Document:

<PAGE>

                          *** CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
                    DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN OMITTED AND FILED
                          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
                       PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17
                                       C.F.R. SECTIONS 200.80(B)(4) AND 230.406.

                                                                   Exhibit 10.32

                              AMENDED AND RESTATED

                           EXCLUSIVE OPTION AGREEMENT

         THIS AMENDED AND RESTATED EXCLUSIVE OPTION AGREEMENT (the "Agreement")
is entered into as of February 24, 2004 with an effective date of February 17,
2004 (the "Effective Date") by and between Anadys Pharmaceuticals, Inc., a
Delaware corporation ("Anadys"), and LG Life Sciences, Ltd., a Korean
corporation ("LGLS").

         WHEREAS, Anadys and LG are parties to that certain Exclusive Option
Agreement dated as of February 17, 2004 (the "Initial Option Agreement");

         WHEREAS, the Initial Option Agreement provided for the parties to
negotiate additional terms of Exhibit A thereto and the parties desire to amend
and restate the Initial Option Agreement to provide for such terms, and to enter
into this Agreement to amend, restate and supersede in its entirety the Initial
Option Agreement;

         WHEREAS, by executing and delivering this Agreement, LGLS and Anadys
have approved the amendment, restatement and superseding of the Initial Option
Agreement in accordance with the requirements set forth in Section 6.5 of the
Initial Option Agreement;

         WHEREAS, Anadys wishes to obtain from LGLS, and LGLS wishes to grant to
Anadys, an exclusive option (defined herein as the "Option") on the terms and
subject to the conditions set forth herein to enter into the License Agreement
(defined herein) with LGLS whereby, among other things (1) LGLS and Anadys would
enter into a co-development program focused on the global clinical development
and registration of the compound known as LB80380 for treating chronic Hepatitis
B Virus ("HBV") infection in humans and (2) LGLS would grant to Anadys the
exclusive right to develop, register and commercialize in the Anadys Territory
the compound known as LB80380 for treating chronic HBV infection in humans, all
as it pertains to the Option on the terms and subject to the conditions set
forth herein; and

         WHEREAS, the parties acknowledge that the purpose of Exhibit A is to
state the basic terms of the understanding between the parties as to the
exclusive license rights to be granted to Anadys upon exercise of the Option,
and that the exclusive license rights are subject to negotiation and preparation
of a definitive agreement that reflects the terms and conditions set forth in
Exhibit A and such other additional terms and conditions to be agreed by the
parties and containing the full terms of the license and collaboration between
the parties, all as provided herein.

<PAGE>

         NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties hereto hereby agree as follows:

         1.       DEFINITIONS

         1.1      "AFFILIATE" means any corporation or other entity which
controls, is controlled by, or is under common control with, a party. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
50% of the voting securities or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity.

         1.2      "ANADYS DUE DILIGENCE REVIEW" means the due diligence review
of the Compounds for use in treating chronic HBV infection in humans and
pharmaceutical matters reasonably related thereto that Anadys will conduct for
purposes of deciding whether to exercise the Option.

         1.3      "ANADYS TERRITORY" means North America, Europe and all other
countries in the world except the LGLS Territory.

         1.4      "CHINA" means The Peoples Republic of China.

                  1.5      "COMPOUNDS" means (i) the compound designated
LB80380, which has the following structure: [...***...], [...***...] which has
the following structure:[...***...], [...***...] which has the following
structure, [...***...] [...***...]

         1.6      "CONTROL" means in relation to intellectual property rights
possession of the ability to grant a license or sublicense under such
intellectual property rights as provided for herein without violating the terms
of any agreement or other arrangement with any Third Party. For the removal of
doubt, the capitalized term "Control" as used in this Agreement is different
from the uncapitalized term "control" as used in the definition of Affiliate in
Section 1.1.

         1.7      "CRO" means a contract research organization engaged by LGLS
to manage clinical or pre-clinical studies of any Product.

         1.8      "JDC" has the meaning set forth in Section 3.1 of this
Agreement.

         1.9      "LGLS KNOW-HOW" means any know-how, trade secret, experimental
data, formula, expert opinion, experimental procedure, pre-clinical and clinical
data, regulatory data and filings and other confidential and/or proprietary
information concerning any Compound (including, but not limited to the
Development Plan, all results of any experiment or study undertaken pursuant to
the Development Plan, and any intellectual property created as a result of
performing the Development Plan) that is Controlled by LGLS and that is
necessary or useful for either (i) the formulation, manufacture, development,
use, and/or application of any Compound, or (ii) establishing clinical trials
and obtaining registration of any Compound.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

         1.10     "LGLS PATENT RIGHTS" means (i) the patents and the patent
applications referred to in Exhibit B and any other patents and patent
applications Controlled by LGLS that are necessary for, or contain claims that
are directed to, the manufacture, use, sale, offer for sale or import of the
Compounds; (ii) all foreign counterparts of any of the patents and patent
applications specified in clause (i) of this definition; and (iii) any reissues,
extensions (or other governmental actions that provide exclusive rights to the
patent holder in the applicable patented subject matter beyond the original
patent term or expiration date), substitutions, confirmations, registrations,
revalidations, re-examinations, additions, continuations, continuations-in-part,
and divisions of or to any of the foregoing.

         1.11     "LGLS TERRITORY" means the countries and territories set forth
in Schedule 1.11 attached to this Agreement.

         1.12     "LICENSE AGREEMENT" means the definitive agreement to be
negotiated in accordance with this Agreement and executed by LGLS and Anadys in
the event that Anadys exercises the Option, which agreement shall reflect the
terms set forth in EXHIBIT A as amended and such additional terms as the parties
may negotiate in good faith, provided that such additional terms do not
contradict, in letter or spirit, the terms set forth in EXHIBIT A.

         1.13     "OPTION" has the meaning set forth in Section 2.2 of this
Agreement.

         1.14     "OPTION PERIOD" means the period commencing on the Effective
Date, and ending on the earlier of (a) the date on which Anadys exercises the
Option, or (b) four months from the Effective Date, unless the Option Period is
extended pursuant to Section 2.3, in which case, the Option Period shall expire
on such later date.

         1.15     "PRODUCT" means any pharmaceutical formulation for
administration to humans to treat chronic HBV infection containing a Compound.

         1.16     "THIRD PARTY" means any entity other than Anadys or LGLS or an
Affiliate of Anadys or LGLS.

         2.       OPTION TO LICENSE

         2.1      OPTION FEE. In consideration of the Option granted to Anadys
by LGLS, Anadys has paid to LGLS a one-time, non-refundable fee equal to Five
Hundred Thousand U.S. Dollars (US$500,000) pursuant to the Initial Option
Agreement.

<PAGE>

         2.2      GRANT OF OPTION. LGLS hereby grants to Anadys an exclusive
option to enter into the License Agreement (the "Option"), exercisable during
the Option Period; provided, however, that such Option may not be exercised
before the parties have agreed to the definitive form of the License Agreement
that reflects the terms and conditions set forth in Exhibit A, and such other
additional terms and conditions to be agreed by the parties. If Anadys exercises
the Option in writing pursuant to Section 2.5 below, the parties will enter into
the License Agreement in accordance with the procedures set forth in Section
2.5. If Anadys elects not to exercise the Option during the Option Period, LGLS
shall retain without any restriction whatsoever all rights that LGLS would have
otherwise granted to Anadys pursuant to the License Agreement if the Option had
been exercised.

         2.3      EXTENSION OF OPTION PERIOD. The Option Period shall be
extended (i) automatically in the event of LGLS's delay in providing material
under Section 3.2 that is material to the Anadys Due Diligence Review, in
responding materially to due diligence requests from Anadys under Section 3.3,
or in providing information under Section 3.4 that is material to Anadys's Due
Diligence Review, for an additional period equal to the duration of such delay,
at no cost to Anadys, provided that such delay is not caused by any act or
omission to act by Anadys, including, without limitation, any ambiguous,
unreasonable or untimely request by Anadys, or failure by Anadys to conduct
reasonably promptly the Anadys Due Diligence Review or (ii) subject to LGLS
approval, for a period of [...***...] ([...***...]) [...***...] beyond the
expiration of the then current Option Period upon payment to LGLS of [...***...]
on or prior to the fifth day prior to such expiration.

         2.4      NEGOTIATION OF THE LICENSE AGREEMENT. LGLS and Anadys agree
that they shall use good faith efforts to complete negotiation of the License
Agreement within sixty (60) days following the Effective Date. Failure to so
complete negotiation of the License Agreement shall not constitute a breach by
either party under this Agreement.

         2.5      OPTION EXERCISE. If during the Option Period, in accordance
with this Article 2, Anadys notifies LGLS in writing that Anadys desires to
exercise the Option, the parties will execute the License Agreement immediately
following receipt by LGLS of such notification.

         2.6      OPTION TO NEGOTIATE. LGLS hereby grants to Anadys an exclusive
option to negotiate with LGLS for a license in the Anadys Territory to the
Compounds for purposes of [...***...], exercisable during the Option Period.

         3.       ACTIONS DURING THE OPTION PERIOD

         3.1      JOINT DEVELOPMENT COMMITTEE. Promptly after the Effective
Date, LGLS and Anadys shall establish a Joint Development Committee ("JDC")
comprised of three (3) members from each party and to be chaired by one
representative of LGLS to be designated by LGLS and one representative of Anadys
to be designated by Anadys, with the right of each party to designate successive
substitutes for its designee. The JDC shall have overall responsibility for
managing, directing, overseeing and implementing the development plan of the
Compounds during the Option Period (the "Development Plan"). The JDC shall not
have any power to amend, modify or waive compliance with the terms of this
Agreement. The JDC will attempt in good faith to make decisions by consensus
with respect to any matters that properly come before

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

it. If the JDC cannot reach consensus on a matter during the Option Period,
[...***...]. Subject to the rights granted to Anadys under the License
Agreement, if the Option is exercised, the Development Plan, all results of any
experiment or study undertaken pursuant to the Development Plan during the
Option Period, and any intellectual property created as a result of performing
the Development Plan shall be the property of LGLS whether or not the Option is
exercised, and Anadys agrees to execute and to cause any of its employees,
contractors or the like to execute any and all assignments, affidavits,
instruments or the like necessary or advisable to evidence LGLS's ownership
thereof.

         3.2      EVALUATION. Within [...***...] ([...***...]) days following
the Effective Date, LGLS will ship to Anadys (i) [...***...] ([...***...])
[...***...] of LB80380, (ii) [...***...]. During the Option Period, Anadys, at
its own expense, may evaluate and perform in vitro and in vivo studies on the
Compounds reasonably related to Anadys' Due Diligence Review and in compliance
with all applicable laws and regulations of any jurisdiction where such studies
are performed.

         3.3      DUE DILIGENCE. Within [...***...] ([...***...]) days following
the Effective Date, LGLS will provide to Anadys the due diligence documents,
reports and information described in the [...***...], provided, however, to the
extent that the provision of such items requires the generation of data or
information relating to ongoing studies, then LGLS will use commercially
reasonable efforts to generate such data or information, but failure or delay
by LGLS to provide such data or information shall not constitute grounds for an
extension of the Option Period; and further, provided, however, that LGLS shall
have no obligation whatsoever to commence any studies or experiments in order
to respond to such Diligence Request Memorandum. In addition, [...***...].

         3.4      ACCESS TO INFORMATION. During the Option Period, LGLS will
provide Anadys with access to the LGLS development team that has worked on the
Compounds, [...***...] who have been [...***...] and review the records and data
held by such parties [...***...], assistance with [...***...] relating to the
Compounds that are [...***...],[...***...] to Anadys to enable Anadys to utilize
such information and such other assistance and access to data, information and
personnel regarding the Compounds as Anadys may reasonably request for the
purpose of evaluating whether to exercise the Option; provided that [...***...]
or other [...***...] shall not extend to any information the disclosure of which
to Anadys would violate any privacy laws or regulations, informed consent,
institutional review board protocols or the like applicable to such information.

         3.5      LGLS AGREEMENTS. During the Option Period, LGLS will consult
with Anadys via the JDC and the parties will work in good faith to achieve
consensus prior to (i) [...***...], (ii) [...***...], (iii) [...***...], or (iv)
[...***...]; [...***...], [...***...]; and further provided, however, that this
Section 3.5 shall not apply to any [...***...], [...***...], [...***...] or
[...***...] to which LGLS has committed to undertake or is in the process of
commencing, performing, submitting or entering into prior to the Effective Date,
including without limitation, that certain study designated as the "[...***...]
Study".

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

performing, submitting or entering into prior to the Effective Date, including,
without limitation, that certain study designated as the "[...***...] Study".

         4.       REPRESENTATIONS, WARRANTIES AND COVENANTS

         4.1      CORPORATE POWER. Each party hereby represents and warrants
that it is duly organized, validly existing and in good standing under the laws
of the state or country of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.

         4.2      DUE AUTHORIZATION. Each party hereby represents and warrants
that such party is duly authorized to execute and deliver this Agreement and to
perform its obligations hereunder.

         4.3      BINDING AGREEMENT. Each party hereby represents and warrants
that this Agreement is a legal and valid obligation binding upon it and is
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.

         4.4      NO CONFLICT. LGLS represents and warrants that it is not
presently bound by any agreement with any Third Party materially limiting LGLS's
performance of any of the obligations or activities provided for under this
Agreement or contemplated by the License Agreement, and that it is not aware of
any patents, patent applications and/or know-how that it does not Control that
is necessary for the development or the commercialization of the Compounds as
contemplated by this Agreement and Exhibit A. LG further represents, warrants
and covenants t[...***...]that it will not, during the [...***...](i)
[...***...], (ii) [...***...], or (iii) [...***...].

         4.5      FINANCIAL POSITION. During the Option Period, Anadys will keep
LGLS apprised of the status of its financial position.

         4.6      OWNERSHIP OF PATENT RIGHTS. LGLS represents and warrants that
(a) it is the sole owner of all right, title and interest in and to the LGLS
Patent Rights and it Controls the LGLS Know-How, (b) it has not granted any
license under the LGLS Patent Rights to any Third Party and is under no
obligation to grant any such license, except to Anadys, and (c) there are no
outstanding liens, encumbrances, agreements or understandings of any kind,
either written, oral or implied, regarding the LGLS Patent Rights or the LGLS
Know-How which are materially inconsistent or are materially in conflict with
this Agreement.

         4.7      PATENT PROCEEDINGS. LGLS represents and warrants that, to the
best of its knowledge, no patent application within the LGLS Patent Rights is
the subject of any pending interference, opposition, cancellation or other
protest proceeding.

         4.8      DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

THE OTHER PARTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
ANY WARRANTY OF NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.

         4.9      LIMITATION OF LIABILITY. EXCEPT FOR THE AMOUNT PAYABLE UNDER
SECTION 2.1, AND LIABILITY FOR BREACH OF CONFIDENTIALITY OR FOR INFRINGEMENT OR
MISAPPROPRIATION, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER
PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION
WITH THE LICENSED TECHNOLOGY OR ANY LICENSE GRANTED HEREUNDER.

         4.10     INDEMNIFICATION BY ANADYS. Anadys hereby agrees to save,
defend, indemnify and hold harmless LGLS and its directors, officers, employees
and agents (each an "LGLS Indemnitee" and collectively, the "LGLS Indemnitees")
from and against any and all liabilities, expenses and losses, including
reasonable legal expense and attorneys' fees ("Losses"), as incurred, arising
directly or indirectly out of (i) the breach of any representation or warranty
made by Anadys hereunder or any Third Party claim or action resulting from the
conduct of the evaluation of the Compounds or the Anadys Due Diligence Review,
except to the extent such[...***...]from the [...***...]or [...***...]of
[...***...], or (ii) any claims brought by any Third Party as a holder of
securities issued by Anadys in their capacity as such. In the event any LGLS
Indemnitee seeks indemnification under this Section 4.10, such LGLS Indemnitee
shall inform Anadys of a claim as soon as reasonably practicable after such LGLS
Indemnitee receives notice of the claim, shall permit Anadys to assume direction
and control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of Anadys) in the defense of the claim; provided that such LGLS
Indemnitee shall have the right to employ separate legal counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
legal counsel shall be at the expense of such LGLS Indemnitee unless (i) the
employment of such legal counsel shall have been specifically authorized in
writing by Anadys, (ii) Anadys shall have failed to assume the defense and
employ legal counsel or (iii) the named persons to any such action (including
any third persons to the action) include both Anadys and such LGLS Indemnitee
and such LGLS Indemnitee shall have been advised that there may be one or more
legal defenses available to such LGLS Indemnitee that are different from or
additional to those available to Anadys (in which case Anadys shall not have the
right to assume the defense on behalf of such LGLS Indemnitee). Anadys shall not
bear the fees and expenses of more than one (1) legal counsel for LGLS
Indemnitees pursuant to the immediately preceding sentence. Anadys shall not be
liable for any settlement of any such action effected by any LGLS Indemnitee
without Anadys's written consent but, if settled with the written consent of
Anadys, Anydys agrees to indemnify and hold harmless such LGLS Indemnitee from
and against any loss or liability by reason of such settlement. With respect to
any pending or threatened proceeding in respect of which any LGLS Indemnitee is
or could have been a party and indemnity could have been sought hereunder by
such LGLS Indemnitee, Anadys shall not effect any settlement of such proceeding
without the prior written consent of such LGLS Indemnitee, unless such
settlement includes an unconditional release of such LGLS Indemnitee from all
liability on claims that are the subject matter of such proceeding.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

         4.11     INDEMNIFICATION BY LGLS. LGLS hereby agrees to save, defend,
indemnify and hold harmless Anadys and its directors, officers, employees and
agents (each an "Anadys Indemnitee" and collectively, the "Anadys Indemnitees")
from and against any and all Losses arising directly or indirectly out of the
breach of any representation or warranty made by LGLS hereunder, except to the
extent such [...***...]from the [...***...]or [...***...]of [...***...], then
this [...***...]to that [...***...]of the [...***...]. Under no circumstances
shall LGLS be required to indemnify Anadys for any Losses arising from any
financing by Anadys or claims asserted against Anadys by any holders of
securities issued by Anadys. In the event any Anadys Indemnitee seeks
indemnification under this Section 4.11, such Anadys Indemnitee shall inform
LGLS of a claim as soon as reasonably practicable after such Anadys Indemnitee
receives notice of the claim, shall permit LGLS to assume direction and control
of the defense of the claim (including the right to settle the claim solely for
monetary consideration), and shall cooperate as requested (at the expense of
LGLS) in the defense of the claim; provided that such Anadys Indemnitee shall
have the right to employ separate legal counsel in any such action and
participate in the defense thereof, but the fees and expenses of such legal
counsel shall be at the expense of such Anadys Indemnitee unless (i) the
employment of such legal counsel shall have been specifically authorized in
writing by LGLS, (ii) LGLS shall have failed to assume the defense and employ
legal counsel or (iii) the named persons to any such action (including any third
persons to the action) include both LGLS and such Anadys Indemnitee and such
Anadys Indemnitee shall have been advised that there may be one or more legal
defenses available to such Anadys Indemnitee that are different from or
additional to those available to LGLS (in which case LGLS shall not have the
right to assume the defense on behalf of such Anadys Indemnitee). LGLS shall not
bear the fees and expenses of more than one (1) legal counsel for Anadys
Indemnitees pursuant to the immediately preceding sentence. LGLS shall not be
liable for any settlement of any such action effected by any Anadys Indemnitee
without LGLS's written consent but, if settled with the written consent of LGLS,
LGLS agrees to indemnify and hold harmless the Anadys Indemnitee from and
against any loss or liability by reason of such settlement. With respect to any
pending or threatened proceeding in respect of which any Anadys Indemnitee is or
could have been a party and indemnity could have been sought hereunder by such
Anadys Indemnitee, LGLS shall not effect any settlement of such proceeding
without the prior written consent of such Anadys Indemnitee, unless such
settlement includes an unconditional release of such Anadys Indemnitee from all
liability on claims that are the subject matter of such proceeding.

         5.       TERM; TERMINATION

         5.1      TERMS. This Agreement shall commence as of the Effective Date
and shall continue until the expiration of the Option Period.

         5.2      TERMINATION.

                  (a)      Either party may terminate this Agreement prior to
the expiration of the term of this Agreement upon the occurrence of any of the
following:

                           (i)      Upon or after the bankruptcy, insolvency,
dissolution or winding up of the other party (other than dissolution or winding
up for the purposes of reconstruction or amalgamation); or

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                           (ii)     Upon or after the breach of any material
provision of this Agreement by the other party if the breaching party has not
cured such breach within 45 days after written notice thereof by the
non-breaching party; provided, however, that with respect to any such breach, if
(A) the breaching party has commenced actions to cure such breach prior to such
45th day and is continuing in good faith to pursue such cure at such 45th day
and (B) it is more likely than not in the reasonable judgment of the
non-breaching party that such actions of the breaching party will succeed in
curing such breach on or before the 90th day after such written notice, then
this agreement shall not be terminable as a consequence of such breach if such
breach shall be so cured on or before such 90th day after such written notice;
further provided, however, that any breach under Section 5.2(b) shall not be
subject to any such right to cure.

                  (b)      If the parties are not able to reach final agreement
on the definitive form of the License Agreement by the sixtieth (60th) day
following the Effective Date as set forth in Section 2.4, then this Agreement
shall be terminated. In the event of termination pursuant to this Section 5.2(b)
then LGLS shall be entitled to retain the payment received from Anadys under
Section 2.1.

                  (c)      LGLS shall have the right to terminate this Agreement
from and after the sixtieth (60th) day following the Effective Date if Anadys
does not at the close of business on such day have net current assets of at
least US$60,000,000 and net assets of at least US $64,000,000. This Section
5.2(c) shall not be subject to cure as provided in Section 5.2(a)(ii) of this
Agreement, and in the event of termination pursuant to this Section 5.2(c) then
LGLS shall be entitled to retain the payment received from Anadys under Section
2.1.

         5.3      EFFECT OF TERMINATION.

                  (a)      Upon termination of this Agreement, all rights and
obligations of the parties hereunder shall terminate, except as provided in this
Section 5.3.

                  (b)      Upon expiration of this Agreement or termination for
any reason whatsoever prior to exercise of the Option, LGLS shall retain without
any restriction whatsover all rights that LGLS would have otherwise granted to
Anadys pursuant to the License Agreement and ownership of the Development Plan,
all results of any experiment or study undertaken pursuant to the Development
Plan, and any intellectual property created as a result of performing the
Development Plan.

                  (c)      Expiration or termination of this Agreement shall not
relieve the parties of any obligation accruing prior to such expiration or
termination. The provisions of Articles [...***...], [...***...]and [...***...]
and Sections [...***...], [...***...], [...***...], and [...***...] shall
survive termination or expiration of this Agreement.

                  (d)      If this Agreement expires without exercise of the
Option, then LGLS shall be entitled to retain as liquidated damages all payments
received by LGLS from Anadys under Sections 2.1 and 2.3, and Anadys shall not be
liable to LGLS for any other damages whatsoever arising from such failure to
exercise the Option; provided that nothing herein shall limit the
indemnification provisions of Section 4.10.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

         6.       MISCELLANEOUS

         6.1      ASSIGNMENT. Neither this Agreement nor any rights or
obligations hereunder may be assigned or otherwise transferred by Anadys without
the prior written consent of LGLS. LGLS may assign this Agreement and its rights
and obligations hereunder without the consent of Anadys (a) [...***...]with the
[...***...]or[...***...]of [...***...]or[...***...]all of [...***...]relating to
the [...***...]of this [...***...]to[...***...], (b) in the event of
[...***...]or [...***...]of [...***...]with or into [...***...], or (c) to any
[...***...]of[...***...]. Except as provided above[...***...]may not
[...***...]or [...***...]this[...***...]or any [...***...]or[...***...]hereunder
without the [...***...]of[...***...], [...***...]. The rights and obligations of
the parties under this Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties. Any assignment not in
accordance with this Agreement shall be void.

         6.2      SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         6.3      NOTICES. Any notices or communications provided for in this
Agreement to be made by either of the parties to the other shall be in English
in writing and delivered personally or sent by registered or certified mail,
postage paid, by overnight delivery service such as FedEx or UPS or by
facsimile, with confirmation of receipt, addressed as follows:

         IF TO ANADYS:                  Anadys Pharmaceuticals, Inc.
                                        9050 Camino Santa Fe
                                        San Diego, CA 92121
                                        Attn: Michael J. Kamdar
                                        Fax No. [...***...]

         IF TO LGLS:                    LG Life Sciences
                                        [...***...]
                                        20, Yoido-dong, Youngdungpo-gu,
                                        Seoul 150-721, Korea
                                        Attn: [...***...]
                                        Fax No. [...***...]

         Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by facsimile
shall be effective upon confirmation of receipt, notices sent by mail or
overnight delivery service shall be effective upon receipt, and notices given
personally shall be effective when delivered.

         6.4      GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the [...***...], without
regard to its choice of law provisions, and any applicable laws of the
[...***...]. Any disputes (except injunctive relief allowed by a court) shall be
finally resolved by Arbitration in accordance with [...***...].

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

         6.5      ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the
exhibits attached hereto) and the Confidentiality Agreement described in Section
6.9 sets forth all of the covenants, promises, agreements, warranties,
representations, conditions and understandings between the parties hereto with
respect to the subject matter hereof, and supersedes and terminates all prior
agreements and understanding between the parties with respect to the subject
matter hereof. There are no covenants, promises, agreements, warranties,
representations conditions or understandings with respect to the subject matter
hereof, either oral or written, between the parties other than as set forth
herein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the parties hereto unless reduced to writing and
signed by the respective authorized officers of the parties.

         6.6      HEADINGS; REFERENCES. The captions contained in this Agreement
are not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles hereof. Unless otherwise specified to
the contrary, references to articles and sections in this Agreement shall be to
the articles and sections comprising this Agreement.

         6.7      INDEPENDENT CONTRACTORS. It is expressly agreed that LGLS and
Anadys shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture or agency of any
kind. Neither party shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior written consent of the other party.

         6.8      WAIVER. Except as specifically provided for herein, the waiver
from time to time by either of the parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of the same rights or remedies or of any other of such party's rights or
remedies provided in this Agreement.

