  such  government   approval,   and  shall
          cooperate with the other Party in any such efforts.

               Section 9.06 U.S.  Export  Controls  The Parties  agree to comply
          with the United  States  laws and  regulations  governing  exports and
          re-exports  of  the   Compound,   intermediates   thereof,   Products,
          Development Program Technology,  JE Technology or any other technology
          or software developed or disclosed as a result of this Agreement.  The
          Parties  acknowledge  that any  performance  under this  Agreement  is
          subject to any restrictions  which may be imposed by the United States
          laws and  regulations  governing  exports and  re-exports.  Each Party
          agrees to  provide  the other  Party with any  reasonable  assistance,
          including  written  assurances  which may be  required  by a competent
          governmental  authority and by applicable  laws and  regulations  as a
          precondition for any disclosure of technology or software by the other
          Party  under  the terms of 


                                       41
<PAGE>

          this  Agreement.  The  obligations  of this Section  9.06  shall 
          survive   termination   or  expiration  of  this Agreement.

               Section 9.07 No Agency.  JE and Agouron  shall have the status of
          independent  contractors under this Agreement and, except as otherwise
          explicitly provided in this Agreement, nothing in this Agreement shall
          be construed as an  authorization of a Party to act as an agent of the
          other Party.

               Section 9.08 Captions; Number; Official Language. The captions of
          the  articles  and  sections  of  this   Agreement   are  for  general
          information  and  reference  only,  and this  Agreement  shall  not be
          construed by  reference to such  captions.  Where  applicable  in this
          Agreement,  the singular  includes  the plural and vice versa.  To the
          extent  appropriate,  the  meaning of terms  whose  first  letters are
          capitalized,  but  which  are  variations  of terms  that are  defined
          elsewhere in this  Agreement,  shall each have the same meaning as the
          defined term. English shall be the official language of this Agreement
          and  any  license   agreement   provided   for   hereunder,   and  all
          communications  between the Parties  hereto shall be conducted in that
          language.

               Section 9.09 Force  Majeure.  A Party shall not be responsible to
          the  other  Party  for  any  failure,  delay  or  interruption  in the
          performance  of any of its  obligations  under this  Agreement if such
          failure,   delay  or  interruption  is  caused  by  any  act  of  God,
          earthquake,  fire, casualty, flood, war, epidemic, riot, insurrection,
          or any act,  exercise,  assertion  or  requirement  of a  governmental
          authority,  or other cause beyond the reasonable  control of the Party
          affected  if the Party  affected  shall have used its best  efforts to
          avoid such occurrence. If a Party believes that the performance of any
          of  its   obligations   under  this  Agreement  shall  be  delayed  or
          interrupted  as a result of any of the reasons  stated in this Section
          9.09,  and  provided  such Party is able to do so,  such  Party  shall
          promptly notify the other Party of such delay or interruption  and the
          cause  therefor,  and shall provide such other Party with its estimate
          of when the performance of its obligations shall recommence.  When the
          Party  affected is able to recommence  the  performance of obligations
          delayed or  interrupted  as a result of any of the  reasons  stated in
          this Section 9.09,  it shall so notify the other Party and,  except as
          otherwise  provided in this  Agreement,  it shall promptly  resume the
          performance of such obligations.

               Section   9.10   Amendment.   This   Agreement,   including   the
          Attachments, Exhibits and Schedules, constitutes the full agreement of
          the Parties with respect to the subject matter of this Agreement,  and
          incorporates any prior  discussions  between them with respect to such
          subject matter.  This Agreement  supersedes the rights and obligations
          of JE and Agouron under the Confidential  Disclosure Agreement and the
          Material  Transfer  Agreement  between  the  Parties  which  were both
          originally   entered  into  on  December  22,  1997.  This  Agreement,
          including the attachments hereto,  shall not be amended,  supplemented
          or otherwise  modified,  except by an instrument in writing  signed by
          duly authorized officers of the Parties.

               Section 9.11  Applicable  Law. This Agreement  shall be construed
          and the rights of the Parties shall be  determined in accordance  with
          the laws of  Japan;  provided,  however,  that  with  regard to issues
          concerning the validity and  construction  of patents,  trademarks and
          other  


                                       42
<PAGE>

          intellectual  property,  the  rights  of the  Parties  shall be
          determined in accordance with the laws of the country under which such
          intellectual   property   rights   were   granted.under   which   such
          intellectual property rights were granted.