<PAGE>

         6.9      CONFIDENTIALITY. The existence and the contents of this
Agreement, the Option, Exhibit A and the existence of the relationship between
LGLS and Anadys and the transactions contemplated by this Agreement shall be
treated under that certain Confidentiality Agreement, dated February 17, 2004,
by and between LGLS and Anadys as Confidential Information (as such term is
defined in such Confidentiality Agreement). To the extent that this Agreement
and Exhibit A must be described in, or attached to or filed with any
governmental agency as an exhibit to or part of, any registration statement,
prospectus, private placement memorandum, securities purchase agreement, term
sheet, application or like instrument relating to the sale of securities by
Anadys or for any other purpose, then the content of such description and any
amendment or revision thereof shall be subject to the prior written approval of
LGLS which shall not be unreasonably withheld or delayed, and, to the extent
that Anadys has the right to apply to any governmental agency for confidential,
non-public treatment of the contents of this Agreement or Exhibit A, LGLS shall
have the right to reasonably request of Anadys those portions of this Agreement
and Exhibit A for which Anadys shall seek such confidential, non-public
treatment, to promptly review any such submission, application, memorandum,
correspondence or the like to such governmental agency seeking, or in support
of, such confidential, non-public treatment prior to the transmission thereof to
such government agency, and Anadys shall not agree to forego such confidential,
non-public treatment of such content so specified by LGLS without the prior
written consent of LGLS, which shall not be unreasonably withheld or delayed,
unless Anadys is required by law or regulation or by the requirements of such
governmental agency, including, without limitation, the Securities and Exchange
Commission, to do so, provided that LGLS shall be given reasonably prompt prior
notice of any such requirement so that LGLS shall have a reasonable opportunity
to limit or otherwise challenge such disclosure.

         6.10     COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

ANADYS PHARMACEUTICALS, INC.                   LG LIFE SCIENCES, LTD.

By: /s/ Kleanthis G. Xanthopoulos, Ph.D.       By: /s/ Heung Joon Yang, Ph.D.
    ------------------------------------           -----------------------------

Name:   Kleanthis G. Xanthopoulos, Ph.D.       Name: Heung Joon Yang, Ph.D.

Title: President and Chief Executive           Title: President and Chief
         Officer                                         Executive Officer

          [SIGNATURE PAGE TO THE AMENDED AND RESTATED EXCLUSIVE OPTION
           AGREEMENT BETWEEN ANADYS PHARMACEUTICALS, INC. AND LG LIFE
                SCIENCES, LTD. DATED AS OF FEBRUARY 24, 2004 AND
                       EFFECTIVE AS OF FEBRUARY 17, 2004]

<PAGE>

                                    EXHIBIT A

         1.1      SCOPE OF LICENSE:

         (a) LGLS will grant to Anadys exclusive rights, with the right to
sublicense, under all LGLS Patent Rights and LGLS Know-How to develop, make,
have made, use, register, offer to sell, sell, export and import the Compounds
and Products in the Anadys Territory for purposes of treating chronic Hepatitis
B Virus ("HBV") infection in humans.

         1.2      PRODUCT DEVELOPMENT:

Anadys and LGLS will enter into a co-development program focused on the global
clinical development and registration of the Compounds for HBV.

                           (a)      The parties will form a Joint Development
Committee (JDC) to develop a global clinical development and regulatory strategy
and plan (the "Global Plan") for, among other things, clinical studies, to
coordinate and direct resource allocation for implementing such strategy and
plan through, among other things, agreement on a global development budget, and
to coordinate registration and regulatory activities for the global clinical
development of the Compounds. The JDC shall meet at least [...***...]
([...***...]) times per year following its formation during the term of the
License Agreement or at such greater frequency as the JDC agrees, with at least
[...***...] ([...***...]) of such meetings per year being face to face. During
the last JDC meeting of each calendar year, the JDC shall approve the annual
budget for the next calendar year, which annual budget shall be mutually agreed
to by the JDC representatives of the parties and amended only by the written
agreement of a representative from each party. The annual budget will become a
part of the global development budget. Any matters on which the JDC cannot reach
a consensus shall be [...***...] to the [...***...]of[...***...]and[...***...]
and, if the[...***...]to [...***...], then to the
[...***...]of[...***...]and[...***...]Notwithstanding the foregoing, for the
[...***...]of [...***...]of [...***...], if the [...***...]the [...***...]from
the [...***...]the [...***...]is [...***...]to [...***...]for[...***...], then
[...***...]the[...***...]; provided that any [...***...]that is [...***...]the
[...***...].

                           (b)      Anadys and LGLS will each contribute 50% of
the Global Development Costs for the development of the Compounds for treatment
of chronic HBV infection in humans incurred in accordance with the annual budget
approved by the JDC.

                           (c)      Each party will keep records of its Global
Development Costs and will provide the JDC with an invoice for Global
Development Costs incurred in accordance with the annual budget. On a quarterly
basis, the JDC will calculate the Global Development Costs to be shared and will
provide to the parties a statement showing Global Development Costs for the
preceding quarter, comparing actual Global Development Costs to budgeted
expenses. On a

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

[...***...], the JDC will include in such statement the cash settlement required
between the parties. Each party will pay any required cash settlement to the
other party within [...***...] ([...***...]) [...***...] following the JDC's
quarterly statement describing such required cash settlement.

                           (d)      Anadys will assume all regulatory
responsibility for filing and obtaining in Anadys' name all regulatory approvals
for the Compounds in the Anadys Territory. LGLS will assume all regulatory
responsibility for filing and obtaining in LGLS's name all regulatory approvals
for the Compounds in the LGLS Territory.

                           Global Development Costs, defined: The costs incurred
                           for or associated with any [...***...] and
                           [...***...] or other [...***...] which are necessary
                           for [...***...], that are directly related to
                           [...***...] for treatment of chronic HBV infection in
                           humans. In addition, Global Development Costs shall
                           include [...***...] for those activities that
                           [...***...] of the development of the Compound,
                           including, [...***...]; provided, that such
                           allocations are mutually determined and agreed by the
                           JDC prior to such allocation. Global Development
                           Costs shall not include costs related to [...***...],
                           including [...***...] of any [...***...] Global
                           Development Costs will include all the costs related
                           to any studies or development activities (as defined
                           in the agreement) that are initiated during or after
                           the Option Period, including [...***...] studies and
                           the [...***...] study. For studies that have been
                           ongoing when the Option Agreement was executed,
                           Global Development Costs will be incurred from the
                           date Anadys exercises its Option. Anadys will
                           reimburse LGLS, upon the [...***...]of[...***...]of
                           the [...***...]and[...***...]to[...***...]of
                           [...***...]of such [...***...]of these [...***...]
                           that have[...***...] by[...***...]the[...***...].
                           [...***...]
         1.3      MANUFACTURING: LGLS will supply sufficient quantities of the
Compounds [...***...] to support the conduct of human clinical trials therewith
on a global basis [...***...]of[...***...]. All quantities supplied shall be of
GMP quality. LGLS's costs to supply such quantities shall be deemed to be Global
Development Costs. [...***...]the[...***...]to[...***...]to[...***...]such
[...***...]the[...***...]to[...***...]and[...***...]to [...***...]for[...***...]
at a [...***...]a[...***...].

         1.4      COMMERCIALIZATION RIGHTS:

                  (a)      Anadys will have exclusive commercialization rights
         in the Anadys Territory.

                  (b)      LGLS will have exclusive commercialization rights in
         the LGLS Territory.

         1.5      MILESTONES:

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

As partial consideration for the exclusive rights granted, Anadys will make
milestone payments to LGLS as set forth below. The milestone payments will be
one time only.

<TABLE>
<CAPTION>
Milestones                                 Payments ([...***...])
----------                                 ----------------------
<S>                                        <C>
[...***...]                                    [...***...]
[...***...]                                    [...***...]
[...***...]                                    [...***...]
[...***...]                                    [...***...]
[...***...]                                    [...***...]
[...***...]                                    [...***...]
[...***...]                                    [...***...]
[...***...]                                    [...***...]

[...***...]                                    [...***...]

[...***...]                                    [...***...]

[...***...]                                    [...***...]

Total Milestone payments:                      $29,500,000
                                               -----------
</TABLE>

         1.6      ROYALTY:

                  (a) Anadys will pay to LGLS the royalties based upon annual
         net sales of the Product by Anadys or its sublicenseesin the Anadys
         Territory as set forth below.

<TABLE>
<CAPTION>
 Annual Net Sales Thresholds in the Anadys Territory ([...***...])             Royalty
 -----------------------------------------------------------------             --------
<S>                                                                            <C>
[...***...]                                                                    [...***...]%
[...***...]                                                                    [...***...]%
</TABLE>

                  (b) LGLS will pay to Anadys the following royalties based upon
         annual net sales of the Product by LGLS or its sublicensees in China as
         set forth below.

<TABLE>
<CAPTION>
Annual Net Sales Thresholds in China ([...***...])                           Royalty
--------------------------------------------------                           --------
<S>                                                                          <C>
Annual Net Sales                                                             [...***...]%
</TABLE>

Royalties in non-patent countries (supplement to Section 1.6): The royalties
upon annual net sales of Product payable by one party to the other party under
the License Agreement shall be paid on a country-by-country and
product-by-product basis for a term (the "Royalty Term") beginning upon the
first commercial sale of such Product in the applicable country and ending on
the later of (a) the expiration in such country of the last-to-expire valid
claim of an issued patent within the LGLS Patent Rights, or (b)
[...***...]([...***...]) years after the date of such first

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

commercial sale of such Product in such country. Notwithstanding the foregoing,
during the Royalty Term for a given country, the applicable royalty payable on
net sales in such country shall be [...***...].

         1.7      ASSIGNMENT. Neither the License Agreement nor any rights or
obligations thereunder may be assigned or otherwise transferred by Anadys
without the prior written consent of LGLS. LGLS may assign the License Agreement
and its rights and obligations thereunder without the consent of Anadys (a) in
connection with the [...***...]or [...***...]of[...***...]or [...***...]all of
[...***...]to the [...***...]of the [...***...]to[...***...], (b) in the
[...***...]of [...***...] or[...***...]of [...***...]with or [...***...], or (c)
to any [...***...]of [...***...]; [...***...]that in the
[...***...]of[...***...], [...***...]shall[...***...]that the [...***...]will be
[...***...]as those of [...***...]to such [...***...], including[...***...]
under the [...***...], [...***...], [...***...]and related[...***...]and
[...***...]and[...***...]that such [...***...]or [...***...]in[...***...]the
[...***...]to [...***...] in[...***...]with the[...***...]and[...***...]of the
[...***...].[...***...],[...***...]or[...***...]the[...***...]or[...***...]or
[...***...]the[...***...],[...***...]. The rights and obligations of the parties
under the License Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties. Any assignment not in
accordance with the License Agreement shall be void.

         1.8      TERMINATION. In addition to customary and usual termination
provisions providing for, among other things, termination in the event of
bankruptcy or insolvency of a party, each party shall have the right to
terminate the License Agreement if the other party materially breaches its
obligations under the License Agreement, including, [...***...]the
[...***...]to[...***...]and[...***...]in the [...***...]in [...***...]with the
[...***...], or [...***...]in such [...***...], or [...***...]
to[...***...]its[...***...]of [...***...]in a [...***...], or to
[...***...]the[...***...]under the [...***...]is[...***...]the [...***...]to be
[...***...]in the [...***...]. [...***...]to[...***...]and to [...***...]in the
[...***...]to [...***...]in the [...***...]of an [...***...] under the
[...***...].

         1.9      FRAMEWORK FOR PATENT FILING, PROSECUTION, MAINTENANCE,
ENFORCEMENT AND DEFENSE

The License Agreement shall contain the following provisions.

         (a)      PROSECUTION OF APPLICATIONS, AND MAINTENANCE ADMINISTRATION

                  (1)      LGLS shall be administratively responsible for
prosecution and maintenance of all patents and patent applications included in
the LGLS Patent Rights throughout the world. For purposes of this Article, the
term "prosecution" includes, without limitation, the preparation and filing of
patent applications and documents and instruments related thereto; and the term
"maintenance", includes, without limitation, the making of maintenance payments.

                  (2)      Regarding the prosecution and maintenance of the LGLS
                  Patent Rights in nations within the Anadys Territory,
                  including, without limitation, the filing of patent
                  applications and other filings and submissions, conferences
                  and appeals,

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                  interference proceedings and oppositions to, with or in the
                  respective patent offices in such nations,
                  [...***...]will[...***...]with[...***...]and[...***...]in
                  [...***...], will [...***...]the [...***...]to [...***...]in
                  [...***...]any[...***...], and will[...***...]of[...***...]
                  from[...***...]. Any such [...***...]on which [...***...]and
                  [...***...], [...***...]. [...***...] the [...***...]to
                  [...***...]any such [...***...]on which the [...***...].
                  [...***...], [...***...] associated with such [...***...]
                  and/or [...***...], and provided that the [...***...], are not
                  [...***...], or b) [...***...].[...***...]
                  (3)      The parties acknowledge that during the term of the
Option Agreement and the License Agreement one or more employees, agents or
contractors of one party either jointly or not jointly with one or more
employees, agents or contractors of the other party may conceive and/or reduce
to practice one or more inventions that are necessary or useful for the
manufacture, use, sale or import of any Compound or Product. Anadys and LGLS
agree to negotiate in good faith and set forth in the terms of the License
Agreement: a) a definition of such joint inventions and such other inventions,
b) the parties respective rights with respect to such joint inventions and such
other inventions, and c) the administrative procedures for handling the filing,
prosecution, maintenance, enforcement and defense of patent applications and
patents claiming such joint inventions and such other inventions; provided,
that, among other things, such terms shall (A) [...***...]or such
[...***...]that [...***...]in order to [...***...]of the [...***...](B)
[...***...]to [...***...]its[...***...]to[...***...], [...***...].

         (b)      PROSECUTION AND MAINTENANCE EXPENSES

                  (1)      [...***...] to prosecution and maintenance of patents
and patent applications comprising the LGLS Patent Rights and patents and patent
applications claiming any joint inventions or such other inventions referred to
in Section 1.9(a)(3) in nations [...***...].

                  (2)      [...***...] relating to prosecution and maintenance
of patents and patent applications comprising the LGLS Patent Rights and patents
and patent applications claiming any joint inventions or such other inventions
referred to in Section 1.9(a)(3) in nations [...***...].

         (c)      ENFORCEMENT

                  (1)      Each party will be responsible for promptly notifying
the other party of any information that comes to its attention relating to
infringing or possibly infringing activities by third parties with respect to
the LGLS Patent Rights or Joint Patent Rights upon learning of such information,
without regard to whether the nation in which such activities have occurred is
in that party's territory or not.

                  (2)      In nations within the Anadys Territory, [...***...].

                  (3)      The party in whose territory the infringing
activities are or allegedly are occurring shall have primary responsibility for
bringing an action for infringement of the LGLS Patent Rights or Joint Patent
Rights (and any related interference proceeding or opposition

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

proceeding with respect to the LGLS Patent Rights or Joint Patent Rights), but
shall not be obligated to do so. If the party with such primary responsibility
is Anadys, LGLS may join the action. If one party elects to take action against
such infringement or alleged infringement or if the parties agree to take such
action together, each party will provide all reasonable assistance to the
enforcing party in connection with any such action, including being named as a
party to such action or furnishing of a power of attorney to the enforcing
party, if necessary to bring such action.

                  (4)      In nations within the Anadys Territory,

                           (a)      if Anadys brings any such action, it shall
bear its own expenses, except that if LGLS joins in such action in accordance
with Section 1.9(c)(3), then [...***...]will[...***...]the[...***...]and any
[...***...]as a [...***...]of such [...***...]as [...***...]of a [...***...],
[...***...], [...***...].

                           (b)      if Anadys does not bring the action, then

                                    (i)      LGLS may bring the action, and
Anadys must cooperate and join if its standing is required in order for the
action to proceed;

                                    (ii)     LGLS shall bear the expense of such
action and shall be entitled to the full amount of any recovery. If after
receipt of any recovery, [...***...], and the result of the action is a
declaration of validity or other confirmation of the scope of the patent
asserted by LGLS, then [...***...].

                  (5)      Neither party shall have the right to settle any
infringement action with respect to the LGLS Patent Rights or Joint Patent
Rights in the Anadys Territory in a manner that would diminish the rights or
interests of the other party or obligate the other party to make any payment or
take any action without the prior written consent of such other party

         (d)      DEFENSE

                  (1)      Each party will be responsible for notifying the
other party of any claim or threatened claim by a third party alleging
infringement by the Product, or of any declaratory judgment action or opposition
asserting the invalidity or unenforceability of a licensed LGLS Patent Right, or
that a licensed LGLS Patent Right is subject to an interference, inter partes
reexamination or an opposition proceeding instituted by a third party without
regard to whether the nation in which such activities have occurred is in that
party's territory or not.

                  (2)      In nations within the Anadys Territory, the parties
shall consult upon a course of action in defending against such claim or
threatened claim, action or proceeding.

                  (3)      In nations within the Anadys Territory, if named as a
defendant in any action alleging any such claim, each party shall have the right
to defend against such claim at its own expense, subject to any indemnity from
the other party provided under the indemnity

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

provisions in the License Agreement. If the claim is brought within the Anadys
Territory and LGLS is not named as a defendant, LGLS may join in the defense of
such claim [...***...].

                  (4)      In nations within the Anadys Territory, any awards
resulting from counterclaims shall be [...***...].

                  (5)      Neither party shall have the right to settle any
action described in this subsection (d) in the Anadys Territory in a manner that
would diminish the rights or interests of the other party or obligate the other
party to make any payment or take any action without the prior written consent
of such other party.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                                    EXHIBIT B

                                  PATENT RIGHTS

<TABLE>
<CAPTION>
                                      Appl. No.        Appl. date      Grant No.       Grant date      Status
-------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>               <C>             <C>              <C>            <C>
[...***...]          [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]     [...***...]      [...***...]    Enter
                                                                                                      designated
                                                                                                      state
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]                      [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
</TABLE>

<TABLE>
<CAPTION>
Title                  country        Appl. No.        Appl. date     Grant No.        Grant date     Status
-------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>               <C>             <C>              <C>            <C>
[...***...]          [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
                     [...***...]    [...***...]       [...***...]
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                                  SCHEDULE 1.11

                    LGLS TERRITORY CONSISTS OF THE FOLLOWING:

Korea
--------------------------------------------------------------------------------
China
--------------------------------------------------------------------------------
Taiwan
--------------------------------------------------------------------------------
Hong Kong
--------------------------------------------------------------------------------
Macao
--------------------------------------------------------------------------------
Bangladesh
--------------------------------------------------------------------------------
Bhutan
--------------------------------------------------------------------------------
Nepal
--------------------------------------------------------------------------------
India
--------------------------------------------------------------------------------
Sri Lanka
--------------------------------------------------------------------------------
Pakistan
--------------------------------------------------------------------------------
Thailand
--------------------------------------------------------------------------------
Laos
--------------------------------------------------------------------------------
Myanmar
--------------------------------------------------------------------------------
Philippines
--------------------------------------------------------------------------------
Vietnam
--------------------------------------------------------------------------------
Indonesia
--------------------------------------------------------------------------------
Singapore
--------------------------------------------------------------------------------
Malaysia
--------------------------------------------------------------------------------
Brunei
--------------------------------------------------------------------------------
Cambodia
--------------------------------------------------------------------------------<PAGE>

                                                                   EXHIBIT 10.33

                                    SUBLEASE

         THIS SUBLEASE ("Sublease") is entered into as of February 23, 2004 (the
"Execution Date"), by and between TORREY MESA RESEARCH INSTITUTE, a Delaware
corporation (formerly Novartis Agricultural Discovery Institute, Inc., a
Delaware corporation ("Novartis")) ("Sublandlord") and ANADYS PHARMACEUTICALS,
INC., a Delaware corporation ("Subtenant").

                                    RECITALS

         A.       Carramerica Realty Corporation, a Maryland corporation
("Master Landlord"), and Novartis entered into that certain Lease dated as of
December 18, 1998 (the "Master Lease"), a copy of which is attached hereto as
Exhibit "A".

         B.       Pursuant to the terms of the Master Lease, Master Landlord
presently leases to Sublandlord certain premises consisting of approximately
79,759 gross rentable square feet, as more particularly described in the Master
Lease (the "Leased Premises") located in building A of the Project known as La
Jolla Spectrum Technology Park and located at 3115 Merryfield Row, San Diego,
California (as more particularly described in the Master Lease, the "Building").
Capitalized terms not otherwise defined in this Sublease shall have the meanings
attributed to such terms in the Master Lease and unless otherwise expressly
provided herein all references in this Sublease to "Section" shall refer to the
respective "Section" of this Sublease and all references to "Paragraph" in this
Sublease shall refer to the respective "Paragraph" of the Master Lease. A list
of defined terms is attached hereto as Schedule "1".

         C.       Sublandlord now desires to sublease to Subtenant, and
Subtenant now desires to sublease from Sublandlord, a portion of the Leased
Premises pursuant to the terms and conditions contained herein.

                                    AGREEMENT

         NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

         1.       SUBLEASE.

                  1.1      Sublease Premises. Sublandlord hereby subleases to
Subtenant, and Subtenant hereby subleases from Sublandlord a portion of the
Leased Premises (hereinafter referred to as the "Sublease Premises"), as
depicted on Exhibit "B" attached hereto and made a part hereof, together with
all appurtenances thereto as provided in the Master Lease, on the terms and
conditions contained in this Sublease. Subtenant may measure the Sublease
Premises within thirty (30) days of the Sublease Commencement Date, provided
such measurement is obtained in accordance with the Standard Method for
Measuring Floor Area as set forth by the Building Owners and Managers
Association International, in which case the number of rentable square

<PAGE>

feet in the Sublease Premises shall be adjusted to the number established by
Subtenant's remeasurement, but in no event less than Fifty Thousand (50,000)
square feet.

                  1.2      Remainder Premises. Unless and until Sublandlord and
Subtenant enter into a sublease for the remaining portion of the Leased
Premises, which portion consists of approximately 30,000 square feet (the
"Remainder Premises"), pursuant to either the Sublease Right or the Right of
First Offer (as those terms are defined in Section 1.5 below), Subtenant shall
have no rights to the Remainder Premises or the Greenhouse (as defined in the
Master Lease), and Sublandlord shall have sole and absolute rights as to such
space, including without limitation, the right to use, occupy or sublet the
Remainder Premises and/or the Greenhouse to any other party, as determined by
Sublandlord in its sole and absolute discretion.

                           1.2.1    In the event that Sublandlord sublets all or
any portion of the Remainder Premises to one or more other subtenants
(individually or collectively, the "Other Subtenants"), the parties shall
coordinate with the Other Subtenants to allow for separate phone service for
each subtenant from the main phone switch. The parties acknowledge that, as part
of Subtenant's Improvements (as defined below), Subtenant is constructing
certain demising walls separating the Sublease Premises from the Remainder
Premises and certain Common Areas and installing certain security measures to
separate the Sublease Premises from the Remainder Premises and certain Common
Areas, as more particularly described on Exhibit "C" attached hereto. Any
additional demising walls or improvements, other than such work performed by
Subtenant, which are necessary to separate the Sublease Premises from the
Remainder Premises or other Common Areas shall be constructed by Sublandlord at
Sublandlord's sole expense. Subtenant hereby agrees to abide by all reasonable
policies and procedures established by Sublandlord to preserve each subtenant's
exclusive use of its respective premises, and Subtenant shall cooperate with
Sublandlord and the Other Subtenants to resolve any issues related to security
(including, without limitation, card access), use, access or any other issues
that arise because the Building is used by multiple subtenants.

                           1.2.2    In connection with the shared use of the
Building, Subtenant and the Other Subtenants shall share the use of the Common
Areas (as defined in the Master Lease), the electricity generated by the
emergency generator, the reception area, bathrooms and the glass wash autoclave,
such shared use to be allocated between Subtenant and the other subtenant(s) on
a pro rata basis to be determined by calculating the ratio of the square footage
subleased by each subtenant to the total square footage of the Building.

                           1.2.3    As part of the Sublease Premises, Subtenant
shall have sole access to the lunch room, the mailroom, and the shipping office,
as such areas are designated on Exhibit "D" attached hereto, and no Other
Subtenants shall be entitled to the use of, or access to, such space.

                           1.2.4    Subtenant acknowledges that the
communication room on the second floor of the Building contains two (2) racks,
only one of which shall be available for Subtenant's use during the Sublease
Term; provided, however, if and only if Subtenant subleases the Remainder
Premises, Subtenant shall then be entitled to the exclusive use of both racks.

                                      -2-
<PAGE>

                  1.3      Right of First Offer. Except to the extent such right
is terminated pursuant to Section 18 below, during the Sublease Term (as defined
in Section 2 below), Subtenant shall have the right of first offer (the "Right
of First Offer") to sublease all, but not a portion of, the Remainder Premises
from Sublandlord according to the terms and conditions hereof. Accordingly,
before Sublandlord offers all or a portion of the Remainder Premises for
sublease to a third party, Sublandlord shall give written notice to Subtenant
("Sublandlord's Notice") of Sublandlord's intent to offer for the Remainder
Premises for sublease. Subtenant shall thereafter have five (5) business days to
deliver written notice ("Subtenant's Notice") to Sublandlord of Subtenant's
election to exercise its Right of First Offer. If Subtenant timely exercises its
Right of First Offer, the parties shall thereafter enter into an amendment to
this Sublease to memorialize the addition of the Remainder Premises to the
Sublease Premises, and, unless the parties otherwise agree, Subtenant's sublease
of the Remainder Premises shall commence thirty (30) days after the date of
Subtenant's Notice; provided, however, Sublandlord shall consider any Subtenant
request to have the sublease of the Remainder Premises commence later than such
thirty-day period if the Remainder Premises Improvements to be installed are, in
Sublandlord's reasonable judgment, complex. If Subtenant declines or fails to
exercise its Right of First Offer within the applicable time period, Sublandlord
shall thereafter be free to sublease all or any part of the Remainder Premises
to third parties; provided, however, that if Sublandlord fails to execute a
sublease of the Remainder Premises within six (6) months after delivery of
Sublandlord's Notice, then Sublandlord must thereafter re-comply with the
provisions of this Section 1.3 prior to again offering the Remainder Premises
for sublease. The parties hereby agree that during the period after Subtenant
fails or declines to sublease the Remainder Premises (but no longer than six (6)
months), or, if Sublandlord is actively negotiating with a third party for the
sublease of the Remainder Premises, until such negotiations terminate without
the execution of a sublease, Subtenant shall have no right to sublease the
Remainder Premises from Sublandlord, including, without limitation, pursuant to
the Sublease Right set forth in Section 1.4 below. The Sublease Premises and the
Remainder Premises, once such premises are subleased by Subtenant, are
collectively referred to herein as the "Premises."

                  1.4      Sublease Right. Except to the extent such right is
terminated pursuant to Section 18 below, if, at any time during the Sublease
Term, Sublandlord has not subleased the Remainder Premises to a third party,
then Subtenant shall have the right, but not the obligation, to sublease all,
but not a portion of, the Remainder Premises pursuant to the terms and
conditions set forth herein (the "Sublease Right"). Subtenant may exercise its
Sublease Right by providing written notice to Sublandlord. If Subtenant
exercises its Sublease Right, the parties shall thereafter enter into an
amendment to this Sublease to memorialize the addition of the Remainder Premises
to the Sublease Premises, and, unless the parties otherwise agree, Subtenant's
sublease of the Remainder Premises shall commence thirty (30) days after the
date of Subtenant's notice; provided, however, Sublandlord shall consider any
Subtenant request to have the sublease of the Remainder Premises commence later
than such thirty-day period if the Remainder Premises Improvements to be
installed are, in Sublandlord's reasonable judgment, complex. Notwithstanding
the foregoing, if Sublandlord delivers a Sublandlord's Notice and Subtenant
fails or declines to exercise its Right of First Offer, the Sublease Right shall
be terminated during the period after Subtenant declines or fails to sublease
the Remainder Premises (but no longer than six (6) months), or, if Sublandlord
is actively negotiating with a third party for the sublease of the Remainder
Premises, until such negotiations terminate without the execution of a sublease.

                                      -3-
<PAGE>

If, after negotiating with a third party, Sublandlord fails to execute a
sublease of the Remainder Premises with such third party, then, upon
Sublandlord's termination of negotiations with such third party, Subtenant's
Sublease Right shall be re-instated.

                  1.5      Subtenant's Rights to Sublease the Greenhouse. If
Subtenant elects to exercise its Sublease Right or Right of First Offer to
sublease the Remainder Premises from Sublandlord, Subtenant may also, at such
time, elect to sublease the Greenhouse from Sublandlord in exchange for
additional consideration to be mutually determined by Sublandlord and Subtenant.
Additionally, prior to Subtenant's use of the Greenhouse for vivarium purposes,
Subtenant shall negotiate and enter into a vivarium service agreement with
Sublandlord, in form and of content reasonably acceptable to both parties.

                  1.6      Use. Subtenant shall be permitted to use the Premises
consistent with the permitted uses under the Master Lease.

         2.       TERM. The term of this Sublease (the "Sublease Term") shall
commence on the later of (a) the date Sublandlord obtains Master Landlord's
written consent to this Sublease, or (b) June 1, 2004 (as the case may be, the
"Sublease Commencement Date"). The Sublease Term shall expire on the date that
the Lease Term ends under the Master Lease, or, subject to any non-disturbance
agreement between Master Landlord and Subtenant, such earlier date upon which
the Master Lease may be terminated pursuant to its provisions or pursuant to
applicable law (as the case may be, the "Expiration Date"). Sublandlord
represents and warrants that the current expiration date under the Master Lease
is August 1, 2009. Notwithstanding the foregoing, upon the full execution of
this Sublease and receipt of Master Landlord's consent to this Sublease pursuant
to Section 19 below, Sublandlord shall permit Subtenant to use that certain
portion of the Sublease Premises as identified on Exhibit "B" to store certain
Hazardous Substances in the Sublease Premises, and Sublandlord shall allow
Subtenant access to the Sublease Premises for construction of the Sublease
Premises Improvements. Such access shall be subject to all of the applicable
terms and conditions of the Master Lease and this Sublease, including without
limitation, Section 11.3 below and Paragraph 28 of the Master Lease, except that
Subtenant's obligation to pay Subtenant's Rent (as defined in Section 4.1) shall
not commence to accrue until the Sublease Commencement Date.

         3.       CONDITION OF SUBLEASE PREMISES. Except as otherwise provided
herein, in entering into this Sublease, Subtenant has not relied upon or been
induced by any statements or representations of any persons with respect to the
condition of the Premises, the Building, the Project or the Land or with respect
to any other matter affecting the Premises, the Building, the Project or the
Land that might be pertinent in considering the leasing of the Premises or the
execution of this Sublease. Subtenant has, on the contrary, relied solely on
such investigations, examinations and inspections as Subtenant has chosen to
make or have made on its behalf. Subtenant acknowledges that it has been
afforded the opportunity for full and complete investigations, examinations and
inspections. Upon taking possession of the Sublease Premises and, if and when
applicable, the Remainder Premises, Subtenant acknowledges and agrees the
neither Sublandlord nor any of Sublandlord's agents, representatives or
employees has made any representations as to the suitability, fitness or
condition of such premises or such Premises for the conduct of Subtenant's
business or for any other purpose, and that Sublandlord has not agreed to

                                      -4-
<PAGE>

provide any improvements or alterations thereto. Except as otherwise provided
herein, Subtenant shall be deemed to have accepted such Premises, the Building
and all improvements located thereon, in their "AS-IS" condition.

         4.       RENT.

                  4.1      Subtenant's Rent.

                           4.1.1    Beginning on the Sublease Commencement Date
and continuing on the first day of each calendar month thereafter, Subtenant
shall pay to Sublandlord rent for the Premises equal to the sum of the
following: (i) Subtenant's Base Rent (as defined in Section 4.2 below); (ii)
Subtenant's Additional Rent (as defined in Section 4.3 below); and (iii) any
other amounts, charges, expenses or sums Subtenant is required to pay under this
Sublease or the Master Lease (collectively, "Subtenant's Rent"). Notwithstanding
the foregoing, in the event any amounts payable by Sublandlord to Master
Landlord are (i) due to Sublandlord's breach of any provision of the Master
Lease, and such breach is not due to Subtenant's acts or omissions; (ii) due to
Sublandlord's negligence or willful misconduct, or (iii) for the sole benefit of
Sublandlord with no relation to the Premises, such amounts shall not be paid by
Subtenant and shall be the sole responsibility of Sublandlord. Subtenant shall
pay Subtenant's Rent for the month in which the Sublease Commencement Date
occurs upon the full execution of this Sublease. Subtenant shall remain
responsible for Subtenant's Rent and any other amounts or charges which arise or
accrue during the Sublease Term, whether such amounts or charges are invoiced
during or after the expiration or termination of the Sublease Term.

                           4.1.2    If the Sublease Commencement Date occurs on
a day other than the first day of a calendar month or the Sublease Term ends on
a day other than the last day of a calendar month, then Subtenant's Rent for the
first and last fractional months of the Sublease Term shall be appropriately
prorated.

                           4.1.3    Subtenant's Rent and all other sums or
charges due or payable by Subtenant to Sublandlord hereunder shall be due and
payable without billing or demand, and without deduction, set-off or counter
claim, in lawful money of the United States of America, at Sublandlord's address
for notices in Section 12 below or to such other person or at such other place
as Sublandlord may from time to time designate in writing, and shall be due and
payable by Subtenant to Sublandlord on or before the date specified in Section
4.1. The failure of Subtenant to make any payments of Subtenant's Rent or any
other sums or charges payable by Subtenant by the date provided herein shall
subject Subtenant to the obligation to pay to Sublandlord interest on such
amounts in accordance with Paragraph 2(D)(2) of the Master Lease, provided,
however, that in the case of the first late payment in any calendar year, such
interest shall not be charged if such payment is received within three (3) days
of the date such amount is due.

                  4.2      Subtenant's Base Rent.

                           4.2.1    For the Sublease Premises, "Subtenant's Base
Rent for the Sublease Premises" shall be $2.80 per square foot of the Sublease
Premises per month; provided, however, during the first twelve (12) months of
the Sublease Term, the amount of Subtenant's Base Rent for the Sublease Premises
shall be equal to $1.40 per square foot of the Sublease

                                      -5-
<PAGE>

Premises per month. Notwithstanding the foregoing, in accordance with Section
1.1 above, in no event shall Subtenant's Base Rent for the Sublease Premises be
an amount less than the applicable base rental rate multiplied by 50,000 square
feet.

         Subtenant's Base Rent for the Sublease Premises, based on square
footage of 50,000, is as follows:

<TABLE>
<CAPTION>
                                         TOTAL ANNUAL                           TOTAL MONTHLY
     PERIOD                                BASE RENT                              BASE RENT
----------------                         -------------                           -----------
<S>                                      <C>                                    <C>
6/1/04 - 5/31/05                         $  840,000.00                           $ 70,000.00

6/1/05 - 5/31/06                         $1,730,400.00                           $144,200.00

6/1/06 - 5/31/07                         $1,782,312.00                           $148,526.00

6/1/07 - 5/31/08                         $1,835,781.36                           $152,981.78

6/1/08 - 5/31/09                         $1,890,854.80                           $157,571.23

6/1/09 - 8/1/09                          $  329,832.17                           $162,298.37
</TABLE>

                           4.2.2    If and when Subtenant subleases the
Remainder Premises, "Subtenant's Base Rent for the Remainder Premises" shall be
calculated in accordance with the provisions of this Section 4.2.2. Subtenant
has advised Sublandlord that, on February 3, 2004, Subtenant filed with the U.S.
Securities and Exchange Commission (the "SEC") Amendment No. 2 to its
registration statement on Form S-1 (the "Registration Statement") in relation to
the initial public offering of Subtenant's common stock (the "IPO"). If
Subtenant has not completed the IPO prior to its sublease of the Remainder
Premises, then Subtenant's Base Rent for the Remainder Premises shall be equal
to $1.40 per square foot of the Remainder Premises per month until November 30,
2005. If Subtenant has completed the IPO prior to its sublease of the Remainder
Premises, then Subtenant's Base Rent for the Remainder Premises shall be equal
to $1.00 per square foot of the Remainder Premises per month until November 30,
2005. Regardless of whether Subtenant has or has not completed the IPO,
beginning on December 1, 2005, Subtenant's Base Rent for the Remainder Premises
shall be calculated according to the then existing rate for the Subtenant's Base
Rent for the Sublease Premises and shall thereafter be increased in accordance
with Section 4.2.3.

                           4.2.3    Subtenant's Base Rent for the Sublease
Premises and Subtenant's Base Rent for the Remainder Premises shall be
collectively referred to herein as "Subtenant's Base Rent." Subtenant's Base
Rent shall be increased on each anniversary of the Sublease

                                      -6-
<PAGE>

Commencement Date by three percent (3%) of the annual Subtenant's Base Rent
payable with respect to the previous Sublease Year and the parties hereby agree
that the initial increase of Subtenant's Base Rent for the Sublease Premises
shall be calculated on the basis of a rental amount of $2.80 per square foot per
month. For purposes of this Sublease, a "Sublease Year" means each successive
12-month period starting on the Sublease Commencement Date.

                  4.3      Subtenant's Additional Rent.

                           4.3.1    Beginning on the Sublease Commencement Date
and continuing until Subtenant subleases the Remainder Premises, Subtenant shall
be responsible for: (a) sixty-two and one-half percent (62.5%) of the Monthly
Base Expenses (as defined below), (b) one hundred percent (100%) of the amount
by which the actual Base Expenses for any month during the Sublease Term is
greater than the amount of Monthly Base Expenses (such difference referred to as
the "Increased Expenses"), where such increase is attributable to those
components of Base Expenses which fluctuate based on occupancy of the Sublease
Premises, and (c) sixty-two and one-half percent (62.5%) of Increased Expenses,
where such increase is not attributable to those components of Base Expenses
which fluctuate based on occupancy of the Sublease Premises. If and when
Subtenant subleases the Remainder Premises from Sublandlord, Subtenant shall be
responsible for all Additional Rent due and payable pursuant to the Master Lease
and any other costs and expenses Sublandlord incurs or pays directly to third
parties in connection with the Premises, such as Taxes, maintenance costs,
operating costs and utilities. Notwithstanding the foregoing, if Sublandlord
subleases any portion of the Remainder Premises to a third party, Sublandlord,
not Subtenant, shall be responsible for any and all Increased Expenses
attributable to such third party's occupancy, based upon such party(ies) pro
rata square footage of the Building; provided, however, that Subtenant shall not
be responsible for payment of any expenses entirely or disproportionately
attributable to such other party(ies). For the purposes of this Sublease, the
term "Base Expenses" shall mean those certain expenses Sublandlord incurs each
month during the Sublease Term in connection with the Premises pursuant to the
Master Lease, whether such expenses are either payable to Master Landlord
pursuant to the Master Lease or are paid directly by Sublandlord, including any
taxes, maintenance costs, operating costs and utilities paid by Sublandlord. The
term "Monthly Base Expenses" shall mean the average monthly Base Expenses
incurred by Sublandlord while the Premises were vacant and shall be calculated
by determining the Base Expenses for the seven (7) month period from June 1,
2003 through January 1, 2004 and dividing such amount by seven (7). Unless and
until Subtenant subleases the Remainder Premises, Sublandlord shall be
responsible for (i) thirty seven and one-half percent (37.5%) of the Monthly
Base Expenses plus (ii) thirty seven and one-half percent (37.5%) of the
Increased Expenses, where such increase is not attributable to those components
of Base Expenses which fluctuate based on occupancy of the Premises. Subtenant's
monetary obligations pursuant to this Section 4.3 shall collectively be referred
to as "Subtenant's Additional Rent."

                           4.3.2    Prior to or at any time after the
commencement of each calendar year during the Sublease Term, Sublandlord shall
promptly provide Subtenant with any notice from Master Landlord with respect to
Subtenant's Additional Rent which will be payable for such calendar year.
Subtenant shall pay to Sublandlord, on a monthly basis as provided in Section
4.1 above, Subtenant's Additional Rent in an amount equal to one twelfth (1/12)
of the

                                      -7-
<PAGE>

amount of Sublandlord's estimate of Subtenant's Additional Rent for the relevant
calendar year of the Sublease Term. If the cost of any item included in
Subtenant's Additional Rent is increased during a calendar year, Sublandlord may
increase the estimated Subtenant's Additional Rent during such year by giving
Subtenant ten (10) days' advance written notice to that effect, and thereafter,
Subtenant shall pay to Sublandlord, in each of the remaining months of such
year, an amount equal to the amount of such increase in the estimated
Subtenant's Additional Rent divided by the number of months remaining in such
year. Promptly after receipt of the year-end reconciliation of Operating Costs
and Taxes completed by Master Landlord under the Master Lease, Sublandlord shall
provide Subtenant with a statement of the amount of such year's actual
Subtenant's Additional Rent owed by Subtenant. If the amount set forth in such
statement exceeds the amount of Additional Rent actually paid by Subtenant for
such year, Subtenant shall pay the amount still owing to Sublandlord within
twenty (20) days of receipt of such statement, which obligation shall survive
the expiration or earlier termination of this Sublease. If the amount set forth
in such statement is less than the amount actually paid by Subtenant,
Sublandlord shall reimburse Subtenant for the same within twenty (20) days of
receipt of such statement or, at Subtenant's request, credit the amount of
Subtenant's excess against the next accruing payment(s) of Subtenant's
Additional Rent.

                  4.4      Managing Costs. Sublandlord shall, at no cost to
Sublandlord, assist Subtenant in Subtenant's reasonable efforts to reduce the
operating expenses for the Sublease Premises.

                  4.5      LATE PAYMENT CHARGES. SUBTENANT ACKNOWLEDGES THAT
LATE PAYMENT BY SUBTENANT TO SUBLANDLORD OF SUBTENANT'S RENT AND OTHER CHARGES
PROVIDED FOR UNDER THIS SUBLEASE WILL CAUSE SUBLANDLORD TO INCUR COSTS NOT
CONTEMPLATED BY THIS SUBLEASE, THE EXACT AMOUNT OF SUCH COSTS BEING EXTREMELY
DIFFICULT OR IMPRACTICABLE TO FIX. THEREFORE, IF ANY INSTALLMENT OF SUBTENANT'S
RENT OR ANY OTHER CHARGE DUE FROM SUBTENANT IS NOT RECEIVED BY SUBLANDLORD
WITHIN FIVE (5) DAYS OF THE DATE DUE, SUBTENANT SHALL PAY TO SUBLANDLORD AN
ADDITIONAL SUM EQUAL TO FIVE PERCENT (5%) OF THE AMOUNT OVERDUE AS A LATE
CHARGE. THE PARTIES AGREE THAT THIS LATE CHARGE REPRESENTS A FAIR AND REASONABLE
ESTIMATE OF THE COSTS THAT SUBLANDLORD WILL INCUR BY REASON OF THE LATE PAYMENT
BY SUBTENANT. SUCH LATE CHARGE SHALL BE IN ADDITION TO, AND NOT IN LIEU OF, ANY
INTEREST THAT MAY ACCRUE ON ANY SUCH OVERDUE AMOUNT PURSUANT TO THE PROVISIONS
OF THE MASTER LEASE. NOTWITHSTANDING THE FOREGOING, NO LATE CHARGE SHALL ACCRUE
IN ANY LEASE YEAR UNLESS SUBLANDLORD SHALL HAVE NOTIFIED TENANT OF ITS FAILURE
TO PAY ANY RENT WHEN DUE ONE PREVIOUS TIME DURING SUCH LEASE YEAR. THE PARTIES
HEREBY AGREE AND ACKNOWLEDGE THAT THE LATE CHARGE SET FORTH IN THIS SECTION 4.5
SHALL BE IN LIEU OF, AND NOT IN ADDITION TO, ANY LATE CHARGE SET FORTH IN THE
MASTER LEASE, INCLUDING PURSUANT TO PARAGRAPH 26(X) THEREOF.

                                      -8-
<PAGE>

                                    Initials:

       ____________________                               _____________________
           Sublandlord                                          Subtenant

                  4.6      Audit Rights. At Subtenant's request, Sublandlord
shall exercise its audit rights under Paragraph 2(D)(4) of the Master Lease for
the benefit of Subtenant and shall cooperate with Subtenant in Subtenant's
exercise of such audit; provided, however, such exercise and cooperation shall
be at no cost, expense, responsibility, liability or obligation to Sublandlord,
and Subtenant shall be responsible for all aspects of conducting such audit,
including without limitation, accessing and reviewing Master Landlord's records,
engaging an auditor acceptable to Master Landlord, paying such auditor and
corresponding with Master Landlord regarding any inquiries or disputes.

         5.       SECURITY DEPOSIT.

                  5.1      Initial Security Deposit. As security for the full
and faithful performance of every provision of this Sublease to be performed by
Subtenant, upon full execution of this Sublease, Subtenant shall provide
Sublandlord an initial security deposit (the "Initial Security Deposit") in the
amount of Four Hundred Twenty Thousand and 00/100 Dollars ($420,000). The
parties hereby agree that Subtenant shall provide the Initial Security Deposit
to Sublandlord in the form a credit against the first Four Hundred Twenty
Thousand and 00/100 Dollars ($420,000) of the Subtenant Improvement Allowance to
be provided by Sublandlord for the Sublease Premises Improvements, as set forth
in Section 6.1 of this Sublease.

                  5.2      Additional Security Deposit. Concurrently with
Subtenant's completion of its IPO, Subtenant shall deposit with Sublandlord an
additional security deposit (the "Additional Security Deposit") in the amount of
Eight Hundred Forty Thousand and 00/100 Dollars ($840,000). The Initial Deposit
and the Additional Security Deposit shall be referred to herein as the "Security
Deposit".

                  5.3      Additional Security. If Subtenant has not completed
its IPO by the Sublease Commencement Date, Subtenant shall provide the following
additional security (collectively, the "Additional Security"), to Sublandlord to
secure its obligations under this Sublease: (a) additional cash security in an
amount up to Two Hundred Ten Thousand Dollars ($210,000), unless the parties
agree that such cash security may be greater, and (b) a secured lien (the
"Lien") on Subtenant's property and equipment (collectively, "Collateral").
Notwithstanding the foregoing, Sublandlord shall not require the Lien as long as
Subtenant maintains a cash position at all times in an amount at least equal to
the most recent six (6) months of Subtenant's average monthly expenditures for
its normal business operations. Subtenant shall promptly notify Sublandlord in
writing if and when its cash position falls below the threshold stated in the
foregoing sentence, and shall, at the request of Sublandlord, authorize and
execute one or more financing statements and fixture filings pursuant to the
Uniform Commercial Code of the State of California, in form and content
satisfactory to Sublandlord, to be filed in all public offices wherever filing
is deemed by Sublandlord to be necessary or desirable, at Subtenant's cost and
expense. Subtenant expressly authorizes Sublandlord to file

                                      -9-
<PAGE>

any and all UCC financing statements relating to the Collateral. If and when
Subtenant's cash position rises above such threshold, Sublandlord shall release
the Lien. Any Additional Security shall constitute part of the "Security
Deposit."

                  5.4      Application of Security Deposit. If Subtenant
defaults with respect to any provision of this Sublease, including but not
limited to, the provisions relating to the payment of Subtenant's Rent,
Sublandlord may use, apply or retain all or any part of the Security Deposit for
the payment of any Subtenant's Rent or any other amount which Sublandlord may
spend or become obligated to spend by reason of Subtenant's default, to repair
damages to the Sublease Premises, to clean the Sublease Premises or to
compensate Sublandlord for any other loss or damage which Sublandlord may suffer
by reason of Subtenant's default. Sublandlord shall not be required to keep the
Security Deposit separate from its general funds, and Subtenant shall not be
entitled to interest on such deposit. Subtenant hereby waives the provisions of
Section 1950.7 of the California Civil Code, or any successor statute. If
Subtenant shall have then performed all of its obligations under this Sublease
to be performed by it, the Security Deposit or any balance thereof shall be
returned to Subtenant within forty-five (45) days of the expiration of the
Sublease Term or earlier termination of this Sublease.

         6.       SUBTENANT IMPROVEMENTS AND SUBTENANT IMPROVEMENT ALLOWANCE.
Sublandlord shall have no obligation to construct any tenant improvements
whatsoever, and Subtenant acknowledges, among other things, that Sublandlord
shall have no obligation to demise the Premises until such time as the Remainder
Premises are sublet by Sublandlord to a third party.

                  6.1      Subtenant Improvement Allowance. Sublandlord shall
provide Subtenant with a subtenant improvement allowance in the amount of One
Million Five Hundred Fifty Thousand and 00/100 Dollars ($1,550,000) (the
"Subtenant Improvement Allowance"). Subtenant shall use the Subtenant
Improvement Allowance solely to construct tenant improvements in the Sublease
Premises in accordance with the terms of the work letter attached hereto as
Exhibit "E" (the "Work Letter") and for Sublease Premises-related expenses, all
of which shall be subject to the prior approval of Sublandlord, which shall not
be unreasonably withheld, conditioned or delayed, and Master Landlord pursuant
to the Master Lease (the "Sublease Premises Improvements").

                  6.2      Additional Subtenant Improvement Allowance. If
Subtenant subleases the Remainder Premises from Sublandlord by June 1, 2007, and
provided that Subtenant is not in default under this Sublease beyond any
applicable cure periods, Sublandlord shall provide Subtenant with an additional
subtenant improvement allowance (the "Additional Subtenant Improvement
Allowance") to be used by Subtenant solely for the following, all of which shall
be subject to the prior approval of Sublandlord, which shall not be unreasonably
withheld, conditioned or delayed, and Master Landlord pursuant to the Master
Lease (the "Remainder Premises Improvements" and collectively with the Sublease
Premises Improvements, the "Subtenant Improvements"): (a) constructing tenant
improvements in the Remainder Premises in accordance with the terms of an
additional work letter to be prepared by the parties in substantially the form
of the Work Letter attached hereto and (b) Remainder Premises-related

                                      -10-
<PAGE>

expenses. The amount and timing of disbursements of the Additional Subtenant
Improvement Allowance shall be determined as follows:

                           6.2.1    Prior to completion of the IPO. If Subtenant
exercises its Sublease Right or Right of First Offer prior to December 1, 2005
and Subtenant has not completed its IPO at the time of such exercise, the
Additional Subtenant Improvement Allowance shall be in the amount of Three
Hundred Thousand and 00/100 Dollars ($300,000). Such amount shall be payable
beginning on the later of: (a) December 1, 2005 or (b) the date Subtenant takes
possession of the Remainder Premises, notwithstanding the actual date that
Subtenant exercised its Sublease Right or the Right of First Offer. If Subtenant
exercises its Sublease Right or Right of First Offer on or after December 1,
2005 and Subtenant has not completed its IPO at the time of such exercise,
Sublandlord will provide Subtenant with an Additional Subtenant Improvement
Allowance in the amount of Three Hundred Thousand and 00/100 Dollars ($300,000).
Such amount shall be payable beginning on the date that is no earlier than the
date that Subtenant commences construction of the Remainder Premises
Improvements.

                           6.2.2    After completion of the IPO. If Subtenant
has completed its IPO when it exercises its Sublease Right or Right of First
Offer, the Additional Subtenant Improvement Allowance shall be in the amount of
Five Hundred Thousand and 00/100 Dollars ($500,000). If such exercise occurs
before December 1, 2005, the Additional Subtenant Improvement Allowance shall be
payable as follows: (a) up to Three Hundred Thousand and 00/100 Dollars
($300,000) payable beginning no earlier than December 1, 2005, and (b) the
remainder of the Additional Subtenant Improvement Allowance payable beginning no
earlier than February 1, 2006. If Subtenant's exercise of its Sublease Right or
Right of First Offer occurs on or after December 1, 2005, the Additional
Subtenant Improvement Allowance shall be payable beginning on the date that is
no earlier than the date Subtenant commences construction of the Remainder
Premises Improvements.

         Except as set forth in this Section 6.2, Sublandlord shall have no
obligation to provide Subtenant with a tenant improvement allowance for the
Remainder Premises.

                  6.3      Procedures Regarding Improvement Allowances.
Subtenant shall, from time to time, submit documentation reasonably acceptable
to Sublandlord evidencing the costs and expenses Subtenant incurred in
connection with the completion of the Subtenant Improvements, including without
limitation, lien releases. Sublandlord shall disburse the Subtenant Improvement
Allowance and the Additional Subtenant Improvement Allowance, if any, in
installments to Subtenant, within thirty (30) days after Sublandlord's receipt
of reasonably acceptable documentation; provided, however, no amounts shall be
disbursed prior to the dates set forth in Section 6.2 above. All Subtenant
Improvements paid for by Sublandlord and Subtenant will remain in the Building
when Subtenant vacates the Premises unless Master Landlord requires the
Subtenant Improvements, or any portion thereof, to be removed (or Master
Landlord permits Subtenant to remove the Subtenant Improvements), in which case
Subtenant shall repair and restore the Premises to the condition existing at the
time the Sublease Premises or the Remainder Premises, as applicable, are
delivered to Subtenant, as otherwise required by the terms of the Master Lease
or as required by Master Landlord's consent to the completion of the Subtenant
Improvements. Personal property of Subtenant that is not attached to the
Premises

                                      -11-
<PAGE>

can be removed by Subtenant at the end of the Sublease Term in accordance with
Paragraphs 5, 14 and 28(E) of the Master Lease.