               Section  9.12  Notices.  Any notice  required or  permitted to be
          given under this  Agreement  shall be in writing and shall be given in
          person,  delivered by recognized  overnight delivery service,  sent by
          mail  (certified or registered,  or air mail for addresses  outside of
          the  continental  U.S.),  or by  telefax  (or other  similar  means of
          electronic  communication),  whose  receipt is confirmed by confirming
          telefax, and addressed, in the case of JE, to its Managing Director of
          Pharmaceuticals and Biobusiness  Division and, in the case of Agouron,
          to the Senior  Vice President,  Commercial Affairs (with a copy to the
          Legal  Department),  at the  addresses  shown at the beginning of this
          Agreement,  or such  other  person  and/or  address  as may have  been
          furnished in writing to the  notifying  Party in  accordance  with the
          provisions of this Section 9.12. Except as otherwise  provided herein,
          any notice shall be deemed delivered upon the earliest of:  (i) actual
          receipt; (ii) four (4) business days after delivery to such recognized
          overnight  delivery  service;  (iii)  eight (8)  business  days  after
          deposit in the mail;  or  (iv) the  date of receipt of the  confirming
          telefax.

               Section 9.13 Assignment.  This Agreement shall be assignable by a
          Party to its  Affiliates;  if this Agreement is assigned by a Party to
          an  Affiliate,  the Party  shall still be  responsible  for all of its
          obligations as specified in this Agreement.  This Agreement shall only
          be  assignable  by a Party to a  non-Affiliated  third  party with the
          prior  written  consent  of the  other  Party,  which  consent  may be
          withheld  at the  sole  discretion  of  such  other  Party.  Any  such
          assignment  without the prior written consent of the other Party shall
          be void. Notwithstanding the preceding, in the event of: (i) a sale or
          transfer of all or substantially  all of a Party's assets; or (ii) the
          merger  or  consolidation  of  a  Party  with  another  company,  this
          Agreement shall be assignable to the transferee or successor company.

               Section 9.14 Succession. This Agreement shall be binding upon all
          successors   in   interest,   assigns,   trustees   and  other   legal
          representatives of the Parties.

                                       43
<PAGE>

               IN  WITNESS  WHEREOF,  the  Parties  hereto  have  executed  this
          Agreement at a formal signing  ceremony on July 28, 1998, in duplicate
          originals, by their respective officers thereunto duly authorized.

JAPAN ENERGY CORPORATION             AGOURON PHARMACEUTICALS, INC.


By:      /s/  Akihiko Nimoyama       By:      /s/ Peter Johnson
Name:    Akihiko Nimoyama            Name:    Peter Johnson
Title:   Representative Director and Title:   Chief Executive Officer
         President                            and President

By:      /s/ Ken Irino               By:      /s/ Gary Friedman
Name:    Ken Irino                   Name:    Gary E. Friedman, Esq.
Title:   Senior Management Director  Title:   Corporate V.P. and General Counsel




WITNESSED BY:

By:      /s/ Toshinobu Miyake                  By:      /s/ R. Kent Snyder
Name:    Toshinobu Miyake                      Name:    R. Kent Snyder
Title:   Assoc. Dir., General Mgr. of          Title:   Senior Vice President
         Coordination                                   Business Development
         Pharmaceuticals & Biobusines
         Division
                                   

                                       44
<PAGE>

                                      S1-1
                                   SCHEDULE 1

                       JE PATENTS AND PATENT APPLICATIONS


                                       *

                                      S1-1
<PAGE>




















                                      S2-1
                                   SCHEDULE 2

                                        *

                                      S2-1
<PAGE>

                                        *


                                   
                                SCHEDULE 7.01(c)

                                        *
                                  

                                   S7.01(c)-1
<PAGE>
                                        *

                                    EXHIBIT 1

                               DEVELOPMENT PROGRAM


                                *


                                      E1-1
<PAGE>
                                 
                                  ATTACHMENT 1

                                TRADEMARK LICENSE


                                        *

                                      A1-1