         7.       MASTER LEASE.

                  7.1      Incorporation by Reference. Except as set forth in
Section 7.5 below, this Sublease is subject to all of the terms and conditions
of the Master Lease, all of which are hereby incorporated by reference. Except
as provided in Section 7.5 and 7.6 below, all references in the Master Lease to
"Landlord" and "Tenant" shall, for purposes of incorporation thereof into this
Sublease, mean and refer to Sublandlord and Subtenant, respectively. Subtenant
hereby agrees to be bound by the terms of the Master Lease as incorporated
herein and, with respect to the Sublease Premises, hereby assumes and agrees to
pay, perform and observe for the benefit of Master Landlord and Sublandlord,
each and all of the liabilities, obligations, covenants, conditions and
restrictions to be paid, performed or observed by Sublandlord, as Tenant, under
the Master Lease, except to the extent any of the same are expressly excluded
from incorporation herein. Without limiting the foregoing, neither Subtenant nor
Sublandlord shall commit or permit to be committed on the Sublease Premises any
act or omission which shall violate any term, covenant or condition of the
Master Lease.

                  7.2      Notice and Cure Periods. Notwithstanding the
foregoing, except as otherwise expressly provided in this Sublease, whenever any
provision of the Master Lease incorporated herein specifies a time period in
connection with the performance of any liability or obligation by tenant
thereunder (except payment of Subtenant's Rent or other sums due hereunder), or
any notice period or other time condition to the exercise of any right or remedy
by tenant thereunder, such time period shall be shortened in each instance by
three (3) business days for the purpose of incorporation into this Sublease. Any
default notice or other notice of any obligation (including any billing or
invoice for any Subtenant's Rent or any other expense or charge falling due
under the Master Lease) from Master Landlord which is received by Subtenant
(whether directly or as a result of being forwarded by Sublandlord to Subtenant)
shall constitute such notice from Sublandlord to Subtenant under this Sublease
without the need for any additional notice from Sublandlord. If Subtenant shall
fail to pay any installment of Subtenant's Rent or any other expense or charge
when due hereunder or shall breach or default in the observance or performance
of any conditions or covenants to be observed or performed by Subtenant
hereunder (including under any of the applicable provisions of the Master Lease
incorporated herein), then Sublandlord shall have and may exercise all rights
and remedies against Subtenant as provided to Master Landlord in the event of
default by tenant as set forth in the Master Lease (including, but not limited
to, the rights and remedies provided in Paragraphs 13 and 28(G) of the Master
Lease). Sublandlord shall forward to Subtenant any material notices received
from Master Landlord immediately, but in no event later than within seven (7)
business days after receipt thereof; provided, however, such delay in or failure
to forward a notice shall not extend any of Subtenant's notice and/or cure
periods or affect any of Subtenant's obligations or Sublandlord's rights or
remedies if Subtenant has already received such notice directly from Master
Landlord.

                  7.3      Automatic Termination. This Sublease is and shall be
at all times subject and subordinate to the Master Lease, including all rights
of Master Landlord thereunder. Without limiting the generality of the foregoing,
in the event of termination of Sublandlord's

                                      -12-
<PAGE>

interest under the Master Lease for any reason other than through the fault of
Sublandlord, then, this Sublease shall automatically terminate concurrently
therewith (subject to any nondisturbance agreement between Subtenant and Master
Landlord), and Sublandlord shall have no liability to Subtenant. Provided that
Subtenant is not in default hereunder and has cash equal to at least three (3)
months of Subtenant's average monthly expenditures for its normal business
operations, Sublandlord will not agree to terminate the Master Lease (other than
pursuant to its rights under the Master Lease), unless Master Landlord agrees to
(a) not disturb Subtenant's occupancy pursuant to this Sublease, or (b) enter
into a direct lease with Subtenant under the terms of this Sublease.

                  7.4      Sublease Controls. In the event of an express
conflict between any provision of the Master Lease, which is incorporated herein
as described above in this Section 7, and any provision of this Sublease, this
Sublease shall control. In determining whether to grant or withhold any consent
or approval hereunder, Sublandlord may expressly condition the same upon the
consent or approval of Master Landlord, as applicable, if such consent or
approval is required under the Master Lease.

                  7.5      Excluded Provisions. Sublandlord and Subtenant hereby
acknowledge that the following provisions of the Master Lease are hereby NOT
incorporated into this Sublease: Provisions 1, 4, 5, 6, 7, 9 and 12 of the
Schedule, Paragraphs 2(A) (except for definitions provided in such paragraph),
3(A) to the extent related to the assignment of warranties, 3(D), the portion of
the first sentence of 5(A) ending with the phrase "Appendix C", 5(E), the third
sentence of 8(A), 8(B), portions of 17(A) related to the Permitted Transferee or
the Novartis Transferee, 20, 25, the first sentence of 26(x), 29, 33, 34,
Appendix C (except as to the definition of Personalty, the definition of
Schedule Sensitive Equipment and Annex 2), Appendix G, Addendum 1 and Addendum
2. Additionally, Subtenant shall have no right, and there shall not be vested in
Subtenant, any right to exercise any rights of first refusal, options to expand
or extend the term of the Master Lease, or other similar preferential rights, if
any, given to Sublandlord as the tenant under the Master Lease.

                  7.6      No Sublandlord Liability. Except as otherwise
provided herein, Sublandlord and Subtenant agree that Sublandlord shall not be
responsible or liable to Subtenant for the performance or nonperformance of any
obligations of Master Landlord under the Master Lease, and in furtherance
thereof agree as follows:

                           7.6.1    Notwithstanding anything to the contrary
contained in this Sublease, Sublandlord shall not be required to (a) provide or
perform any insurance and services (including without limitation, the insurance
described in Paragraph 8 of the Master Lease) or any alterations, improvements,
improvement allowances or other construction obligations as to the Sublease
Premises that Master Landlord may have agreed to provide or perform pursuant to
the Master Lease or as required by law, (b) provide any project services to the
Sublease Premises that Master Landlord may have agreed to furnish pursuant to
any provision of the Master Lease or as required by law, including without
limitation, Paragraph 4 and Appendix F of the Master Lease, (c) perform any
maintenance or make any of the repairs to the Sublease Premises or the Building
that Master Landlord may have agreed to perform or make pursuant to the Master
Lease or as required by law, including without limitation, Paragraphs 5(B) and
9(B) of the

                                      -13-
<PAGE>

Master Lease, (d) comply with any laws or requirements of governmental
authorities regarding the maintenance or operation of the Sublease Premises, (e)
take any other action relating to the operation, maintenance, repair, alteration
or servicing of the Sublease Premises that Master Landlord may have agreed to
provide, furnish, make, comply with, or take, or cause to be provided,
furnished, made, complied with or taken under the Master Lease, or (f) provide
Subtenant with any rebate, credit, allowance or other concession required of
Master Landlord pursuant to the Master Lease except to pass through to Subtenant
a pro rata portion of any such rebate, credit, allowance or concession that may
in fact be granted by the Master Landlord.

                           7.6.2    Sublandlord agrees, upon written request of
Subtenant, to use commercially reasonable efforts, at Subtenant's sole cost and
expense, to cause Master Landlord to provide, furnish, or comply with any of
Master Landlord's obligations under the Master Lease (provided, however, that
Sublandlord shall not be obligated to use such efforts or take any action which,
in Sublandlord's reasonable judgment, might give rise to a default by
Sublandlord under the Master Lease). If Master Landlord shall default in the
performance of any of its obligations under the Master Lease or at law,
Sublandlord shall, upon the reasonable request and at the expense of Subtenant,
cooperate with Subtenant in the prosecution of any action or proceeding in order
to have Master Landlord: (a) make such repairs, provide such services or comply
with any other obligation of Master Landlord under the Master Lease or as
required by law, and/or (b) compensate Subtenant for any earlier default by
Master Landlord in the payment or performance of its liabilities and obligations
under the Master Lease during the Sublease Term. Notwithstanding the foregoing,
Subtenant shall not make any claim against Sublandlord for any damage which may
arise by reason of: (y) the failure of Master Landlord to keep, observe or
perform any of its obligations under the Master Lease; or (z) the acts or
omissions of Master Landlord or its agents, contractors, employees, invitees or
licensees.

                           7.6.3    Neither Sublandlord nor any of its
directors, officers, employees, shareholders, partners, members, affiliates,
agents, representatives or consultants shall have any personal liability
regarding this Sublease or Sublandlord's obligations set forth herein.

                  7.7      Modifications to Master Lease. Except for any
modifications or amendments required to address or reflect changes in applicable
laws or regulations, Sublandlord shall not amend or modify the Master Lease in
such a manner as to materially or adversely affect Subtenant's use of the
Sublease Premises or increase the obligations or decrease the rights of
Subtenant thereunder or hereunder, without the prior written consent of
Subtenant, which may be granted or withheld at Subtenant's reasonable discretion

         8.       INSURANCE. Subtenant shall comply in all respects with the
provisions of Paragraph 8 of the Master Lease with regard to the maintenance of
insurance. Such insurance shall only be required to cover the applicable
Premises but shall nevertheless be in the amounts specified in Paragraph 8(C) of
the Master Lease. All such insurance shall name, as additional insureds, Master
Landlord, Master Landlord's property manager, Master Landlord's Agents (as
defined in the Master Lease), the mortgagees and ground lessors, if any, as
notified by Master Landlord, Sublandlord and any other parties required to be
named under the terms of the Master Lease, and a policy or certificate thereof
shall be provided to Sublandlord not later than five (5) business days prior to
the earlier of: (a) the Sublease Commencement Date, or (b) Subtenant's

                                      -14-
<PAGE>

early entry onto the Premises pursuant to Section 2 above. The maintenance of
insurance coverage with respect to the Premises and any property of Subtenant
shall be the sole obligation of Subtenant. All insurance required to be
maintained by Subtenant shall provide for thirty (30) days' prior written notice
to Sublandlord and Master Landlord in the event of any termination or reduction
in coverage of such insurance. Any waiver of subrogation provision set forth in
the Master Lease shall be deemed a three party agreement binding among and
inuring to the benefit of Sublandlord, Subtenant and Master Landlord (by reason
of its consent hereto).

         9.       SURRENDER AND HOLDOVER.

                  9.1      Surrender. As soon as its right to possession ends,
Subtenant will surrender the Sublease Premises to Sublandlord in the condition
existing as of the Execution Date and the Remainder Premises in the condition
existing on the date possession of such premises are delivered to Subtenant,
excepting (a) ordinary wear, tear and casualty, (b) Hazardous Materials existing
at the Execution Date (as to the Sublease Premises) or the date the Remainder
Premises are delivered to Subtenant (as to the Remainder Premises), except to
the extent the existence of any such Hazardous Materials are caused or permitted
by Subtenant or its Agents, and (c) interior improvements made by Subtenant
which Sublandlord and Master Landlord state in writing may be surrendered at
termination of the Sublease. Such surrender shall otherwise be in accordance
with the provisions of this Sublease and the Master Lease to the extent
incorporated herein, including, without limitation, Paragraphs 5, 14 and 28 of
the Master Lease. Without limiting the generality of the preceding sentence,
Subtenant hereby agrees upon surrender of the Subleased Premises to remove all
property required to be removed under the Master Lease to the extent required by
Master Landlord.

                  9.2      Holdover. Under no circumstances shall Subtenant be
permitted to holdover following the end of the Sublease Term. Accordingly, if
Subtenant has not fully surrendered possession of the Sublease Premises in the
manner required by the Master Lease and as required by the terms of this
Sublease on or before termination of this Sublease, all of the terms, covenants
and agreements hereof shall continue to bind Subtenant to the extent applicable,
except that (i) the monthly Subtenant's Rent shall be equal to one hundred fifty
percent (150%) of Subtenant's Rent payable by Subtenant under this Sublease for
the month immediately preceding such holdover period, and (ii) Subtenant shall
indemnify and defend Sublandlord against, and hold Sublandlord harmless from,
any and all claims, losses and liabilities for damages, consequential or
otherwise, resulting from Subtenant's failure to surrender possession, including
without limitation, any such claims by Master Landlord or any successor tenant
of all or any portion of the Sublease Premises.

         10.      INDEMNIFICATION AND REPRESENTATIONS. The following provisions
and obligations shall survive the termination of this Sublease:

                  10.1     Subtenant shall indemnify, defend, protect, and hold
Sublandlord harmless from and against all actions, claims, demands, costs,
liabilities, losses, reasonable attorneys' fees, damages, penalties, and
expenses (collectively, "Claims") which may be brought or made against
Sublandlord or which Sublandlord may pay or incur to the extent caused by (a) a
breach of this Sublease by Subtenant, (b) the use or occupancy by Subtenant or
its employees, agents, contractors, invitees, assignees or sublessees
(collectively, "Agents") of the Sublease Premises,

                                      -15-
<PAGE>

and, if subleased by Subtenant, the Remainder Premises, (c) the negligence or
willful misconduct of Subtenant or its Agents, (d) the storage, use, release or
disposal of Hazardous Substances on or about the Sublease Premises and, if
subleased by Subtenant, the Remainder Premises, by Subtenant or its Agents; (e)
Subtenant's failure to comply with any Environmental Laws following the
Execution Date; (f) Subtenant's failure to remove Subtenant's Hazardous
Substances on termination of this Sublease as required pursuant to this Section
11.5 and Paragraph 28(E) of the Master Lease; and (g) Subtenant's failure to
comply with the laws and regulations pertaining to the Permissible Chemical
Inventory. Notwithstanding anything to the contrary in this Sublease or Master
Lease, Subtenant shall have no obligation to clean up or to comply with any law
regarding, or to reimburse, indemnify, defend or hold harmless Sublandlord or
Master Landlord with respect to, any Hazardous Materials discovered (i) on the
Sublease Premises which existed, or was caused by conditions which existed,
prior to the Execution Date or (ii) on the Remainder Premises which existed, or
was caused by conditions which existed, prior to the date the Remainder Premises
are delivered to Subtenant, except to the extent any such Hazardous Materials
are caused or permitted by Subtenant or its Agents. The provisions of this
Section 10.1 shall survive the expiration or earlier termination of this
Sublease.

                  10.2     Sublandlord represents, to the actual knowledge of
the officer executing this Sublease, that (a) the Master Lease is in full force
and effect between Master Landlord and Sublandlord, and (b) the copy of the
Master Lease which is attached hereto as Exhibit "A" is a true, correct and
complete copy of the Master Lease.

         11.      HAZARDOUS MATERIALS.

                  11.1     Sublandlord's Phase I Report. Prior to the Sublease
Commencement Date, Sublandlord shall deliver a Phase I environmental report
regarding the Premises (the "Phase I Report") to Subtenant. If the Phase I
Report reveals any hazardous materials violations of applicable Environmental
Laws and to the extent such violations existed, or were caused by conditions
which existed, prior to the date on which the Premises is delivered to
Subtenant, Sublandlord shall remove, repair and/or correct, or cause to be
removed, repaired and/or corrected, such violations to the extent Sublandlord is
required to do so under any Environmental Laws or the Master Lease; provided,
however, that Sublandlord shall not be precluded from exercising its remedies
against Master Landlord or any other party to the extent available under the
Master Lease or at law or in equity. Except as may otherwise be disclosed on the
Phase I Report, Sublandlord hereby warrants and represents to Subtenant, that to
Sublandlord's actual knowledge, without investigation or inquiry, the Premises
does not contain any Hazardous Substances not otherwise permitted under the
terms of the Master Lease and in compliance with Environmental Laws.

                  11.2     Permitted Hazardous Substances. In accordance with
the requirements of the Master Lease and all applicable Environmental Laws,
Subtenant shall be entitled to use Permitted Hazardous Substances (as defined in
the Master Lease) in the Premises in the course of Subtenant's operations,
provided that Subtenant shall comply with all Environmental Laws in its use of
such Permitted Hazardous Substances. If Subtenant desires to use any Hazardous
Substances not deemed Permitted Hazardous Substances under the Master Lease,
then, prior to

                                      -16-
<PAGE>

such use, Subtenant shall comply with all requirements of the Master Lease to
obtain such consent, including without limitation, Paragraph 28(A).

                  11.3     Environmental Questionnaire. Subject to Section 2, as
soon as possible after execution of this Sublease but not later than the
Sublease Commencement Date, Subtenant shall complete, execute and deliver to
Sublandlord and Master Landlord an Environmental Questionnaire and Disclosure
Statement (the "Environmental Questionnaire") in the form of Exhibit "F"
attached hereto. The completed Environmental Questionnaire shall be deemed
incorporated into this Sublease for all purposes, and Master Landlord and
Sublandlord shall be entitled to rely fully on the information contained
therein. Subtenant shall provide an updated Environmental Questionnaire annually
on each anniversary of the Sublease Commencement Date. If Subtenant desires to
transfer any of its interest in this Sublease, in addition to complying with the
requirements for such a transfer set forth in the Master Lease and in Section 15
of this Sublease, Subtenant shall also deliver to Master Landlord and
Sublandlord a completed Environmental Questionnaire from the proposed assignee
or subtenant.

                  11.4     Hazardous Substances List. If Subtenant does not
attach to the Environmental Questionnaire a Hazardous Materials
Disclosure-Chemical Inventory and Business Emergency Plan pursuant to Paragraph
7(b) thereof, Subtenant shall also provide to Sublandlord, whenever an
Environmental Questionnaire is due and to the extent the following information
is not provided on an Environmental Questionnaire, a list (the "Hazardous
Substances List") identifying each type of Hazardous Substance to be present in
or about the Premises and setting forth all governmental approvals or permits
required in connection with the presence of Hazardous Substances in or about the
Premises. For each type of Hazardous Substance listed, the Hazardous Substances
List shall include the: (i) chemical name; (ii) material state (solid, liquid,
gas, cryogen); (iii) concentration; (iv) storage amount and storage condition
(cabinets or no cabinets); (v) use amount and use condition (open use or closed
use); (vi) location (room number/identification); and (vii) chemical abstract
service (CAS) number, if known. Sublandlord may, at Subtenant's expense, hire a
person or firm qualified to analyze the Hazardous Substances List to confirm
Subtenant's compliance with this Sublease and applicable building and fire code
requirements.

                  11.5     Subtenant's Phase I Report. Prior to the expiration
or earlier termination of this Sublease, Subtenant shall provide Sublandlord
with a Phase I Report as to the Premises, which report shall be completed and
dated no earlier than thirty (30) days prior to such expiration or termination
of this Sublease. The Phase I Report shall be provided to Sublandlord as
evidence that the Premises are free and clear of any contamination or the
presence of any Hazardous Substances caused by Subtenant or its subtenants,
employees, guests, officers, directors, agents or contractors. Notwithstanding
the results of such report, Subtenant shall be liable, at its sole cost and
expense, for the removal of all Hazardous Substances in, on or near the Premises
caused or permitted by Subtenant or its subtenants, employees, guests, officers,
directors, agents or contractors, and such obligation shall survive the
expiration or termination of this Sublease. Additionally, as part of its
surrender obligations hereunder, Subtenant shall have taken all steps necessary
to complete a decommission process for the Sublease Premises with the City of
San Diego and any other applicable governmental entity to the extent required by
law, and Subtenant shall have removed or transferred any licenses Subtenant or
its subtenants, agents or contractors

                                      -17-
<PAGE>

have placed on the Sublease Premises including any radioactive license(s). In
connection with the expiration or earlier termination of this Sublease,
Subtenant shall comply with the surrender and removal obligations set forth in
the Master Lease incorporated by reference into this Sublease, including,
without limitation, Paragraph 28(E) thereof.

                  11.6     Permissible Chemical Inventory. The Building consists
of four (4) control zones ("Control Zones") for the purposes of determining the
permissible amount of chemical inventory that may be brought on, handled, stored
or used in the Building at any given time (the "Permissible Chemical
Inventory"). Two (2) of the Control Zones (collectively, the "Premises Control
Zones") are located entirely within the Sublease Premises and portions of the
remaining two (2) Control Zones (collectively, the "Other Control Zones") are
also located within the Sublease Premises. Until such time as Subtenant
subleases both the Sublease Premises and the Remainder Premises from
Sublandlord, the Permissible Chemical Inventory shall be allocated between the
Sublease Premises and the Remainder Premises such that Subtenant shall be
entitled to one hundred percent (100%) of the Permissible Chemical Inventory
allocable to the Premises Control Zones located entirely within its Sublease
Premises and fifty percent (50%) of the Permissible Chemical Inventory allocable
to the Other Control Zones. Notwithstanding the foregoing, if Sublandlord
subleases the Remainder Premises to a third-party subtenant who desires a
pro-rata portion of the Permissible Chemical Inventory, Subtenant shall reduce
its usage of Permissible Chemical Inventory in the Other Control Zones from
fifty percent (50%) to twenty-five percent (25%). Sublandlord shall assist
Subtenant with any out-of-pocket incremental costs Subtenant incurs to cause
such reduction, up to a maximum amount of the greater of: (a) fifty percent
(50%) of the amount of such costs; or (b) $20,000. Subtenant shall cause such
reduction to occur within thirty (30) days after delivery of written notice from
Sublandlord to Subtenant. If Subtenant subleases the entire Premises from
Sublandlord, Subtenant shall thereafter be entitled to one hundred percent
(100%) of the Permissible Chemical Inventory for all Control Zones. Subtenant
shall strictly comply with all federal, state and local laws, rules and
regulations, including, without limitation, the California Health and Safety
Code and the Uniform Fire Code, as adopted by the State Fire Marshall, regarding
the Permissible Chemical Inventory. Such compliance by Subtenant shall include,
without limitation, satisfying all tracking and reporting requirements,
submitting all required certifications and inventory forms, maintaining all
required permits and following all required procedures and protocols.

                  11.7     Hazardous Substances Storage Sheds. Subtenant
acknowledges there currently exists on the Project two (2) Hazardous Substances
storage sheds (collectively, the "Storage Sheds"). Subtenant shall be entitled
to use a pro rata portion of the Storage Sheds, such portion to be determined
based on the square footage in the Building occupied by Subtenant.

         12.      NOTICES. Subtenant hereby designates the party set forth below
as the sole representative of Subtenant authorized to give and receive all
notices and other communications on behalf of Subtenant under this Sublease. All
notices, demands, statements and other communications that may or are required
to be given by either party to the other hereunder shall be in writing and shall
be (i) personally delivered to the address or addressee provided herein, (ii)
sent via facsimile to the fax number provided below, provided that such notice
is also sent by a second method approved hereunder, or (iii) sent by certified
first class United States mail,

                                      -18-
<PAGE>

postage prepaid, return receipt requested, or (iv) delivered by a reputable
overnight courier service and, in any case, addressed as follows:

If to Sublandlord:                         Torrey Mesa Research Institute
                                           c/o Syngenta Corporation
                                           2200 Concord Pike
                                           P.O. Box 8353
                                           Wilmington, DE 19803-8353
                                           Attention: Joseph Powell
                                           FAX: (302) 425-2005

If to Subtenant (prior to the Sublease     Anadys Pharmaceuticals, Inc.
Commencement Date):                        9050 Camino Santa Fe
                                           San Diego, CA 92121
                                           Attention: Mary Glanville
                                           FAX: (858) 527-0417

If to Subtenant (after the Sublease        Anadys Pharmaceuticals, Inc.
Commencement Date):                        3115 Merryfield Way
                                           San Diego, California 92037
                                           Attention: Mary Glanville
                                           FAX: [To be provided upon occupancy.]

Notices shall be deemed to have been fully given upon (a) personal delivery if
sent by personal delivery and such delivery is confirmed, (b) confirmation of
fax, if sent by fax and by a second approved method, (c) three (3) business days
after deposit in the United States mail, if sent by certified mail, or (d) the
next delivery date, if overnight courier is confirmed. If delivery thereof is
refused, then upon such refusal to accept delivery (provided that there is
reasonable evidence of such refusal). Either party shall have the right upon
five (5) days prior notice to the other to change its address for notice as
provided above.

         13.      ALTERATIONS. Notwithstanding anything to the contrary
contained in the Master Lease, Subtenant shall not construct or install a
vivarium or otherwise make any alterations, renovations, improvements or other
installations, whether structural or nonstructural (collectively, "Subtenant
Alterations") in or to the Premises without the prior written consent of
Sublandlord, which approval shall not be unreasonably withheld or delayed, and
Master Landlord pursuant to the Master Lease. In the event that Subtenant
desires to construct or install a vivarium or biobubble, such proposed vivarium
or biobubble shall be designed, constructed, and operated in full compliance
with all Federal, State and local government laws, regulations and statutes,
including without limitation, compliance with the Public National Institutes of
Health Guide for Care and Use of Laboratory Animals. If Master Landlord consents
or does not require its consent to the construction of a vivarium or biobubble,
Subtenant will not need Sublandlord's consent to such vivarium or biobubble. All
Subtenant Alterations shall be subject to the terms and conditions of the Master
Lease, including without limitation, the obligation, at Subtenant's sole cost
and expense, to remove such Subtenant Alterations at the end of the Sublease
Term and restore the Sublease Premises to the condition existing immediately
prior to

                                      -19-
<PAGE>

completion of the Subtenant Alterations, if so required by Sublandlord or Master
Landlord. All Subtenant Alterations shall be performed by a contractor
reasonably approved by Sublandlord and Master Landlord and shall be completed in
accordance with Paragraph 5 of the Master Lease. Subtenant shall, at its sole
cost and expense, obtain any permits or other approvals from the Master Landlord
and from any governmental entities required for any Subtenant Alterations
desired by Subtenant and shall comply with all building codes, requirements and
other laws related thereto, including without limitation the Americans With
Disabilities Act. Subtenant shall indemnify, defend (with counsel reasonably
acceptable to Sublandlord), and hold harmless Sublandlord and its agents,
contractors, directors, shareholders and representatives from and against any
and all losses, costs, claims, liabilities and damages (including reasonable
attorneys' and experts' fees and expenses) arising from or relating in any
manner to the installation, use, operation, repair, maintenance, restoration,
replacement and removal of the Subtenant Alterations and all substances and
materials used in connection therewith, except to the extent caused by the gross
negligence or willful misconduct of Sublandlord.

         14.      BROKERS. Subtenant and Sublandlord respectively warrant and
represent to each other that they have not dealt with any leasing agent or
broker in connection with this Sublease other than Colliers International, on
behalf of Sublandlord ("Sublandlord's Broker"), and Phase 3 Properties, Inc., on
behalf of Subtenant ("Subtenant's Broker" and collectively, with Sublandlord's
Broker referred to herein as the "Brokers") and that no brokerage commission or
finder's fee has been incurred in connection with this transaction except a
brokerage commission to be paid to the Brokers by Sublandlord pursuant to a
separate agreement between Sublandlord and Sublandlord's Broker. Subtenant and
Sublandlord each agree to indemnify, defend and hold the other party harmless
from and against any claims arising out of a breach of the foregoing
representation and warranty. The provisions of this Section 14 shall survive the
expiration or earlier termination of this Sublease.

         15.      ASSIGNMENT AND SUBLETTING. Subtenant shall not assign this
Sublease or any interest therein nor further sublet the Sublease Premises in
whole or in part, or any right or privilege appurtenant thereto nor permit the
occupancy or use of any part thereof by any person without the prior written
consent of Sublandlord and Master Landlord, which consent shall not be
unreasonably withheld or delayed pursuant to the terms of Paragraph 17 of the
Master Lease. Subtenant acknowledges and agrees that in the event that Subtenant
sublets or assigns this Sublease, any excess payments for rent profit due under
Paragraph 17(E) of the Master Lease to the Master Landlord (if any) shall be the
sole responsibility of Subtenant and Sublandlord shall have no liability or
responsibility for payment of any portion of such excess payments. Subject to
such obligation, Subtenant shall be entitled to retain any and all rent profit
Subtenant receives from a third party during the Sublease Term. Except to the
extent permitted above, any assignment or further subletting, occupancy or use
by a third party of the Premises without the prior written consent of
Sublandlord and/or Master Landlord shall, at the option of the Sublandlord,
terminate this Sublease and any such purported assignment, sub-sublease,
occupancy or use shall be null and void. Without limiting the foregoing, any
further sublease or assignment by Subtenant under this Section 15 shall be
subject to the costs and limitations set forth in Paragraph 17 of the Master
Lease and such transferee shall be required to provide the information required
under Sections 11.2 and 11.4 of this Sublease.

                                      -20-
<PAGE>

         16.      RISK OF CASUALTY. In the event of fire or other casualty to
the Sublease Premises prior to the Sublease Commencement Date or otherwise
during the Sublease Term, which in Master Landlord's estimation (based on the
determination of a licensed architect retained by Master Landlord, as described
in Paragraph 9 of the Master Lease) (the "Master Landlord's Repair Estimate")
will take less than ten (10) months to repair or more than two (2) months if the
restoration would begin during the last twelve (12) months of the Sublease Term,
this Sublease will remain in full force and effect and Subtenant's Rent will be
abated based upon the extent to which such damage and the making of such repairs
interferes with Subtenant's ability to occupy and use the Sublease Premises
while such repairs are being made. In the event of casualty to the Sublease
Premises prior to the Sublease Commencement Date or otherwise during the
Sublease Term, which in Master Landlord's Repair Estimate will take more than
ten (10) months to repair, Subtenant may terminate this Sublease, by giving
Sublandlord notice of such termination within seven (7) days of receipt of the
Master Landlord's Repair Estimate. In any event, and without limiting Section
7.3 above, if the Master Lease is terminated by Master Landlord pursuant to
Paragraph 9 of the Master Lease, this Sublease shall terminate.

         17.      FINANCIAL STATEMENTS. If Subtenant has not completed its IPO
by the Sublease Commencement Date, Subtenant shall provide Sublandlord with a
three-year projection of earnings and cash flow of its operations without the
IPO financing. Additionally, until Subtenant completes its IPO, Subtenant shall
provide Sublandlord with (a) financial statements for each calendar year during
the Sublease Term by March 31 of the following year, which financial statements
shall have been prepared in accordance with generally accepted accounting
principles ("GAAP"), consistently applied, audited and certified by an
independent certified public accountant, and (b) current quarterly interim
financial statements by June 1, September 1 and December 1 of each calendar
year, prepared according to GAAP. If Subtenant's cash position at any time falls
below the amount that is three (3) months of Subtenant's average monthly
expenditures for its normal business operations, Subtenant shall promptly
provide Sublandlord with written notice of such occurrence. Subtenant
represents, warrants and covenants that any quarterly or annual financial
statements previously furnished to Sublandlord, and any financial statements
hereafter furnished to Sublandlord are accurate and are not materially
misleading as of the date such statements were or are given to Sublandlord.

         18.      WARRANTS FOR PREFERRED STOCK. Upon full execution of this
Sublease and subject to approval of this Sublease by Master Landlord, Subtenant
will issue Sublandlord a warrant to purchase 150,000 shares of the Series C
Preferred Stock of Subtenant (the "Preferred Stock") at an exercise price of One
and 35/100 Dollars ($1.35) per share (the "Exercise Price"), which warrant shall
have a five (5) year term and shall be adjustable for stock splits, stock
dividends, recapitalizations and the like, and will include such other terms and
conditions as are mutually agreeable to Sublandlord and Subtenant (the "Sublease
Warrant"). The Sublease Warrant shall also contain a statement of "no
impairment," assuring Sublandlord that Subtenant shall not willfully avoid or
seek to avoid the observance or performance of any of the provisions of the
warrant or otherwise adversely affect the economic benefit of the
warrantholder's rights to the underlying stock in a manner different from all
other holders of the Company's stock. If the IPO has not been completed by
October 1, 2004, Subtenant's Sublease Right and Right of First Offer set forth
in Sections 1.3 and 1.4 above shall terminate and have no further force or
effect unless Subtenant, in its sole discretion, provides to Sublandlord, prior
to November 1, 2004, a warrant

                                      -21-
<PAGE>

to purchase an additional 100,000 shares of Series C Preferred Stock (such
number to be adjusted for any stock splits, stock dividends and the like,
including but not limited to the reverse stock split expected to occur in
connection with Subtenant's proposed initial public offering) at the Exercise
Price (to be adjusted as set forth above and as provided in the Sublease
Warrant), which warrant will be subject to the same requirements as the warrant
referenced above (the "Second Sublease Warrant"). No warrants that Subtenant
issues shall be required to be returned at the end of the Sublease Term or the
earlier expiration of this Sublease. Subtenant hereby represents and warrants to
Sublandlord that Subtenant has the authority to issue the Sublease Warrant and
has taken all necessary and appropriate action to enable Subtenant to issue the
Sublease Warrant, such action to include, without limitation, making all
required disclosures in connection with the IPO or otherwise. Subtenant further
represents and warrants that in the event it decides, in its sole discretion, to
issue the Second Sublease Warrant, that it will obtain the requisite authority
and take all necessary action to enable it to issue the Second Sublease Warrant.

         19.      MASTER LANDLORD'S CONSENT. This Sublease shall not become
effective and shall not be deemed to be an offer to sublease or create any
rights or obligations between Subtenant or Sublandlord unless and until
Sublandlord and Subtenant have executed and delivered the same, and Master
Landlord has executed and delivered a consent to this Sublease in a form
reasonably acceptable to Sublandlord and Subtenant. If no such consent to this
Sublease is given or deemed given by Master Landlord within ten (10) business
days after the delivery of a copy of the fully executed Sublease to Master
Landlord, then either Sublandlord or Subtenant shall have the right, by written
notice to the other, to terminate this Sublease at any time prior to such
consent from Master Landlord being given or deemed given. By delivering this
Sublease, each party hereby represents and warrants to the other that such
execution and delivery has been duly authorized by all necessary corporate or
partnership action and that the person(s) executing same have been duly
authorized to do so.

         20.      PARKING. Subtenant shall be permitted to use its proportionate
share of the parking rights granted to Sublandlord under the Master Lease, which
proportionate share shall be determined by calculating the ratio of the square
footage of the Sublease Premises to the total square footage of the Building. If
and when Subtenant subleases the Remainder Premises from Sublandlord, Subtenant
shall thereafter be entitled to all of the parking rights granted to Sublandlord
under the Master Lease.

         21.      SIGNAGE; ROOF AND CABLE RIGHTS. Subtenant, at Subtenant's sole
cost and expense, shall have the non-exclusive right to maintain signs on or
about the Premises in accordance with all Governmental Regulations (as defined
in the Master Lease) and the terms and conditions of the Master Lease, including
without limitation, Paragraphs 11(b) and 30. Master Landlord and Sublandlord
shall have the right to approve such signage, to the extent so provided in the
Master Lease, which approval shall not be unreasonably withheld, conditioned or
delayed. Subtenant shall have roof access and cable rights in the Sublease
Premises to the extent Sublandlord has such rights in the Master Lease.

         22.      QUIET ENJOYMENT. Sublandlord shall use commercially reasonable
efforts to obtain a non-disturbance agreement from Master Landlord on
Subtenant's behalf; provided, however, that such efforts shall not require
Sublandlord to incur any cost or expense and the

                                      -22-
<PAGE>

ability to obtain such agreement shall not be a condition to the effectiveness
of this Sublease. Sublandlord makes no representation or warranty of quiet
enjoyment to Subtenant. If Master Landlord seeks to terminate the Master Lease
because of a default or alleged default by Sublandlord under the Master Lease
(other than a default or alleged default caused by the default by Subtenant
under this Sublease), Sublandlord shall use diligent, good-faith efforts to
cure, or cause the cure of, such default. In the event that Sublandlord defaults
in the performance or observance of any of Sublandlord's obligations under this
Sublease or receives a notice of default from Master Landlord under the Master
Lease, then Subtenant shall give written notice to Sublandlord specifying in
what manner Sublandlord has defaulted. If such default shall not be cured within
a reasonable time, but in no event later than thirty (30) days after
Sublandlord's receipt of such written notice from Subtenant (except that if such
default cannot be cured within said thirty (30) day period, this period shall be
extended for an additional reasonable time, provided that Sublandlord commences
to cure such default within such thirty (30) day period and proceeds diligently
thereafter to effect such cure as quickly as possible), then Subtenant shall
give Sublandlord a second written notice specifying Sublandlord's failure to
cure such default. If Sublandlord does not cure some default within fifteen (15)
days thereafter, Subtenant shall be entitled, at Subtenant's option, to cure
such default and promptly collect from Sublandlord Subtenant's reasonable
expenses in so doing (including, without limitation, reasonable attorneys' fees
and court costs), unless such default by Sublandlord is caused by a default of
Subtenant hereunder (in which case Sublandlord shall not be liable for
Subtenant's costs to cure the default). Subtenant shall not be required to wait
the entire cure period provided for herein if earlier action is required to
prevent a termination by Master Landlord of the Master Lease and Sublandlord has
failed to take such earlier action. Nothing contained herein shall entitle
Subtenant to act on behalf of Sublandlord or in Sublandlord's name. Except as
required under the Master Lease, Subtenant shall not be required to execute any
non-disturbance agreement during the Sublease Term that would adversely affect
Subtenant's rights under this Sublease.

         23.      MISCELLANEOUS.

                  23.1     This Sublease may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one instrument.

                  23.2     This Sublease cannot be changed or terminated orally.
All informal understandings and agreements heretofore made between the parties
are merged in this Sublease, which alone fully and completely expresses the
agreement between Sublandlord and Subtenant as to the subleasing of the Sublease
Premises.

                  23.3     Each and every indemnification obligation set forth
in this Sublease, or incorporated into this Sublease from the Master Lease,
shall survive the expiration or earlier termination of the term of this
Sublease.

                  23.4     If, for any reason, any suit be initiated between
Sublandlord and Subtenant to enforce any provision of this Sublease, the
prevailing party shall be entitled to legal costs, expert witness expenses, and
reasonable attorneys' fees, as fixed by the court.

                                      -23-
<PAGE>

                  23.5     Subject to the restrictions on assignment set forth
in this Sublease, this Sublease shall be binding on and shall inure to the
benefit of the parties hereto and their respective successors and assigns.

                  23.6     The parties mutually acknowledge that this Sublease
has been negotiated at arm's length. The provisions of this Sublease shall be
deemed to have been drafted by all of the parties and this Sublease shall not be
interpreted or constructed against any party solely by virtue of the fact that
such party or its counsel was responsible for its preparation.

                  23.7     No Third Party Rights. The benefit of the provisions
of this Sublease is expressly limited to Sublandlord and Subtenant and their
permitted successors and assigns. Under no circumstances will any third party be
construed to have any rights as a third party beneficiary with respect to any of
said provisions.

                  23.8     Confidentiality. Sublandlord shall treat all
information furnished by Subtenant pursuant to this Sublease as confidential and
shall not disclose such information to any person or entity, except for Master
Landlord or Sublandlord's affiliates or consultants, or as otherwise expressly
provided herein, without Subtenant's prior written consent, which consent shall
not be unreasonably withheld or delayed, except as required by law.

         IN WITNESS WHEREOF, the parties have executed this Sublease as of the
date set forth above.

SUBLANDLORD:                      TORREY MESA RESEARCH INSTITUTE,
                                  a Delaware corporation

                                  By:   /s/ Joseph L. Powell
                                        ----------------------------------------
                                  Name: Joseph L. Powell
                                  Its:  President

SUBTENANT:                        ANADYS PHARMACEUTICALS, INC.,
                                  a Delaware corporation

                                  By:   /s/ Kleanthis G. Xanthopoulos
                                        ----------------------------------------
                                  Name: Kleanthis G. Xanthopoulos, Ph. D.
                                  Its:  President and CEO

                                  By:   ________________________________________
                                  Name: ________________________________________
                                  Its:  ________________________________________

                                      -24-
<PAGE>

                           CONSENT OF MASTER LANDLORD

         Notwithstanding any provision in the Master Lease prohibiting the
sublease of the Premises, the undersigned, as owner and holder of all right,
title and interest of Master Landlord under the Master Lease, hereby consents to
the foregoing sublease of the Premises and waives any objection to the sublease
contained herein.

                                  CARRAMERICA REALTY CORPORATION,
                                  a Maryland corporation

Dated: _______________, 2004      By:   ________________________________________
                                  Name: ________________________________________
                                  Its:  ________________________________________

                                      -1-
<PAGE>

                                  DEFINED TERMS

         Unless the context otherwise indicates, whenever used in this Agreement
or an Exhibit to this Agreement, the following terms will have the meaning
ascribed thereto in the section identified:

<TABLE>
<CAPTION>
                                                                    Section in Which
                                                                    ----------------
Term                                                                     Defined
----                                                                     -------
<S>                                                                 <C>
Additional Security Deposit                                         5.2
Additional Subtenant Improvement Allowance                          6.2
Base Expenses                                                       4.3.1
Brokers                                                             14
Building                                                            Recital B
Common Stock                                                        18
Control Zones                                                       11.6
Environmental Questionnaire                                         11.3
Execution Date                                                      Introduction
Exercise Price                                                      18
Expiration Date                                                     2
First Installment                                                   14
GAAP                                                                17
Hazardous Substances List                                           11.4
Increased Expenses                                                  4.3.1
Initial Security Deposit                                            5.1
IPO                                                                 4.2.2
Leased Premises                                                     Recital B
Master Landlord                                                     Recital A
Master Landlord's Repair Estimate                                   16
Master Lease                                                        Recital A
Monthly Base Expenses                                               4.3.1
Novartis                                                            Introduction
Other Control Zones                                                 11.6
Other Subtenants                                                    1.2.1
Permissible Chemical Inventory                                      11.6
Phase I Report                                                      11.1
Premises                                                            1.3
Premises Control Zones                                              11.6
Registration Statement                                              4.2.2
Remainder Premises                                                  1.2
Remainder Premises Improvements                                     6.2
Right of First Offer                                                1.3
SEC                                                                 4.2.2
Second Installment                                                  14
Second Sublease Warrant                                             18
Security Deposit                                                    5.2
</TABLE>

                                      -1-
<PAGE>

<TABLE>
<CAPTION>
                                                                    Section in Which
                                                                    ----------------
Term                                                                     Defined
----                                                                     -------
<S>                                                                 <C>
Storage Sheds                                                       11.7
Sublandlord                                                         Introduction
Sublandlord's Broker                                                14
Sublandlord's Notice                                                1.3
Sublease                                                            Introduction
Sublease Commencement Date                                          2
Sublease Premises                                                   1.1
Sublease Premises Improvements                                      6.1
Sublease Right                                                      1.4
Sublease Term                                                       2
Sublease Warrant                                                    18
Sublease Year                                                       4.2.3
Subtenant                                                           Introduction
Subtenant Alterations                                               13
Subtenant Improvement Allowance                                     6.1
Subtenant Improvements                                              6.2
Subtenant's Additional Rent                                         4.3
Subtenant's Base Rent                                               4.2.3
Subtenant's Base Rent for the Remainder Premises                    4.2.2
Subtenant's Base Rent for the Sublease Premises                     4.2.1
Subtenant's Broker                                                  14
Subtenant's Notice                                                  1.3
Subtenant's Rent                                                    4.1
Work Letter                                                         6.1
</TABLE>

                                      -2-
<PAGE>

                                   EXHIBIT "A"

                                  MASTER LEASE

                                      A-1

                     [ATTACHED AFTER EXHIBIT F OF SUBLEASE]

<PAGE>

                                   EXHIBIT "B"

                       DEPICTION OF THE SUBLEASE PREMISES

                  [FLOORPLANS DETAILING ANADYS SPACE AS SHADED]

                                      B-1

<PAGE>

                                   EXHIBIT "C"

                            SUBTENANT'S DEMISING WORK

                   [FLOORPLANS DETAILING TENANT IMPROVEMENTS]

                                      C-1

<PAGE>

                                    EXHIBIT D

                          SUBTENANT'S SOLE ACCESS AREAS

                  [FLOORPLANS DETAILING ANADYS SPACE AS SHADED]

                                      D-1

<PAGE>

                                   EXHIBIT "E"

                              WORK LETTER AGREEMENT

         This Work Letter AGREEMENT (this "Work Letter") is attached to,
supplements, and is made a part of that certain Sublease dated as of February
23, 2004, by and between TORREY MESA RESEARCH INSTITUTE, a Delaware corporation
("Sublandlord") and ANADYS PHARMACEUTICALS, INC., a Delaware corporation
("Subtenant"). These provisions define the responsibilities of Sublandlord and
Subtenant for the completion and payment of certain Subtenant Improvements, a
general description of which are described on Exhibit "1" attached hereto. All
initially capitalized terms not defined herein shall have the same meaning as
set forth in the Sublease.

         1.       Appointment of Construction Representatives.

                  (a) By Master Landlord. Master Landlord hereby appoints the
following person as Master Landlord's representative ("Master Landlord's
Representative") to act for Master Landlord in all matters covered by this Work
Letter: Mike Becker.

                  (b) By Sublandlord. Sublandlord hereby appoints the following
person as Sublandlord's representative ("Sublandlord's Representative") to act
for Sublandlord in all matters covered by this Work Letter: Henry Graef. All
submissions shall be concurrently delivered to Sublandlord's consultant: James
Serbia, Serbia Consulting Group, 4445 Eastgate Mall, Suite 200, San Diego CA
92121.

                  (c) By Subtenant. Subtenant hereby appoints the following
person as Subtenant's representative ("Subtenant's Representative") to act for
Subtenant in all matters covered by this Work Letter: Mary Glanville.

                  (d) Communications. All communications with respect to the
matters covered by this Work Letter shall be made to Master Landlord's
Representative, Sublandlord's Representative or Subtenant's Representative, as
the case may be. Either party may change its representative under this Work
Letter at any time by written notice to the other parties.

         2.       Construction Plans for Subtenant Improvements.

                  (a) Preparation of Space Plans. Subtenant shall retain a
licensed architect approved by Master Landlord and Sublandlord (the "Architect")
to prepare the preliminary space plans for the Sublease Premises (the "Space
Plans"). Master Landlord and Sublandlord hereby approve Roy Davies of RDA as
Subtenant's Architect. Upon completion of the Space Plans, the Architect shall
deliver a copy of the Space Plans to Master Landlord and Sublandlord for their
review and approval (which shall be provided within three (3) business days
after receipt thereof).

                  (b) Preparation of Final Plans. Upon approval of the Space
Plans by Master Landlord and Sublandlord, Tenant shall cause the Architect, in
consultation with engineers

                                      E-1
<PAGE>

and/or other consultants reasonably approved by Master Landlord and Sublandlord
(to be provided within five (5) days), to prepare complete architectural plans,
drawings and specifications and complete engineering, mechanical, fire/life
safety, structural and electrical working drawings for all of the Subtenant
Improvements (collectively, the "Final Plans") showing: (1) the layout,
lighting, finish and decoration work (including carpeting and other floor
coverings); and (2) all other specifications for the Subtenant Improvements. The
Final Plans shall be submitted to Master Landlord and Sublandlord for their
reasonable approval. Master Landlord and Sublandlord shall respond to any
request for approval by Subtenant (including any changes requested pursuant to
Section 1.1(g) below) within five (5) days of Subtenant's request accompanied by
a complete set of proposed Final Plans and any other related documentation
reasonably requested by Master Landlord or Sublandlord. If Master Landlord or
Sublandlord disapproves of any portion of the Final Plans, such party shall
advise Subtenant in writing of such disapproval and the reasons therefor.
Subtenant shall then re-submit to Master Landlord and Sublandlord for their
reasonable approval, a redesign of the Final Plans, incorporating those
revisions required by Master Landlord or Sublandlord.

                  (c) Requirements of Final Plans. The Final Plans shall include
locations and complete dimensions and shall: (1) be compatible with the building
shell and with the design, construction and equipment of the building and (2)
comply with all applicable laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, and permits (collectively,
"Applicable Law").

                  (d) No Changes to Structural Components of Building. Neither
the approved Final Plans nor any amendment or supplement thereto shall require
changes to or penetration of any structural component of the Building.

                  (e) Governmental Approvals. Subtenant shall be solely
responsible for obtaining approval of the Final Plans by all governmental
agencies having jurisdiction, including all necessary permits and the temporary
and permanent certificate of occupancy (or other required, equivalent approval
from the local governmental authority permitting occupancy of the Sublease
Premises). Sublandlord shall reasonably cooperate with Subtenant in obtaining
such approvals so long as Sublandlord shall not incur any financial or other
liability in that regard.

                  (f) Compliance with Law. Subtenant shall construct the
Subtenant Improvements in compliance with all Applicable Laws and Environmental
Laws (as defined in the Sublease). Without limiting the generality of the
foregoing, Subtenant specifically acknowledges that it shall be responsible for
compliance and the cost of compliance with the Americans with Disabilities Act
of 1990 (42 U.S.C. Section 12101 et seq.) applicable to the construction of the
Subtenant Improvements and occupancy and use of the Sublease Premises.

                  (g) Changes. In the event that changes to the Space Plans or
Final Plans are requested by Subtenant or required by any governmental agency
subsequent to Master Landlord's and Sublandlord's approval thereof, such changes
and the costs thereof shall be forwarded to Master Landlord and Sublandlord for
approval (which approval shall not be unreasonably withheld and shall be
provided within three (3) business days after receipt thereof)) prior to
incorporation into the work. After approval of the changes and the costs thereof
by Master Landlord and Sublandlord, the changes shall be documented by a change
order.

                                      E-2
<PAGE>

         3.       Management of Construction. Subtenant shall manage and be
responsible for all aspects of construction of the Subtenant Improvements.

         4.       Payment for Subtenant Improvements.

                  (a) Allowance From Sublandlord. Sublandlord shall provide
Subtenant with the Subtenant Improvement Allowance per the terms of Section 6 of
the Sublease, which allowance shall be used only for the purposes set forth
therein, including, without limitation, the payment of any professional expenses
incurred with respect to the creation of the Space Plans and Final Plans, any
construction drawings and the payment of any fees charged by any governmental
entity with respect to the construction or approval of Subtenant Improvements.

                  (b) Balance from Subtenant. With the exception of
Sublandlord's obligation to provide the Subtenant Improvement Allowance,
Subtenant shall be solely responsible for payment of the costs of the Subtenant
Improvements, including without limitation: (1) all design and engineering fees
incurred in connection with the preparation of the Space Plans and Final Plans;
(2) the costs of permits, fees and taxes; (3) testing and inspecting costs; (4)
the costs and charges for material and labor, contractor's profit and general
overhead incurred by Subtenant in having the Subtenant Improvements constructed;
(5) the cost of any bonds or guarantees issued in connection with the Subtenant
Improvements and the cost of construction insurance; (6) the cost of reproducing
blueprints, plans and other construction documents; and (7) all other costs
incurred in the construction of the Subtenant Improvements. To the extent that
the total cost of the Subtenant Improvements exceeds the Subtenant Improvement
Allowance, Subtenant shall pay the full amount of such excess. Subtenant shall
receive no payment, rent reduction or credit for an unused portion of the
Subtenant Improvement Allowance.

         5.       Construction.

                  (a) Approval of Contractor. Master Landlord and Sublandlord
hereby approve David Begent and Company, Inc. as Subtenant's general contractor
to undertake the construction of the Subtenant Improvements ("Contractor"). In
the event of any changes to the Contractor, Master Landlord and Sublandlord
shall respond to Subtenant's request for approval (which shall not be
unreasonably withheld) promptly, but in no case more than five (5) days
following Subtenant's request. Subtenant shall promptly enter into a
construction contract with the Contractor for the Subtenant Improvements (the
"Contract"), which Contract shall be approved in writing by Master Landlord and
Sublandlord, which approval shall not be unreasonably withheld or delayed and
shall be provided within five (5) business days after receipt thereof. Subtenant
shall be solely responsible for the performance of the work of the Subtenant
Improvements to be performed by the Contractor and any and all subcontractors,
suppliers and the like performing services for Subtenant and/or the Contractor.

                  (b) Construction Schedule. Prior to commencement of
construction of any Subtenant Improvements, Subtenant shall furnish to Master
Landlord's Representative and Sublandlord's Representative for their written
approval a schedule setting forth projected completion date and showing the
deadlines for any actions required to be taken by Subtenant during such
construction. Such approval shall be provided within three (3) business days
after receipt thereof.

                                      E-3
<PAGE>

                  (c) Commencement and Completion of Subtenant Improvements.
Following approval of the Final Plans and Subtenant's selection of the
Contractor and subcontractors by Master Landlord and Sublandlord and execution
of the Contract pursuant to Section 5(a) above, Subtenant shall direct the
Contractor and such subcontractors to immediately commence and diligently
complete construction of the Subtenant Improvements. All Subtenant Improvements
work shall be carried out in accordance with reasonable rules and regulations
promulgated by Master Landlord and Sublandlord and in such a manner as to
minimize, as much as reasonably possible, interference with other tenants and
with the use of the Common Areas. Such work shall be performed diligently, in a
first-class, workmanlike manner. Master Landlord's facilities manager, Mike
Becker, shall have the right to enter the Premises at all times to inspect the
work and to post notices of non-responsibility. Other representatives of Master
Landlord and Sublandlord shall have the right to enter the Premises upon
reasonable notice to Subtenant (except in the case of an emergency when no such
notice is required). Subtenant shall ensure lien-free completion of the
Premises, and Subtenant shall comply with all provisions of the Master Lease
regarding liens, including Paragraph 5(C) thereof.

                  (d) Insurance. Prior to the Contractor entering the Sublease
Premises and during the pendency of the construction of the Subtenant
Improvements, Subtenant shall cause the Contractor to carry the following
insurance and otherwise comply with the following provisions:

                           (1) Liability. A policy or policies of commercial
general liability insurance on an "occurrence" basis, with reasonably acceptable
deductibles, and with minimum limit of One Million Dollars ($1,000,000), or the
limit carried by Contractor, whichever is greater, covering Operations,
Independent Contractors, Products and Completed Operations, Contractual
Liability (specifically covering Contractor's indemnification of Master Landlord
and Sublandlord, if any), Broad Form Property Damage (including completed
operations), Severability of Interest and Cross Liability clauses, and Personal
Injury.

                           (2) Workers' Compensation. Workers' Compensation
Insurance including Employer's Liability in a minimum amount of One Million
Dollars ($1,000,000), including waiver of subrogation by the insurance carrier
with respect to Master Landlord, Sublandlord and Subtenant.

                           (3) Automobile Liability. A policy or policies of
automobile liability insurance with a minimum limit of Two Million Dollars
($2,000,000), or the limit carried by Contractor, whichever is greater.

                           (4) Additional Insured. All policies of insurance
carried by the Contractor shall be primary and shall name Master Landlord,
Sublandlord and Subtenant and their respective employees, consultants and
representatives as additional insureds, and shall apply severally to Master
Landlord, Sublandlord, Subtenant and Contractor, with the provision that any
other insurance carried by Master Landlord, Sublandlord and Subtenant shall be
noncontributing. Such policies shall contain a provision that the naming of an
additional insured shall not negate any right the additional insured would have
had as claimant under the policy if not so named.

                           (5) Form and Procedures. Any policies or certificates
of insurance required under the provisions of this Section 5(d) shall be issued
by insurance companies rated at

                                      E-4
<PAGE>

least A:VIII by the current Best's Key Rating Guide and contain an endorsement
or provision that not less than thirty (30) days' prior written notice be given
to Master Landlord and Sublandlord prior to cancellation, non-renewal or
reduction of coverage or amount of such policy. A certificate issued by the
insurance carrier of each policy of insurance required to be maintained by
Contractor, stating the limits and other provisions required hereunder and in a
form reasonably acceptable to Master Landlord and Sublandlord, shall be
delivered to Master Landlord and Sublandlord before the Contractor enters the
Sublease Premises and, thereafter, prior to the expiration of the term of each
such policy.

                           (6) Subcontractors. Subtenant shall also cause
Contractor to require all subcontractors performing work on the Subtenant
Improvements to carry insurance in commercially reasonable amounts and naming as
additional insureds the same persons required to be named as additional insureds
under Contractors policies, as described in Section 5(d)(4) above, provided that
in no event shall minimum limits of liability under such policies be less than
Five Hundred Thousand Dollars ($500,000). Should the subcontractors retain
sub-subcontractors, Subtenant shall cause Contractor to arrange for the policies
of such sub-subcontractors to name the same persons described above as
additional insureds.

                           (7) Indemnity by Contractor. Should Subtenant be
indemnified by the Contractor or any subcontractors in connection with the
construction of the Subtenant Improvements, then Subtenant shall require the
Contractor and such subcontractors to similarly indemnify Master Landlord and
Sublandlord.

                           (8) Approvals by Master Landlord and Sublandlord.
Approval by Master Landlord and Sublandlord of the Space Plans, Final Plans, the
Contractor, the Contract or any other aspect of the construction and completion
of the Subtenant Improvements shall in no way be construed as a representation
or warranty by either Master Landlord or Sublandlord and Master Landlord and
Sublandlord hereby specifically disclaims any such effect. Subtenant agrees that
it has full responsibility for making all such decisions and shall not rely on
any approval by Master Landlord or Sublandlord in that regard.

                           (9) No Agency. Subtenant is acting as a principal in
the construction of the Subtenant Improvements and is not acting as an agent of
either Master Landlord or Sublandlord in that regard.

                  (e) Deemed Approval. Notwithstanding anything to the contrary
herein, in the event Sublandlord fails to approve or disapprove of any matter
requiring approval under the terms of this Work Letter within the time
specified, such matter shall be deemed approved. Also, if Master Landlord
approves or is deemed to have approved any item requiring Master Landlord's
consent hereunder, Sublandlord will be deemed to have approved such matter if
Sublandlord does not disapprove such matter in writing within one (1) day after
its receipt of Master Landlord's approval of such matter. Sublandlord shall
assist Subtenant with its efforts to obtain Master Landlord's approvals as
required herein, but Sublandlord shall have no liability or obligation regarding
Master Landlord's failure to respond to any of Subtenant's submissions within
the time periods specified in this Work Letter Agreement or the Sublease, or to
otherwise comply with the terms of this Work Letter Agreement.

                                      E-5
<PAGE>

                                      E-6
<PAGE>

                           EXHIBIT "1" TO EXHIBIT "E"
                                       TO
                     WORK LETTER FOR SUBTENANT IMPROVEMENTS

                  General Description of Subtenant Improvements

                   [FLOORPLANS DETAILING TENANT IMPROVEMENTS]

                                      E-7
<PAGE>

                                   EXHIBIT "F"

                          ENVIRONMENTAL QUESTIONNAIRE/
                         HAZARDOUS MATERIAL SURVEY FORM

         The purpose of this form is to obtain information regarding the use of
Hazardous Substances on the Premises. Prospective tenants, subtenants and
contractors should answer the questions in light of their proposed activities on
the Premises. Existing tenants, subtenants and contractors should answer the
questions as they relate to ongoing activities on the Premises and should update
any information previously submitted.

         If additional space is needed to answer the questions, you may attach
separate sheets of paper to this form. When completed, the form should be sent
to the address for Sublandlord listed in the notice section of the Sublease:

         1.       GENERAL INFORMATION.

         Name of Responding Company: ___________________________________________
         Check all that apply:         Tenant      (  )    Contractor  (  )
                                       Prospective (  )    Existing    (  )

         Mailing Address: ______________________________________________________
         Contact Person & Title: _______________________________________________
         Telephone Number: (  )____________________

         Length of Sublease: _______________________________________

         Address of Current Operations (if different from Premises):____________

         Describe the proposed operations to take place on the Premises,
including principal products manufactured or services to be conducted. Existing
tenants, subtenants and contractors should describe any proposed changes to
ongoing operations. ____________________________________________________________
________________________________________________________________________________
_________________________________________________________.

         2.       HAZARDOUS MATERIALS/SUBSTANCES. For the purposes of this
Survey Form, the term "hazardous substances" means any raw material, product or
agent considered hazardous under any state or federal law and as otherwise
defined in the Paragraph 28 of the Master Lease. The term does not include
wastes which are intended to be discarded.

                  a.       Will any hazardous substances be used or stored on
site?

              Chemical Products         Yes   (  )   No    (  )
              Biological Hazards/
              Infectious Wastes         Yes   (  )   No    (  )

                                      F-1
<PAGE>

              Radioactive Materials     Yes   (  )   No    (  )
              Petroleum Products        Yes   (  )   No    (  )

                  b.       List any hazardous substances to be used or stored,
the quantities that will be on-site at any given time, and the location and
method of storage (e.g., bottles in storage closet on the Premises).

<TABLE>
<CAPTION>
                          Location and Method
Hazardous Substances           of Storage                      Quantity
--------------------           ----------                      --------
<S>                       <C>                           <C>
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
</TABLE>

                  c.       Is any underground storage of hazardous substances
proposed or currently conducted on the Premises?  Yes ( )  No ( )

                  If yes, describe the materials to be stored, and the size and
construction of the tank. Attach copies of any permits obtained for the
underground storage of such substances. ________________________________________
________________________________________________________________________________
_______________________.

         3.       HAZARDOUS WASTE. For the purposes of this Survey Form, the
term "hazardous waste" means any waste (including biological, infectious or
radioactive waste) considered hazardous under any state or federal law, and
which is intended to be discarded.

                  a.       List any hazardous waste generated or to be generated
on the Premises, and indicate the quantity generated on a monthly basis.

<TABLE>
<CAPTION>
                          Location and Method
                          of Storage Prior to
  Hazardous Waste               Disposal                       Quantity
--------------------            --------                       --------
<S>                       <C>                           <C>
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
</TABLE>

                  b.       Describe the method(s) of disposal (including
recycling) for each waste. Indicate where and how often disposal will take
place.

                                      F-2
<PAGE>

<TABLE>
<CAPTION>
                          Location of Disposal
Hazardous Substances             Site                      Disposal Method
--------------------             ----                      ---------------
<S>                       <C>                           <C>
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
_____________________     ____________________          _____________________
</TABLE>

                  c.       Is any treatment or processing of hazardous,
infections or radioactive wastes currently conducted or proposed to be conducted
on the Premises?  Yes ( )  No ( )

                           If yes, please describe any existing or proposed
treatment methods. _____________________________________________________________
__________________________________________________________________________.

                           Attach copies of any hazardous waste permits or
licenses issued to your company with respect to its operations on the Premises.

         4.       SPILLS (Current Tenants or Subtenants Only).

                  a.       During the past year, have any spills or releases of
hazardous substances occurred on the Premises?  Yes ( )  No ( )

                           If so, please describe the spill and attach the
results of any testing conducted to determine the extent of such spills. _______
________________________________________________________________________________
________.

                  b.       Were any agencies notified in connection with such
spills?
                                 Yes ( ) No ( )

                  If so, attach copies of any spill reports or other
correspondence with regulatory agencies.

                  c.       Were any clean-up actions undertaken in connection
with the spills?
                                 Yes ( ) No ( )

                           If so, briefly describe the actions taken. Attach
copies of any clearance letters obtained from any regulatory agencies involved
and the results of any final soil or groundwater sampling done upon completion
of the clean-up work. __________________________________________________________
________________________________________________________________________________
________.

         5.       WASTEWATER TREATMENT/DISCHARGE.

                  a.       Do you discharge industrial wastewater to:

                                      F-3
<PAGE>

                           ____  storm drain?     ____  sewer?

                           ____  surface water?   ____  no industrial discharge

                  b.       Is your industrial wastewater treated before
discharge?  Yes ( )  No ( )

                  If yes, describe the type of treatment conducted. ____________
________________________________________________________________________________
__________________________________.

                  c.       Attach copies of any wastewater discharge permits
issued to your company with respect to its operations on the Premises.

         6.       AIR DISCHARGES.

                  a.       Do you have any air filtration systems or stacks that
discharge into the air?
                                 Yes ( ) No ( )

                  b.       Do you operate any equipment that require air
emissions permits?
                                 Yes ( ) No ( )

                  c.       Attach copies of any air discharge permits pertaining
to these operations.

         7.       HAZARDOUS SUBSTANCES DISCLOSURES.

                  a.       Does your company handle an aggregate of at least 500
pounds, 55 gallons or 200 cubic feet of hazardous material at any given time?
Yes ( ) No ( )

                  b.       Has your company prepared a Hazardous Substances
Disclosure - Chemical Inventory and Business Emergency Plan or similar
disclosure document pursuant to state or county requirements? Yes ( ) No ( )

                           If so, attach a copy.

                  c.       Are any of the chemicals used in your operations
regulated under Proposition 65?

                           If so, describe the procedures followed to comply
with these requirements. _______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_____________.

                                      F-4
<PAGE>

                  d.       Is your company subject to OSHA Hazard Communication
Standard Requirements? Yes ( ) No ( )

                  If so, describe the procedures followed to comply with these
requirements. __________________________________________________________________
________________________________________________________________________________
__________________________________________________.

         8.       ANIMAL TESTING.

                  a.       Does your company bring or intend to bring live
animals onto the Premises for research or development purposes? Yes ( ) No ( )

                           If so, describe the activity. _______________________
________________________________________________________________________________
____________.

                  b.       Does your company bring or intend to bring animal
body parts or bodily fluids onto the Premises for research or development
purposes? Yes ( ) No ( )

                  If so, describe the activity. ________________________________
____________________________________________________________.

         9.       ENFORCEMENT ACTIONS, COMPLAINTS.

                  a.       Has your company ever been subject to any agency
enforcement actions, administrative orders, lawsuits, or consent orders/ decrees
regarding environmental compliance or health and safety? Yes ( ) No ( )

                  If so, describe the actions and any continuing obligations
imposed as a result of these actions.___________________________________________
____________________________________________________________.

                  b.       Has your company ever received any request for
information, notice of violation or demand letter, complaint, or inquiry
regarding environmental compliance or health and safety? Yes ( ) No ( )

                  c.       Has an environmental audit ever been conducted which
concerned operations or activities on Premises occupied by you? Yes ( ) No ( )

If you answered "yes" to any questions in this section, describe the
environmental action or complaint and any continuing compliance obligation
imposed as a result of the same. _______________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________.

                                      F-5
<PAGE>

                                         ANADYS PHARMACEUTICALS, INC.,
                                         a Delaware corporation

                                         By:   _________________________________
                                         Print Name:  __________________________
                                         Print Title: __________________________
                                         Date: _________________________________

                                         By:   _________________________________
                                         Print Name:  __________________________
                                         Print Title: __________________________
                                         Date: _________________________________

                                      F-6
<PAGE>

                              ********************

                                      LEASE

                        LA JOLLA SPECTRUM TECHNOLOGY PARK

                               3115 MERRYFIELD ROW

                              SAN DIEGO, CALIFORNIA

                              ********************

                                     BETWEEN

                 NOVARTIS AGRICULTURAL DISCOVERY INSTITUTE, INC.

                                    (TENANT)

                                       AND

                         CARRAMERICA REALTY CORPORATION

                                   (LANDLORD)

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
1.       LEASE AGREEMENT........................................................................................    4

2.       RENT...................................................................................................    4
         A.       Types of Rent.................................................................................    4
                  (1)      Base Rent............................................................................    4
                  (2)      Operating Cost Share Rent............................................................    4
                  (3)      Tax Share Rent.......................................................................    4
                  (4)      Additional Rent......................................................................    4
                  (5)      Rent.................................................................................    5
         B.       Payment of Operating Cost Share Rent and Tax Share Rent.......................................    5
                  (1)      Payment of Estimated Operating Cost Share Rent and Tax Share Rent....................    5
                  (2)      Correction of Operating Cost Share Rent..............................................    5
                  (3)      Correction of Tax Share Rent.........................................................    5
         C.       Definitions...................................................................................    6
                  (1)      "Common Areas".......................................................................    6
                  (2)      "Operating Costs"....................................................................    6
                  (3)      Equitable Adjustment.................................................................    6
                  (4)      Excluded Operating Costs.............................................................    7
                  (5)      Property Management Fee..............................................................    8
                  (6)      Taxes................................................................................    8
                  (7)      Lease Year...........................................................................    9
                  (8)      Fiscal Year..........................................................................    9
         D.       Computation of Base Rent and Rent Adjustments.................................................    9
                  (1)      Prorations...........................................................................    9
                  (2)      Default Interest.....................................................................   10
                  (3)      Rent Adjustments.....................................................................   10
                  (4)      Books and Records....................................................................   10
                  (5)      Miscellaneous........................................................................   11

3.       PREPARATION AND CONDITION OF PREMISES; POSSESSION AND SURRENDER OF PREMISES............................   11
         A.       Condition of Premises.........................................................................   11
         B.       Tenant's Possession...........................................................................   11
         C.       Maintenance...................................................................................   12
         D.       Landlord's Contribution.......................................................................   12

4.       PROJECT SERVICES.......................................................................................   12

5.       ALTERATIONS AND REPAIRS................................................................................   13
         A.       Landlord's Consent and Conditions for Alterations.............................................   13
         B.       Damage to Systems.............................................................................   14
         C.       No Liens......................................................................................   14
</TABLE>

                                      -i-

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
         D.       Ownership of Improvements.....................................................................   15
         E.       Removal at Termination........................................................................   15
         F.       Landlord's Work...............................................................................   16

6.       USE OF PREMISES........................................................................................   16

7.       GOVERNMENTAL REQUIREMENTS AND PROJECT RULES............................................................   17

8.       WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE...........................................................   17
         A.       Mutual Waiver of Claims.......................................................................   17
         B.       Mutual Indemnification........................................................................   17
         C.       Tenant's Insurance............................................................................   17
         D.       Landlord's Insurance..........................................................................   19
         E.       Insurance Certificates........................................................................   19

9.       FIRE AND OTHER CASUALTY................................................................................   19
         A.       Termination...................................................................................   19
         B.       Restoration...................................................................................   19

10.      EMINENT DOMAIN.........................................................................................   20

11.      RIGHTS RESERVED TO LANDLORD............................................................................   20
         A.       Name..........................................................................................   20
         B.       Signs.........................................................................................   20
         C.       Window Treatments.............................................................................   20
         D.       Keys..........................................................................................   20
         E.       Access........................................................................................   20
         F.       Preparation for Reoccupancy...................................................................   20
         G.       Heavy Articles................................................................................   20
         H.       Show Premises.................................................................................   20
         I.       Use of Lockbox................................................................................   21
         J.       Repairs and Alterations.......................................................................   21
         K.       Landlord's Agent..............................................................................   21
         L.       Building Services.............................................................................   21
         M.       Other Actions.................................................................................   21

12.      TENANT'S DEFAULT.......................................................................................   21
         A.       Rent Default..................................................................................   21
         B.       Assignment/Sublease...........................................................................   21
         C.       Other Performance Default.....................................................................   22
         D.       Credit Default................................................................................   22
         E.       Abandonment Default...........................................................................   22
</TABLE>

                                      -ii-

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
13.      LANDLORD REMEDIES......................................................................................   22
         A.       Termination of Lease or Possession............................................................   22
         B.       Lease Termination Damages.....................................................................   22
         C.       Continuation of Lease.........................................................................   23
         D.       Possession Termination Damages................................................................   23
         E.       Landlord's Remedies Cumulative................................................................   23
         F.       CONSENT TO JURISDICTION.......................................................................   24
         G.       Attorney's Fees...............................................................................   24

14.      SURRENDER..............................................................................................   24

15.      HOLDOVER...............................................................................................   24

16.      SUBORDINATION TO GROUND LEASES AND MORTGAGES...........................................................   24
         A.       Subordination.................................................................................   24
         B.       Termination of Ground Lease or Foreclosure of Mortgage........................................   25
         C.       Notice and Right to Cure......................................................................   25
         D.       Definitions...................................................................................   25

17.      ASSIGNMENT AND SUBLEASE................................................................................   25
         A.       In General....................................................................................   25
         B.       Landlord's Consent............................................................................   26
         C.       Procedure.....................................................................................   26
         D.       Change of Management or Ownership.............................................................   27
         E.       Excess Payments...............................................................................   27

18.      CONVEYANCE BY LANDLORD.................................................................................   27

19.      ESTOPPEL CERTIFICATE...................................................................................   27

20.      OFFSET.................................................................................................   28

21.      FORCE MAJEURE..........................................................................................   28

22.      [INTENTIONALLY OMITTED]................................................................................   28

23.      NOTICES................................................................................................   28
         A.       Landlord......................................................................................   28
         B.       Tenant........................................................................................   29

</TABLE>

                                      -iv-

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
24.      QUIET POSSESSION.......................................................................................   29

25.      REAL ESTATE BROKER.....................................................................................   29

26.      MISCELLANEOUS..........................................................................................   29
         A.       Successors and Assigns........................................................................   29
         B.       Date Payments Are Due.........................................................................   29
         C.       Meaning of "Landlord", "Re Entry", "including" and "Affiliate"................................   30
         D.       Time of the Essence...........................................................................   30
         E.       No Option.....................................................................................   30
         F.       Severability..................................................................................   30
         G.       Governing Law.................................................................................   30
         H.       Lease Modification............................................................................   30
         I.       No Oral Modification..........................................................................   30
         J.       Landlord's Right to Cure......................................................................   30
         K.       Captions......................................................................................   30
         L.       Authority.....................................................................................   30
         M.       Landlord's Enforcement of Remedies............................................................   30
         N.       Entire Agreement..............................................................................   30
         O.       Landlord's Title..............................................................................   31
         P.       Light and Air Rights..........................................................................   31
         Q.       Singular and Plural...........................................................................   31
         R.       No Recording by Tenant........................................................................   31
         S.       Exclusivity...................................................................................   31
         T.       No Construction Against Drafting Party........................................................   31
         U.       Survival......................................................................................   31
         V.       Rent Not Based on Income......................................................................   31
         W.       Property Manager and Service Providers........................................................   31
         X.       Late Charge and Interest on Late Payments.....................................................   31

27.      UNRELATED BUSINESS INCOME..............................................................................   32

28.      HAZARDOUS SUBSTANCES...................................................................................   32

29.      EXCULPATION............................................................................................   34

30.      SIGNAGE................................................................................................   34

31.      REASONABLE CONSENT.....................................................................................   35

32.      ARBITRATION............................................................................................   35
         A.       Disputes To Be Resolved By Binding Arbitration................................................   35
         B.       Selection of Arbitrator.......................................................................   35
         C.       Pre-Decision Arbitration Procedures...........................................................   36
</TABLE>

                                      -iv-

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
         D.       Arbitration Hearing...........................................................................   36
         E.       Governing Law.................................................................................   36
         F.       Arbitration Award.............................................................................   36
         G.       Attorneys' Fees and Costs.....................................................................   36
         H.       Temporary Restraining Order...................................................................   37

33.      SECURITY DEPOSIT.......................................................................................   37
</TABLE>

                                      -v-

<PAGE>

APPENDIX A         -       PLAN OF THE PREMISES
APPENDIX B         -       RULES AND REGULATIONS
APPENDIX C         -       TENANT IMPROVEMENT AGREEMENT
APPENDIX D         -       COMMENCEMENT DATE CONFIRMATION
APPENDIX E         -       REMOVABLE PROPERTY
APPENDIX F-1       -       PHASE I
APPENDIX F-2       -       PHASE II
APPENDIX G         -       LETTER OF CREDIT FORM
APPENDIX H         -       LANDLORD INSURANCE

                                      -vi-

<PAGE>

                                      LEASE

         THIS LEASE (the "Lease") is made as of December 18, 1998 between
CARRAMERICA REALTY CORPORATION, a Maryland corporation (the "Landlord"), and the
Tenant as named in the Schedule below. The term "Project" means Buildings "A"
and "B" (each, a "Building" and the references in this Lease to the "Building"
shall mean the Building in which the Premises is located unless clearly
indicated otherwise) known as "La Jolla Spectrum Technology Park" and the land
(the "Land") located at 3115 Merryfield Row, San Diego, California. "Premises"
means that part of the Project leased to Tenant described in the Schedule and
outlined on Appendix A.

         The following schedule (the "Schedule") is an integral part of this
Lease. Initially-capitalized terms not defined in this Schedule are defined in
the Lease (including without limitation in the Appendices attached hereto).

                                    SCHEDULE

         1.       TENANT: NOVARTIS AGRICULTURAL DISCOVERY INSTITUTE, INC., a
                  Delaware corporation; provided that Novartis Institute for
                  Functional Genomics, Inc. shall have the right to occupy and
                  use all or any part of the Premises throughout the Term in
                  accordance with all terms and conditions of this Lease and
                  without limiting or affecting Tenant's primary liability for
                  all of the terms and conditions of this Lease.

         2.       PREMISES: All of the building known as 3115 Merryfield Row,
                  San Diego, California (also known as "Building A" of the
                  Project).

         3.       RENTABLE SQUARE FEET OF THE PREMISES: 79,759 gross rentable
                  square feet.

         4.       TENANT'S PROPORTIONATE SHARE: From and after the Phase II
                  Commencement Date (as hereinafter defined), 100% with respect
                  to the Premises and 50.91% with respect to the Common Areas
                  (based on 79,759 gross rentable square feet in the Premises
                  and 156,653 gross rentable square feet in the Project);
                  provided that prior to the Phase II Commencement Date Tenant's
                  Proportionate Share with respect to the Premises and the
                  Building shall be determined by dividing the actual gross
                  rentable square feet in Phase I by 79,759 gross rentable
                  square in the Premises and 156,653 gross rentable square feet
                  in the Project, respectively.

         5.       SECURITY DEPOSIT: $15,000,000 in the form of a letter of
                  credit as provided in Section 33 and as the same may be
                  reduced as provided in Section 33.

         6.       TENANT'S REAL ESTATE BROKER FOR THIS LEASE: Goldman Ferguson
                  Partners (John W. Jarvis) and Colliers International (Kevin
                  Craven), jointly, each entitled to fifty percent (50%) of the
                  commission.

         7.       LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: CB Richard Ellis
                  (Neil Fox)

                                      -1-

<PAGE>

         8.       TENANT IMPROVEMENTS: See the "Tenant Improvement Agreement"
                  attached hereto as Appendix C. Tenant Improvements are divided
                  into two phases (each, a "Phase"):

                  A.       PHASE I is approximately 26,440 gross rentable square
                           feet, including a portion of the second floor of the
                           Premises plus all other portions of the Premises
                           reasonably needed to access, occupy and operate Phase
                           I, as more particularly described on Appendix F-1
                           attached hereto; and reasonably needed to access,
                           occupy and operate Phase I, as more particularly
                           described on Appendix F-1 attached hereto; and

                  B.       PHASE II is the remaining approximately 53,319 gross
                           rentable square feet of the Premises and the
                           Greenhouse (as hereinafter defined) and the hydraulic
                           dock lift, as more particularly described on Appendix
                           F-2 attached hereto.

         9.       ESTIMATED COMPLETION DATE: With respect to Phase I, May 8,
                  1999, and with respect to Phase II, July 6, 1999, subject to
                  extension for Force Majeure Delays (as defined in Appendix C);

         10.      COMMENCEMENT DATE: The Commencement Date for each Phase shall
                  be the Completion Date (as defined in Appendix C); provided
                  that if Tenant Delays (as defined in Appendix C) delay the
                  Completion Date for any Phase beyond the Estimated Completion
                  Date for such Phase, then the Commencement Date for such Phase
                  shall be the Estimated Completion Date for such Phase. The
                  Commencement Date for Phase I is the date on which the Term
                  commences and Tenant's obligation to pay Base Rent for Phase I
                  and all other Rent under this Lease commences, subject to the
                  provisions of Appendix C regarding Landlord Delay (as defined
                  in Appendix C). The Commencement Date for Phase II is the date
                  Tenant's obligation to pay Base Rent for Phase II commences,
                  subject to the provisions of Appendix C regarding Landlord
                  Delay. Landlord and Tenant shall execute Commencement Date
                  Confirmations substantially in the form of Appendix D promptly
                  following the Commencement Date for each Phase.

         11.      TERMINATION DATE/TERM: The term of this Lease (the "Term")
                  shall commence on the Commencement Date for Phase I and end
                  ten (10) years after the Commencement Date for Phase II, or if
                  the Commencement Date for Phase II is not the first day of a
                  month, then the term shall end the first day of the following
                  month. Tenant shall have options to renew this Lease as set
                  forth in Addendum 1, and a right of first offer with respect
                  to the Premises as set forth in Addendum 2.

         12.      BASE RENT: Base Rent for the Premises is set forth below.
                  Until the Commencement Date for Phase II, the Base Rent shall
                  be calculated by multiplying the actual gross rentable square
                  feet in Phase I by Two Dollars and Fifty Cents ($2.50). Base
                  Rent for any partial month shall be prorated as provided in
                  Section 2(D)(1).

                                       2.

<PAGE>

<TABLE>
<CAPTION>
                            TOTAL ANNUAL          TOTAL MONTHLY
   PERIOD                    BASE RENT              BASE RENT
   ------                    ---------              ---------
<S>                         <C>                   <C>
Lease Year 1                 $2,392,770            $199,397.50
Lease Year 2                 $2,464,553            $205,379.42
Lease Year 3                 $2,538,490            $211,540.80
Lease Year 4                 $2,614,644            $217,887.02
Lease Year 5                 $2,693,083            $224,423.64
Lease Year 6                 $2,773,876            $231,156.33
Lease Year 7                 $2,857,092            $238,091.01
Lease Year 8                 $2,942,805            $245,233.74
Lease Year 9                 $3,031,089            $252,590.75
Lease Year 10                $3,122,022            $260,168.47
</TABLE>

         13.      SOLE PERMITTED USE: Without limiting the provisions of
                  Sections 5, 7 or 17, any use permitted under the City of San
                  Diego SR Zone zoning classification, including, without
                  limitation, general office purposes and biotechnology and/or
                  scientific research and development laboratory purposes, but
                  in no event in violation of any Governmental Requirements (as
                  hereinafter defined) or any provision of the Rules and
                  Regulations attached as Appendix B hereto. Notwithstanding
                  anything to the contrary in this Lease, Landlord specifically
                  acknowledges and approves of the use during the Term of a
                  portion of the Property (but exterior to the Building) by
                  Tenant as a greenhouse (the "Greenhouse"), subject to
                  compliance with all applicable Governmental Requirements and
                  the receipt of all necessary governmental approvals relating
                  to the Greenhouse, without the payment of any additional rent
                  for such use. Landlord shall have the right to review and
                  approve any and all plans and specifications for the
                  Greenhouse in accordance with the Tenant Improvement Agreement
                  attached as Appendix C hereto. Other than as may be
                  specifically provided otherwise in this Lease to the contrary,
                  the Greenhouse shall be deemed a part of the Premises for
                  purposes of Tenant's obligations, liabilities and indemnities
                  under this Lease, but Landlord shall under no circumstances
                  have any obligations or liabilities regarding the Greenhouse.

                                       3.

<PAGE>

         1.       LEASE AGREEMENT. On the terms stated in this Lease, Landlord
leases the Premises to Tenant, and Tenant leases the Premises from Landlord, for
the Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.

         2.       RENT.

         A.       Types of Rent. Tenant shall pay the following Rent in the form
of a check to Landlord at the following address:

                  CarrAmerica Realty Corporation
                  t/a La Jolla Spectrum Technology Park - Building A
                  P.O. Box [to be provided by Landlord to Tenant by separate
                  written notice] Atlanta, GA 30384 0566

or by wire transfer as follows:

                  NationsBank of DC, N.A.
                  ABA Number 061-000-052
                  Account Number 01100330

or in such other manner as Landlord may notify Tenant:

                  (1)      Base Rent in monthly installments, without deduction
                           or offset (except to the extent expressly provided in
                           Section 20), in advance, the first monthly
                           installment payable concurrently with the execution
                           of this Lease and thereafter on or before the first
                           day of each month of the Term in the amount set forth
                           on the Schedule.

                  (2)      Operating Cost Share Rent in an amount equal to the
                           Tenant's Proportionate Share of the Operating Costs
                           for the applicable fiscal year of the Lease, paid
                           monthly in advance in an estimated amount.
                           Definitions of Operating Costs and Tenant's
                           Proportionate Share, and the method for billing and
                           payment of Operating Cost Share Rent are set forth in
                           Sections 2B, 2C and 2D.

                  (3)      Tax Share Rent in an amount equal to the Tenant's
                           Proportionate Share of the Taxes for the applicable
                           fiscal year of this Lease, paid monthly in advance in
                           an estimated amount. A definition of Taxes and the
                           method for billing and payment of Tax Share Rent are
                           set forth in Sections 2B, 2C and 2D.

                  (4)      Additional Rent in the amount of all costs, expenses,
                           liabilities, and amounts which Tenant is required to
                           pay under this Lease, excluding Base Rent, Operating
                           Cost Share Rent and Tax Share Rent, but including any
                           interest for late payment of any item of Rent. Unless
                           another date for payment of Additional Rent is set
                           forth in this Lease, Additional Rent shall be due ten
                           (10) days after written notice from Landlord.

                                       4.

<PAGE>

                  (5)      Rent as used in this Lease means Base Rent, Operating
                           Cost Share Rent, Tax Share Rent and Additional Rent.
                           Tenant's agreement to pay Rent is an independent
                           covenant, with no right of setoff, deduction or
                           counterclaim of any kind (except to the extent
                           expressly provided in Section 20).

         B.       Payment of Operating Cost Share Rent and Tax Share Rent.

                  (1)      Payment of Estimated Operating Cost Share Rent and
                           Tax Share Rent. Landlord shall estimate the Operating
                           Costs and Taxes of the Premises and the Common Areas
                           by April 1 of each fiscal year, or as soon as
                           reasonably possible thereafter. Landlord may revise
                           these estimates whenever it obtains more accurate
                           information, such as the final real estate tax
                           assessment or tax rate for the Project.

                  Within ten (10) days after receiving the original or revised
         estimate from Landlord, Tenant shall pay Landlord one twelfth (1/12th)
         of Tenant's Proportionate Share of this estimate, multiplied by the
         number of months that have elapsed in the applicable fiscal year to the
         date of such payment including the current month, minus payments
         previously made by Tenant for the months elapsed. On the first day of
         each month thereafter, Tenant shall pay Landlord one twelfth (1/12th)
         of Tenant's Proportionate Share of this estimate, until a new estimate
         becomes applicable.

                  (2)      Correction of Operating Cost Share Rent. Landlord
                           shall deliver to Tenant a report for the previous
                           fiscal year (the "Operating Cost Report") by April 1
                           of each year, or as soon as reasonably possible
                           thereafter, setting forth (a) the actual Operating
                           Costs incurred, (b) the amount of Operating Cost
                           Share Rent due from Tenant, and (c) the amount of
                           Operating Cost Share Rent paid by Tenant. Within
                           thirty (30) days after such delivery, Tenant shall
                           pay to Landlord the amount due minus the amount paid.
                           If the amount paid exceeds the amount due, Landlord
                           shall apply the excess to Tenant's payments of
                           Operating Cost Share Rent next coming due.

                  (3)      Correction of Tax Share Rent. Landlord shall deliver
                           to Tenant a report for the previous fiscal year (the
                           "Tax Report") by April 1 of each year, or as soon as
                           reasonably possible thereafter, setting forth (a) the
                           actual Taxes, (b) the amount of Tax Share Rent due
                           from Tenant, and (c) the amount of Tax Share Rent
                           paid by Tenant. Within thirty (30) days after such
                           delivery, Tenant shall pay to Landlord the amount due
                           from Tenant minus the amount paid by Tenant. If the
                           amount paid exceeds the amount due, Landlord shall
                           apply any excess to Tenant's payments of Tax Share
                           Rent next coming due. At Tenant's written request
                           given on or after July 2 of any fiscal year, Landlord
                           shall deliver to Tenant a copy of the notice of
                           assessed value of the Project (the "Assessment") for
                           such fiscal year within ten (10) business days after
                           Landlord's receipt thereof from the county tax
                           assessor or shall notify Tenant if Landlord has not
                           received the

                                       5.

<PAGE>

                           Assessment by August 31 in any fiscal year in which
                           Tenant shall have requested a copy thereof.

         C.       Definitions.

                  (1)      "Common Areas" means all areas and facilities outside
                           the Building and within the exterior boundary line of
                           the Project that are provided and designated by
                           Landlord from time to time for the general non
                           exclusive use of Landlord, Tenant and other tenants
                           of the Project and their respective employees,
                           suppliers, shippers, customers and invitees,
                           including, without limitation, parking areas, loading
                           and unloading areas, trash areas, roadways,
                           sidewalks, walkways, parkways, ramps, driveways,
                           landscaped areas and decorative walls.

                  (2)      "Operating Costs" means any expenses, costs and
                           disbursements of any kind other than Taxes, paid or
                           incurred by Landlord in connection with the
                           management, maintenance, operation, insurance, repair
                           and other related activities in connection with any
                           part of the Building or Common Areas, as applicable,
                           including, without limitation, costs incurred in
                           connection with any personal property, fixtures,
                           machinery, equipment, systems and apparatus owned or
                           leased by Landlord for use in connection therewith,
                           including the cost of providing those services
                           required to be furnished by Landlord under this
                           Lease. Operating Costs shall also include the costs
                           of any capital improvements that (a) are intended to
                           reduce Operating Costs (which capital improvements to
                           reduce Operating Costs shall be subject to Tenant's
                           approval) or improve safety, (b) are made to keep the
                           Building or Common Areas, as applicable, in
                           compliance with Governmental Requirements (as
                           hereinafter defined) applicable from time to time,
                           and/or (c) relate to the maintenance, repair and/or
                           replacement of the roof membrane (but not roof
                           structure) of the Building, or the HVAC (including,
                           without limitation, constant velocity and one pass
                           air supply), elevator, electrical, water and all
                           other building systems in the Building (collectively
                           (a), (b) and (c) are "Included Capital Items");
                           provided that Landlord shall fully amortize the costs
                           of any Included Capital Item, together with an amount
                           equal to interest at ten percent (10%) per annum,
                           over the reasonably estimated useful life of such
                           item and include in Operating Costs only the
                           amortized amount for each year, or portion thereof,
                           of such useful life that occurs during the Term.
                           Operating Costs for insurance carried by Landlord
                           which covers other properties in addition to the
                           Project shall be allocated by Landlord to the
                           Premises and the Common Area in a commercially
                           reasonable and non discriminatory manner.

                  (3)      Equitable Adjustment. From and after the Commencement
                           Date for Phase II, if the Building or Project, as
                           applicable, is not fully occupied during any portion
                           of any fiscal year. Landlord may increase (make an
                           "Equitable Adjustment" to) Operating Costs to the
                           amount that would

                                       6.

<PAGE>

                           have been incurred by Landlord had the Building or
                           Project, as applicable, been fully occupied;
                           provided, however, that in no event shall any such
                           Equitable Adjustment increase the Operating Cost
                           Share Rent payable by Tenant above the Operating Cost
                           Share Rent Tenant would have paid had the Building or
                           Project been fully occupied and had Landlord not made
                           the Equitable Adjustment. This Equitable Adjustment
                           shall apply only to Operating Costs that vary, and
                           thus increase, as occupancy of the Project increases.
                           Landlord shall incorporate any Equitable Adjustment
                           which Landlord elects to make as provided herein in
                           its estimates of Operating Costs.

                  (4)      Excluded Operating Costs. Operating Costs shall not
                           include:

                           (a)      costs of capital improvements other than
                                    Included Capital Items (including, without
                                    limitation, a parking structure not included
                                    in the Shell Improvements (as defined in
                                    Appendix C) and the original construction of
                                    the Common Areas by Landlord);

                           (b)      interest and principal payments on mortgages
                                    or any other debt costs, or rental payments
                                    on any ground lease of the Project;

                           (c)      real estate brokers' leasing commissions;

                           (d)      legal fees, space planner fees and
                                    advertising expenses incurred with regard to
                                    leasing the Building or portions thereof,

                           (e)      any cost or expenditure for which Landlord
                                    is reimbursed, by insurance proceeds or
                                    otherwise, except by Operating Cost Share
                                    Rent;

                           (f)      depreciation (without limiting the
                                    provisions of Section 2(C)(2) with respect
                                    to the amortization of Included Capital
                                    Items as provided therein);

                           (g)      franchise or income taxes imposed upon
                                    Landlord;

                           (h)      costs of correcting defects in construction
                                    of the Building or Project (as opposed to
                                    the cost of normal repair, maintenance and
                                    replacement expected with the construction
                                    materials and equipment installed in the
                                    Building or Project in light of their
                                    specifications);

                           (i)      legal and auditing fees which are for the
                                    benefit of Landlord such as collecting
                                    delinquent rents, preparing tax returns and
                                    other financial statements, and audits other
                                    than those incurred in connection with the
                                    preparation of reports required pursuant to
                                    Section 2B above;

                                       7.

<PAGE>

                           (j)      the wages and benefits of any employee for
                                    services not related directly to the
                                    management, maintenance, operation and
                                    repair of the Project, and management fees
                                    in excess of the Property Manager's Fee (as
                                    defined in Section 2(C)(5));

                           (k)      fines, penalties and interest;

                           (l)      costs to maintain, improve, replace or
                                    repair structural (load bearing) components,
                                    foundations and roof structure (excluding
                                    roof membrane) of the Building; and

                           (m)      costs of insurance carried by Landlord (a)
                                    for any type of insurance which is not set
                                    forth on Appendix H attached hereto, or (b)
                                    with respect to any type of insurance set
                                    forth on Appendix H, for policy limits in
                                    excess of the policy limits set forth on
                                    Appendix H attached hereto.

                  (5)      Property Management Fee. Landlord also, shall serve
                           as the Property Manager for an annual fee equal to
                           two percent (2%) of the Base Rent, and Landlord may
                           recover from Tenant the actual out of pocket costs of
                           providing property management services (collectively,
                           the "Property Manager's Fee").

         (6)      Taxes. "Taxes" means any and all taxes, assessments and
                  charges of any kind, general or special, ordinary or
                  extraordinary, levied against the Building or Common Areas, as
                  applicable, which Landlord shall pay or become obligated to
                  pay in connection with the ownership, leasing, renting,
                  management, use, occupancy, control or operation of the
                  Project or of the personal property, fixtures, machinery,
                  equipment, systems and apparatus owned or leased by Landlord
                  for use in connection therewith. Taxes shall include real
                  estate taxes, personal property taxes, sewer rents, water
                  rents, special or general assessments, transit taxes, ad
                  valorem taxes, and any tax levied on the Rent or the interest
                  of Landlord under this Lease (the "Rent Tax"). Taxes shall
                  also include all fees and other costs and expenses paid by
                  Landlord in reviewing any tax and in seeking a refund or
                  reduction of any Taxes, whether or not Taxes are refunded or
                  reduced; provided that if Landlord receives a refund of Taxes
                  paid by Tenant under this Lease, Tenant's Proportionate Share
                  of such refund, less Tenant's Proportionate Share of the fees
                  and other costs and expenses incurred by Landlord in obtaining
                  such refund (if Tenant's Proportionate Share of such fees,
                  costs and expenses has not then been paid by Tenant) shall be
                  credited against the Taxes next due from Tenant or otherwise
                  paid to Tenant if the Term has expired or this Lease has
                  otherwise terminated. If Landlord elects not to appeal any
                  assessment of the Premises and Common Area for any fiscal
                  year, Tenant may, at its cost, appeal such assessment and
                  otherwise seek a refund of Taxes for such fiscal year;
                  provided that if Tenant is successful in so obtaining any
                  refund of Taxes,

                                       8.

<PAGE>

                  the costs incurred by Tenant in obtaining such refund shall be
                  deducted therefrom.

                  For any year, the amount to be included in Taxes, (a) from
         taxes or assessments payable in installments, shall be the amount of
         the installments (with any interest) due and payable during such year,
         and (b) from all other Taxes, shall at Landlord's election be the
         amount accrued, assessed, or otherwise imposed for such year or the
         amount due and payable in such year. Any refund or other adjustment to
         any Taxes by the taxing authority, shall apply during the year in which
         the adjustment is made, except as otherwise expressly provided herein.

                  Taxes shall not include any net income (except Rent Tax),
         capital, stock, succession, transfer, franchise, gift, estate or
         inheritance tax, except to the extent that such tax shall be imposed in
         lieu of any portion of Taxes, nor any fines, penalties or interest
         charged because Landlord paid the Taxes late without Tenant's Default
         (as defined in Section 12) in connection therewith.

                  Taxes shall not include (i) any assessments, charges or liens
         arising in connection with the remediation or removal of any Hazardous
         Substances (as defined in Section 28) placed on the Project before the
         Commencement Date for Phase I (unless placed on the Project by Tenant,
         its employees, agents, licensees, invitees, contractors, or any other
         person or entity for whom Tenant is responsible), or (ii) reserves for
         Taxes other than for the current Fiscal Year, or (iii) Taxes on capital
         improvements to the Project (excluding Included Capital Items and
         excluding the initial construction of both Buildings and the Common
         Areas).

                  (7)      Lease Year. The first "Lease Year" shall commence on
                           the Phase I Commencement Date and shall continue
                           through the final day of the twelfth month after the
                           Phase II Commencement Date (or if the Phase II
                           Commencement Date is not the first day of a calendar
                           month, the first day of the following month); and
                           thereafter, each "Lease Year" shall be each
                           subsequent consecutive twelve month period following
                           the prior Lease Year.

                  (8)      Fiscal Year. "Fiscal Year" means the calendar year,
                           except that the first fiscal year and the last fiscal
                           year of the Term may be a partial calendar year.

         D.       Computation of Base Rent and Rent Adjustments.

                  (1)      Prorations. If the Term begins on a day other than
                           the first day of a month, the Base Rent, Operating
                           Cost Share Rent and Tax Share Rent shall be prorated
                           for such partial month based on the actual number of
                           days in such month. If the Term begins on a day other
                           than the first day, or ends on a day other than the
                           last day, of the fiscal year, Operating Cost Share
                           Rent and Tax Share Rent shall be prorated for the
                           applicable fiscal year.

                                       9.

<PAGE>

                  (2)      Default Interest. Any Rent due from Tenant to
                           Landlord not paid when due shall bear interest from
                           the date due until paid at the lesser of twelve
                           percent (12%) per annum or the maximum rate permitted
                           by law; provided that in the case only of the first
                           two (2) late payments in any calendar year, such
                           interest shall not be charged if such payment is
                           received by Landlord within three (3) days of the
                           date such amount is due.

                  (3)      Rent Adjustments. The square footage of the Premises
                           and the Project set forth in the Schedule are
                           conclusively deemed to be the actual square footage
                           thereof, without regard to any subsequent
                           remeasurement of the Premises. If any Operating Cost
                           paid in one fiscal year relates to more than one
                           fiscal year, Landlord shall proportionately allocate
                           such Operating Cost among the related fiscal years.

                  (4)      Books and Records. Landlord shall maintain books and
                           records reflecting the Operating Costs and Taxes in
                           accordance with generally accepted accounting
                           principles and sound management practices. Tenant and
                           its certified public accountant shall have the right
                           to inspect and audit Landlord's books and records at
                           Landlord's office upon at least seventy two (72)
                           hours' prior notice during normal business hours
                           during the two hundred forty (240) days following the
                           respective delivery of the Operating Cost Report or
                           the Tax Report; provided that Tenant shall provide
                           Landlord with written notice that Tenant intends to
                           inspect and/or audit Landlord's books and records
                           within ninety (90) days following the respective
                           delivery of the Operating Cost Report or the Tax
                           Report. The results of any such inspection shall be
                           kept strictly confidential by Tenant and its agents,
                           and Tenant and its certified public accountant must
                           agree, in their contract for such services, to such
                           confidentiality restrictions and shall specifically
                           agree that the results shall not be made available to
                           any other tenant of the Project who is not an
                           Affiliate (as defined in Section 26(C)) of Tenant.
                           Unless Tenant notifies Landlord in writing of its
                           exceptions to either such Report within said two
                           hundred forty (240) day period, such Report shall be
                           deemed final and accepted by Tenant. Tenant shall pay
                           without prejudice the amount shown on both Reports in
                           the manner prescribed in this Lease, whether or not
                           Tenant ever takes exception thereto. If Tenant makes
                           a timely exception, Landlord and Tenant shall engage,
                           and each pay one-half of the fees of, an independent,
                           nationally recognized certified public accounting
                           firm acceptable to Landlord and Tenant (the "Selected
                           Accountant") to issue a final and conclusive
                           resolution of Tenant's exception; provided, however
                           that if the parties fail to engage a Selected
                           Accountant within thirty (30) days after Tenant makes
                           a timely exception to any Report, either party may
                           apply to the Presiding Judge of the San Diego
                           Superior Court, which Presiding Judge shall be
                           entitled to appoint an independent nationally
                           recognized certified public accounting firm to act as
                           the Selected Accountant, with the same effect as a
                           Selected Accountant engaged by Landlord and Tenant.
                           Tenant shall reimburse Landlord for the fee of the
                           Selected Accountant

                                      10.

<PAGE>

                           paid by Landlord unless Landlord's original
                           determination of annual Operating Costs or Taxes
                           overstated the amounts thereof by more than three
                           percent (3%), in which event Landlord shall reimburse
                           Tenant for the fee of the Selected Accountant paid by
                           Tenant. All fee arrangements with any Selected
                           Accountant with respect to the matters covered by
                           this Section shall be on a flat fee basis and shall
                           not be tied to the results of such Selected
                           Accountant's work.

                  (5)      Miscellaneous. So long as Tenant is in Default of any
                           obligation under this Lease, Tenant shall not be
                           entitled to any refund of any amount from Landlord.
                           If this Lease is terminated for any reason prior to
                           the annual determination of Operating Cost Share Rent
                           or Tax Share Rent, either party shall pay the full
                           amount due to the other within fifteen (15) days
                           after Landlord's notice to Tenant of the amount when
                           it is determined. Landlord may commingle any payments
                           made with respect to Operating Cost Share Rent or Tax
                           Share Rent, without payment of interest.

         3.       PREPARATION AND CONDITION OF PREMISES; POSSESSION AND
SURRENDER OF PREMISES.

         A.       Condition of Premises. Landlord is leasing the Premises to
Tenant absolutely "as is" (i.e., as a "grey" shell, being the walls, roof and
structural second floor) without any obligation to alter, remodel, improve,
repair or decorate any part of the Premises; provided that Landlord shall assign
to Tenant (or otherwise enforce at Landlord's election upon Tenant's written
request) any and all warranties (including statutory) received from or rights
against all contractors and subcontractors regarding the Tenant Improvements,
which Landlord will confirm last, to the extent available at no additional cost,
at least one (1) year after the earlier of (i) for each Phase, the Completion
Date of the applicable Tenant Improvements and (ii) completion of the applicable
work. Nothing in this Section 3A shall prevent Landlord from accepting a longer
warranty from a manufacturer provided such is available at no additional cost.
Landlord expressly disclaims any warranty or representation, express or implied,
with respect to the Project or any portion thereof, including, without
limitation, any warranty or representation as to fitness, condition, the
existence of any defect, patent or latent, merchantability, quality or
durability. Without limiting the foregoing, Landlord shall repair and/or
replace, as necessary, at Landlord's expense and not as an Operating Cost (a)
throughout the Term, defects in the construction of the Shell Improvements (as
defined in Appendix C) (as opposed to normal repair, maintenance and replacement
expected with the construction materials and equipment installed in the Building
or Project in light of their specifications), and (b) until the date which is
one (1) year after the Phase I Commencement Date, nonwatertight roof joints
and/or penetrations installed by Landlord in the Building. Tenant shall be
solely responsible to design, install and maintain any special HVAC equipment
that Tenant deems necessary or appropriate for operation of any laboratories on
the Premises. Further, Landlord expressly disclaims any warranty or
representation, express or implied, with respect to the adequacy or fitness for
use, of any HVAC system installed at the Premises for laboratory use, or
otherwise.

         B.       Tenant's Possession. Subject to Landlord's correction of
"punchlist" items in accordance with Appendix C, Tenant's taking possession of
any portion of the Premises shall be

                                      11.

<PAGE>

conclusive evidence that the Premises were in good order, repair and condition.
If Landlord authorizes Tenant to take possession of any part of the Premises
prior to the Commencement Date for purposes of doing business, all terms of this
Lease shall apply to such pre-Term possession, including Base Rent at the rate
set forth for the First Lease Year in the Schedule prorated for any partial
month.

         C.       Maintenance. Throughout the Term, Tenant shall maintain the
Premises in good order, repair and condition, loss or damage caused by the
elements, ordinary wear, and fire and other casualty excepted, and at the
termination of this Lease, or Tenant's right to possession, Tenant shall return
the Premises to Landlord in broom-clean, safe, neat and sanitary condition. To
the extent Tenant falls to perform either obligation, Landlord may, but need
not, restore the Premises to such condition and Tenant shall pay the cost
thereof.

         D.       Landlord's Contribution. Landlord shall provide Landlord's
Contribution (as defined in the Tenant Improvement Agreement), in accordance
with the Tenant Improvement Agreement.

         4.       PROJECT SERVICES.

         Attached hereto as Appendix F is a complete description of the services
Landlord shall perform as Property Manager for the Project. Landlord shall be
responsible for maintaining, repairing and replacing the roof and structure of
the Building, as well as maintaining, repairing and replacing the following
systems in the Building: HVAC (including, without limitation, constant velocity
and one-pass air supply), elevator, electrical, water, and any other system in
the Building which is applicable to the functioning of the Building for general
office use, but excluding all other special systems (collectively, the "Special
Systems") unique to Tenant's use of the Premises and its laboratory areas and
the Greenhouse, including, without limitation, deionized water or pure water and
security and data/information systems. Tenant shall, at its sole cost and
expense, maintain, repair and/or replace, in accordance with this Lease and all
Governmental Requirements, all Special Systems and the Greenhouse. Landlord
shall also furnish janitorial services in accordance with Appendix F.

         Tenant shall directly contract and pay for all utilities serving the
Premises and shall make all deposits required by any applicable utility provider
in connection therewith. In no event shall Landlord have any liability to Tenant
in connection with any failure of any utilities to be provided to the Premises,
nor shall any such failure be construed as an eviction of Tenant, work an
abatement of any portion of Rent, nor relieve Tenant of any of its obligations
under this Lease.

         The third party service contractors used by Landlord to provide
services to the Premises shall be subject to Tenant's prior approval. If Tenant
reasonably and in good faith is dissatisfied with the services provided by any
such contractor, Tenant shall so notify Landlord and Landlord shall either
direct such contractor to correct such performance or replace such contractor
with another contractor approved by Landlord and Tenant; provided that Landlord
shall have no obligation to direct any contractor to provide, or to replace any
contractor that fails to provide, services meeting a lesser standard than set
forth in the contract with such contractor. The timing of any replacement of a
contractor pursuant to this subsection shall be subject to the time period

                                      12.

<PAGE>

set forth in the contract with the contractor for the termination of such
contract. Tenant may deliver to Landlord or Landlord's designated agent other
specific requests relating to the performance of any such service contractor's
obligations under the applicable contract, but only Landlord or Landlord's
designated agent shall have the authority to direct any such service contractor.

         5.       ALTERATIONS AND REPAIRS.

         A.       Landlord's Consent and Conditions for Alterations.

         Except for the initial Tenant Improvements which shall be designed and
constructed in accordance with Appendix C, Tenant shall not make any
improvements or alterations to the Premises ("Alterations") without in each
instance submitting plans and specifications for the Alterations, (the
"Alteration Plans") to Landlord. Whether or not Landlord shall have a right to
approve any Alterations under this Section 5(A), Landlord shall notify Tenant
within ten (10) days after landlord's receipt of the Alteration Plans whether
Tenant shall be required to remove such Alterations at the expiration or earlier
termination of this Lease. Tenant shall obtain Landlord's prior written consent
before commencing any Alterations that (i) are reasonably estimated to cost more
than $50,000, or (ii) may affect the base structural components or systems of
the Premises, or (iii) would alter the exterior appearance of the Premises
(excluding the Greenhouse). Without limiting the foregoing, Landlord may
reasonably refuse to approve any Alterations that would (a) adversely impact, or
overload, the base structural components or mechanical and electrical systems of
the Premises, or (b) not be architecturally compatible with the existing
appearance of the Premises (excluding the Greenhouse). Where Landlord's consent
is required for any Alterations, Tenant shall pay Landlord's standard charge
(not to exceed $500 per set of Alterations Plans) to review the Alterations
Plans.

The following requirements shall apply to all Alterations:

         (1)      At its sole cost, Tenant shall design and construct all
Alterations.

         (2)      Prior to commencement, Tenant shall furnish Landlord with
copies of all applicable building permits and certificates of insurance required
of Tenant or its contractors under Section 8.

         (3)      Tenant shall cause all Alterations to be constructed so as to
maintain peace and harmony among other contractors serving the Project and to
avoid interfering with work or services others are performing in the Project.

         (4)      All Alterations shall be performed in a good and workmanlike
manner, meeting the standard for construction and quality of materials in the
Premises, and shall comply with all insurance requirements and all applicable
governmental laws, ordinances and regulations, and development permits
applicable to the Project, including, without limitation, requirements of
applicable zoning and any Planned Industrial Permit and Coastal Zone Permit, and
any CC&Rs or restrictions recorded against the Project (collectively,
"Governmental Requirements").

                                      13.

<PAGE>

         (5)      Tenant shall perform all Alterations so as to minimize or
prevent disruption to other tenants in the Project and shall comply with all
reasonable requests of Landlord in response to complaints from other tenants.

         (6)      Tenant shall perform all Alterations in compliance with
Landlord's "Policies, Rules and Procedures for Construction Projects"
("Policies") in effect at the time the Alterations are constructed, to the
extent such Policies are reasonably similar to the Policies in effect as of the
date of this Lease (excluding any changes to the Policies to comply with
applicable Governmental Requirements, which changes shall be applicable to any
Alterations).

         (7)      At no cost to Tenant, Landlord shall have the right to inspect
all Alterations.

         (8)      Upon completing any Alterations, Tenant shall furnish Landlord
with copies of unconditional mechanic's lien waivers for such Alterations,
receipted bills covering all labor and materials, and all other close-out
documentation required in Landlord's "Policies, Rules and Procedures for
Construction Projects". In addition, upon completing any Alterations costing
more than $50,000, Tenant shall furnish Landlord with copies of as-built plans
and specifications for such Alterations.

         Without limiting the provisions of Section 28, if any Alteration Plans
delivered to Landlord for its approval under this Section 5(A) clearly identify
that Hazardous Substances will be used, and are reasonably necessary, in
connection with such Alterations, then if Landlord approves such Alteration
Plans and the use of such Hazardous Substances (i) Tenant shall at its cost at
all time comply with all Environmental Laws and this Lease relating to such
Hazardous Substances, (ii) if Landlord elects not to have the applicable
Alterations removed by Tenant at the expiration or earlier termination of this
Lease, then so long as Tenant has complied with the provisions of clause (i),
Tenant shall not be obligated to pay the costs of the removal of such Hazardous
Substances if Landlord removes such Hazardous Substances after the expiration or
earlier termination of this Lease, and (iii) if Landlord elects to have the
applicable Alterations removed by Tenant at the expiration or earlier
termination of this Lease, Tenant shall perform such removal at its cost and in
compliance with all Environmental Laws.

         B.       Damage to Systems. If any part of the mechanical, electrical
or other systems in the Premises shall be damaged, Tenant shall promptly notify
Landlord, and Landlord shall repair such damage. Landlord may also at any
reasonable time make any repairs or alterations which Landlord deems necessary
for the safety or protection of the Project, or which Landlord is required to
make by any court or pursuant to any Governmental Requirements. Tenant shall at
its expense make all other repairs necessary to keep the Premises, and Tenant's
Personalty (as defined in Appendix C), in good order, condition and repair. To
the extent Tenant Defaults in making such necessary repairs, Landlord may make
such repairs itself. To the extent not waived in Section 8(A), the cost of any
repairs made by Landlord on account of Tenant's Default, or on account of the
misuse or neglect by Tenant or its invitees, contractors or agents anywhere in
the Project, shall become Additional Rent payable by Tenant on demand.

         C.       No Liens. Tenant has no authority to cause or permit any lien
or encumbrance of any kind to affect Landlord's Interest in the Project; any
such lien or encumbrance shall attach to Tenant's leasehold Interest in the
Premises only. If any mechanic's lien shall be filed or claim of

                                      14.

<PAGE>

lien made for work or materials furnished to Tenant, then Tenant shall at its
expense within ten (10) days thereafter either discharge or contest the lien or
claim. If Tenant contests the lien or claim, then Tenant shall (i) within such
(10) day period, provide Landlord adequate security for the lien or claim, (ii)
contest the lien or claim in good faith by appropriate proceedings that operate
to stay its enforcement, and (iii) pay promptly any final adverse judgment
entered in any such proceeding. If Tenant does not comply with these
requirements, Landlord may discharge the lien or claim, and the amount paid, as
well as attorney's fees and other expenses incurred by Landlord, shall become
Additional Rent payable by Tenant on demand. Nothing contained in this Lease
shall constitute any consent by Landlord to subject Landlord's estate to
liability under any mechanics' or other lien law. Tenant shall give Landlord
adequate opportunity, and Landlord shall have the right at all times, to post
such notices of nonresponsibility as may be allowed under California law.

         D.       Ownership of Improvements. All Shell Improvements, Tenant
Improvements, Schedule Sensitive Equipment (as defined in Appendix C), equipment
shown on the Plans (as defined in Appendix C), modular laboratories, laboratory
benches, modular laboratory cabinetry (also known as "C frames") and fume hoods
(whether or not any such items are shown on the Plans), constructed or installed
in the Premises by or on behalf of either Landlord or Tenant, but excluding the
property described on Appendix E hereto (the "Removable Property"), the
Personalty (as defined in Appendix C), and any Alterations Landlord shall have
required Tenant to remove in accordance with Section 5(A), (i) shall, to the
extent paid for with Landlord's Contribution, become Landlord's property upon
installation without compensation to Tenant, (ii) shall, to the extent paid for
with Tenant's own funds and not Landlord's Contribution, belong to Tenant during
the Term to the extent necessary for Tenant to depreciate such property for
Tenant's income tax purposes, but shall automatically become Landlord's property
upon the expiration or earlier termination of this Lease without compensation to
Tenant, (iii) shall remain in the Premises during the Term unless Landlord
consents otherwise in writing, (iv) shall not be encumbered, transferred or
otherwise hypothecated by Tenant, and (v) shall be surrendered to Landlord with
the Premises at the expiration or earlier termination of the Lease.

         E.       Removal at Termination. Upon the expiration or earlier
termination of this Lease or Tenant's right of possession (i) Tenant shall
remove from the Project the Removable Property and its Personalty (except to the
extent any such other Personalty is required to remain in the Premises under
Section 5D), any Alterations which Landlord elects shall be removed by Tenant
pursuant to Section 5(A), and any improvements to any portion of the Project
other than the Premises (including, without limitation, the Greenhouse, to the
extent provided in this Section 5(E)), and (ii) if the Premises have been used
for a Sole Permitted Use other than general office purposes and biotechnology
and/or scientific research and development laboratory, purposes (the "Initial
Use"), at Landlord's election Tenant shall restore the Premises to the condition
suitable for the Initial Use. Not less than thirty (30) days before the stated
expiration of the Term, and otherwise as soon as reasonably possible on or after
any earlier expiration of the Term, Landlord shall confirm by notice by Tenant
that Tenant must remove the Greenhouse at the expiration or earlier termination
of the Term. If Tenant does not timely remove any such property, then Tenant
shall be conclusively presumed to have, at Landlord's election (x) conveyed such
property to Landlord without compensation or (y) abandoned such property, and
Landlord may dispose of or store any part thereof in any manner at Tenant's sole
cost, without waiving Landlord's right to claim from Tenant all expenses arising
out of Tenant's failure to remove the

                                      15.

<PAGE>

property, and without liability to Tenant or any other person. Landlord shall
have no duty to be a bailee of any such property which is not timely removed by
Tenant. If Landlord elects abandonment, Tenant shall pay to Landlord, upon
demand, any expenses incurred for removal and disposition. Tenant expressly
releases Landlord of and from any and all claims and liability for damage to or
destruction or loss of property left by Tenant upon the Premises at the
expiration or other termination of this Lease and, to the extent permitted by
then applicable law, Tenant shall protect, indemnify, defend and hold Landlord
harmless from and against any and all claims and liability with respect thereto.

         F.       Landlord's Work. Landlord shall have the right at any time to
change the arrangement and location of all entrances, passageways, doors,
doorways, corridors, stairs, toilets and other public parts of the Project
(excluding the Premises, except to the extent changes to the Premises are
necessary for Landlord's compliance with its obligations under this Lease) and,
upon giving Tenant reasonable notice thereof, to change any name, number or
designation by which the Premises or the Project is commonly known.

         6.       USE OF PREMISES. Tenant shall use the Premises only for the
"Sole Permitted Use" identified in the Schedule. Tenant shall not allow any use
of the Premises which will negatively affect the cost of Landlord's insurance on
the Project. Tenant shall not allow any use of the Premises which would cause
the value or utility of any part of the Premises to diminish or would interfere
with the operation of the Project by Landlord. Tenant shall not cause or permit
any nuisance or waste (excluding Hazardous Substances, which are governed by
Section 28) upon the Premises, or allow any offensive noise or odor in or around
the Premises or in any way obstruct or interfere with the rights of other
tenants or occupants of the Project.

         Tenant acknowledges that the Americans With Disabilities Act of 1990
(as amended and as supplemented by further laws from time to time, the "ADA")
imposes certain requirements upon the owners, lessees and operators of
commercial facilities and places of public accommodation, including, without
limitation, prohibitions on discrimination against any individual on the basis
of disability. Notwithstanding any other provision of this Lease, Tenant agrees,
at Tenant's expense, to take all proper and necessary action to cause the
Premises, any repairs, replacements, alterations and improvements thereto to be
maintained, used and occupied in compliance with the ADA requirements, whether
or not those requirements are based upon the Tenant's use of the Premises and,
further, to otherwise assume all responsibility to ensure the Premises'
continued compliance with all provisions of the ADA throughout the Term. Tenant
shall, at its expense, make any alterations or modifications, within or without
the Premises, to bring Tenant's use and occupancy of the Premises into
compliance with the ADA. Tenant shall pay, as Additional Rent, Tenant's
Proportionate Share of expenses incurred by Landlord in bringing Common Areas of
the Project into compliance with provisions of the ADA. The Premises shall not
be used as a "place of public accommodation" under the ADA or similar laws,
regulations, statutes and/or ordinances; provided, that if any governmental
authority shall deem the Premises to be a "place of public accommodation" as a
result of Tenant's use, Tenant shall either modify its use to cause such
authority to rescind its designation or be responsible for any alterations,
structural or otherwise, required to be made to the Project or the Premises
under such laws.

                                      16.

<PAGE>

         7.       GOVERNMENTAL REQUIREMENTS AND PROJECT RULES. Tenant shall
comply with all Governmental Requirements applying to its use of the Premises.
Tenant shall also comply with all reasonable rules established for the Project,
including, without limitation, the parking area, from time to time by Landlord.
The present rules and regulations are contained in Appendix B. Failure by
another tenant to comply with the rules or failure by Landlord to enforce them
shall not relieve Tenant of its obligation to comply with the rules or make
Landlord responsible to Tenant in any way. Landlord shall use reasonable efforts
to apply the rules and regulations uniformly with respect to Tenant and tenants
in the Building under leases containing rules and regulations similar to this
Lease. In the event of alterations and repairs performed by Tenant, Tenant shall
comply with the provisions of Section 5 of this Lease and also Landlord's
"Policies, Rules and Regulations for Construction Projects".

         8.       WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.

         A.       Mutual Waiver of Claims. As used herein, "Agents" means the
applicable party's Affiliates, officers, directors, employees, contractors or
agents. Notwithstanding anything in this Lease to the contrary, to the extent
permitted by law, Tenant waives any claims Tenant may have against Landlord or
its Agents for business interruption or property damage sustained by Tenant as
the result of any act or omission of Landlord or its Agents. Notwithstanding
anything in this Lease to the contrary, to the extent permitted by law, Landlord
waives any claims Landlord may have against Tenant or its Agents for loss of
Rent or property damage sustained by Landlord as the result of any act or
omission of Tenant or its Agents. Tenant and Landlord shall obtain enforceable
waivers of their respective insurers' rights of subrogation to all claims for
property damage, business interruption or loss of Rents the parties have waived
herein.

         B.       Mutual Indemnification. Tenant and Landlord shall each
indemnify, defend and hold harmless the other party and its Agents for all
claims by any third party for injury to any person or damage to or loss of any
property occurring at or in the Project and arising from any act or omission or
negligence of the indemnifying party or any of its Agents. The parties' mutual
duties of indemnification under this Section 8(B) shall survive the expiration
or earlier termination of this Lease.

         C.       Tenant's Insurance. Tenant shall maintain the following
insurance commencing on the earlier of the Commencement Date for Phase I or the
date of Tenant's or its Agents' earlier access to the Premises as provided in
Appendix C, and continuing throughout the Term and any renewals thereof, with
such other additional terms and coverages as Landlord shall reasonably require
from time to time:

                  (1)      Commercial General Liability Insurance, (a) with
                           Contractual Liability covering Tenant's
                           indemnification obligations under this Lease to the
                           extent available, (b) with a severability of interest
                           endorsement, (c) with limits of not less than One
                           Million Dollars ($1,000,000) combined single limit
                           per occurrence and not less than Two Million Dollars
                           ($2,000,000) in the aggregate for bodily injury,
                           sickness or death, and property damage, and umbrella
                           coverage of not less than Six Million Dollars
                           ($6,000,000), and (d) naming as additional insureds
                           Landlord, its property manager and

                                      17.

<PAGE>

                           Agents and the mortgagees and ground lessors, if any,
                           for the Project of whom Landlord shall have notified
                           Tenant;

                  (2)      Broad Form Property Insurance covering the Tenant
                           Improvements and Personalty for the broadest
                           available range of risks on a special-causes-of-loss
                           policy form, including vandalism, malicious mischief,
                           sprinkler leakage and earthquake sprinkler leakage,
                           but excluding earthquake and flood, with an
                           agreed-amount endorsement for one hundred percent
                           (100%) of the full replacement cost (new, without
                           deduction for depreciation) satisfying any
                           coinsurance requirements of the policy; and Tenant
                           waives all rights of subrogation, and Tenant's
                           property insurance shall include a waiver of
                           subrogation in favor of Landlord.

                  (3)      Workers' compensation or similar insurance in form
                           and amounts required by law, and Employer's Liability
                           with not less than the following limits:

<TABLE>
<S>                                             <C>
Each Accident                                   $500,000
Disease--Policy Limit                           $500,000
Disease--Each Employee                          $500,000
</TABLE>

                  Such insurance shall contain a waiver of subrogation provision
         in favor of Landlord and its agents.

                  (4)      Broad Form Builder's Risk Insurance for not less than
                           the contract price of all work Tenant or its
                           contractors shall perform on the Premises or Common
                           Areas to install Personalty or construct Alterations,
                           including, course of construction, vandalism and
                           malicious mischief coverage.

                  (5)      Pollution liability coverage insurance for (1)
                           discovery of new conditions, on-site cleanup and
                           diminution of value, and (2) third party claims for
                           on site bodily injury, with not less than $5,000,000
                           coverage combined single limit per occurrence and in
                           the aggregate, naming as additional insureds
                           Landlord, its property manager and Agents and the
                           mortgagees and ground lessors; if any, for the
                           Project. Coverage with respect to third party claim
                           for bodily injury shall extend beyond the Lease Term
                           for a period of three years.

         Tenant's insurance shall be primary and not contributory to that
carried by Landlord, its agents or mortgagee. The insurers issuing the insurance
which Tenant is required to maintain under this Lease shall at all times be
subject to Landlord's approval, shall be licensed to do business in the State of
California, and shall have A.M. Best policyholder and financial class ratings of
"A-" and "VI" or better (as such ratings are defined by A.M. Best at the date of
this Lease).

         Tenant shall cause any contractor performing work for Tenant on the
Premises or Common Areas to maintain Commercial Liability Insurance (including
contractor's liability coverage) with contractual liability, protective
liability, completed operations, and broad form property damage endorsements,
Workers' Compensation and Employer's Liability insurance in

                                      18.

<PAGE>

the same form and meeting the same requirements as the insurance Tenant is
required to carry hereunder. Such insurance shall contain a waiver of
subrogation provision in favor of Landlord and its agents.

         Tenant's contractor's insurance shall be primary and not contributory
to that carried by Tenant, Landlord, their Agents or mortgagees. Tenant and
Landlord, and if any, Landlord's building manager, or Agents, mortgagee or
ground lessor shall be named as additional insured on Tenant's contractor's
insurance policies.

         D.       Landlord's Insurance. Landlord shall maintain all insurance
Tenant is required to maintain hereunder (except pollution insurance), with
policy limits not less than the policy limits required for the insurance Tenant
is required to maintain hereunder, affording reciprocal rights to Tenant and its
Agents as Tenant's insurance is required to afford Landlord and its Agents;
provided, however, Landlord's insurance shall cover the entire Premises and
Common Areas, excluding only Tenant's Personalty and the Removable Property.
Landlord may, at its election in its sole discretion, also carry rent loss,
earthquake and/or flood insurance.

         E.       Insurance Certificates. Tenant shall deliver to Landlord
certificates evidencing all insurance required to be carried by Tenant hereunder
no later than the earlier of the Commencement Date for Phase I or Tenant's
earlier entry on the Premises in accordance with Appendix C, and Landlord shall
deliver to Tenant certificates evidencing all insurance required to be carried
by Landlord hereunder within thirty (30) days after Landlord's and Tenant's
execution and delivery of this Lease. Thereafter, each party shall deliver such
certificates to the other no later than, ten (10) days after each renewal date.
Each certificate will provide for thirty (30) days' prior written notice of
cancellation or modification to Landlord or Tenant as applicable.

         9.       FIRE AND OTHER CASUALTY.

         A.       Termination. If a fire or other casualty causes substantial
damage to the Premises, Landlord shall engage a registered architect to certify
within one (1) month of the date of the casualty to both Landlord and Tenant the
amount of time needed to fully restore the Premises, using standard working
methods. If the time needed exceeds ten (10) months from the beginning of the
restoration, or two (2) months therefrom if the restoration would begin during
the last twelve (12) months of the Lease, then either Landlord or Tenant may
terminate this Lease, by notice to the other party within ten (10) days after
the notifying party's receipt of the architect's certificate. The termination
shall be effective thirty (30) days from the date of the notice and Rent shall
be paid by Tenant to that date, with an abatement for any portion of the
Premises that was rendered untenantable by the casualty from the date of the
casualty until the date of such termination.

         B.       Restoration. If a casualty causes damage to the Premises but
this Lease is not terminated for any reason, then subject to the rights of any
mortgagee or ground lessors, Landlord shall obtain the applicable insurance
proceeds, diligently obtain all necessary entitlements and permits for such
restoration and diligently and fully restore the Premises, subject to current
Governmental Requirements. Tenant shall at its cost replace its damaged

                                      19.

<PAGE>

Personalty. Rent shall be abated on a per diem basis for any portion of the
Premises which is untenantable from the date of the casualty until such portion
is fully restored.

         10.      EMINENT DOMAIN. If a part of the Project is taken by eminent
domain or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business or Tenant does
not have reasonable access to the Premises, then either party may terminate this
Lease effective as of the date of the taking. Rent shall abate from the date of
the taking in proportion to any part of the Premises taken. The entire award for
a taking of any kind shall be paid to Landlord, and Tenant shall have no right
to share in the award. All obligations accrued to the date of the taking shall
be performed by each party.

         11.      RIGHTS RESERVED TO LANDLORD.

         Landlord may exercise at any time any of the following rights
respecting the operation of the Project without liability to the Tenant of any
kind:

         A.       Name. To change the name or street address of the Building or
the suite number(s) of the Premises.

         B.       Signs. To install, remove and maintain any signs on the
exterior and in the interior of the Premises, and to approve at its sole
discretion, prior to installation, any of Tenant's signs in the Premises visible
from the Common Areas or the exterior of the Premises.

         C.       Window Treatments. To approve, at its discretion, prior to
installation, any shades, blinds, ventilators or window treatments of any kind,
as well as any lighting within the Premises that may be visible from the
exterior of the Premises or any interior Common Areas.

         D.       Keys. To retain and use at any time passkeys to enter the
Premises or any door within the Premises. Tenant may alter or add any lock or
bolt, provided it delivers copies of any keys to Landlord within one (1)
business day of such alteration or addition.

         E.       Access. To have access to inspect the Premises, and to perform
its obligations, or make repairs, alterations, additions or improvements, as
permitted this Lease.

         F.       Preparation for Reoccupancy. To decorate, remodel, repair,
alter or otherwise prepare the Premises for reoccupancy at any time after Tenant
abandons the Premises, without relieving Tenant of any obligation to pay Rent.

         G.       Heavy Articles. To approve the weight, size, placement and
time and manner of movement within the Premises of any safe, central filing
system or other heavy article of Tenant's property. Tenant shall move its
property entirely at its own risk.

         H.       Show Premises. To show the Premises to prospective purchasers,
tenants, brokers, lenders, investors, rating agencies or others at any
reasonable time, provided that Landlord gives prior notice to Tenant and does
not materially interfere with Tenant's use of the Premises.

                                      20.

<PAGE>

         I.       Use of Lockbox. To designate a lockbox, collection agent for
collections of amounts due Landlord. In that case, the date of payment of Rent
or other sums shall be the date of the agent's receipt of such payment or the
date of actual collection if payment is made in the form of a negotiable
instrument thereafter dishonored upon presentment. However, Landlord may reject
any payment for all purposes as of the date of receipt or actual collection by
mailing to Tenant within 21 days after such receipt or collection a check equal
to the amount sent by Tenant.

         J.       Repairs and Alterations. To make repairs or alterations to the
Project and in doing so transport any required material through the Premises, to
close entrances, doors, corridors, elevators and other facilities in the
Project, to open any ceiling in the Premises, or to temporarily suspend services
or use of Common Areas in the Project. Landlord may perform any such repairs or
alterations during ordinary business hours, except that Tenant may require any
Work in the Premises to be done after business hours if Tenant pays Landlord for
overtime and any other expenses incurred. Landlord may do or permit any work on
any nearby building, land, street, alley or way.

         K.       Landlord's Agent. If Tenant is in Default under this Lease,
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.

         L.       Building Services. To install, use and maintain through the
Premises, pipes, conduits, wires and ducts serving the Building, provided that
such installation, use and maintenance does not unreasonably interfere with
Tenant's use of the Premises.

         M.       Other Actions. To take any other action which Landlord deems
reasonable in connection with the operation, maintenance or preservation of the
Project.

         12.      TENANT'S DEFAULT.

         Any of the following shall constitute a "Default" by Tenant; provided
Tenant shall have failed to cure the specified breach of this Lease within the
time period, if any, specified in this Section 12. All time periods specified
herein for Tenant's opportunity to cure are in lieu of, and not in addition to,
any notice required by law, including, without limitation, California Code of
Civil Procedure Section 1161 et seq.

         A.       Rent Default. Tenant fails to pay any Rent when due and this
failure continues for five (5) days after written notice from Landlord; provided
that with respect only to notices delivered in any year during the last two (2)
weeks of December, or in January before the first generally recognized business
day, such five (5) day period shall be seven (7) days;

         B.       Assignment/Sublease. Tenant defaults in its obligations under
Section 17 Assignment and Sublease, and this failure continues for fifteen (15)
days after written notice from Landlord, except that if Tenant begins to cure
its default within the fifteen (15) day period but cannot reasonably complete
its cure within such period, then so long as Tenant continues to diligently
attempt to cure its default, the fifteen (15) day period shall be extended for
as long as reasonably necessary to complete the cure up to a maximum of thirty
(30) days;

                                      21.

<PAGE>

         C.       Other Performance Default. Tenant fails to perform any other
nonmonetary obligation to Landlord under this Lease, and this failure continues
for ten (10) days after written notice from Landlord, except that if Tenant
begins to cure its breach within the ten (10) day period but cannot reasonably
complete its cure within such period, then, so long as Tenant continues to
diligently attempt to cure its breach, the ten (10) day period shall be extended
for as long as reasonably necessary to complete the cure up to a maximum of
sixty (60) days;

         D.       Credit Default. One of the following credit defaults occurs:

                  (1)      Tenant commences any proceeding under any law
                           relating to bankruptcy, insolvency, reorganization or
                           relief of debts, or seeks appointment of a receiver,
                           trustee, custodian or other similar official for the
                           Tenant or for any substantial part of its property,
                           or any such proceeding is commenced against Tenant
                           and either remains undismissed for a period of
                           forty-five (45) days or results in the entry of an
                           order for relief against Tenant which is not fully
                           stayed within seven (7) days after entry;

                  (2)      Tenant becomes insolvent or bankrupt, does not
                           generally pay its debts as they become due, or admits
                           in writing its inability to pay its debts, or makes a
                           general assignment for the benefit of creditors, and
                           any such default is not cured within ten (10) days
                           after written notice from Landlord;

                  (3)      Any third party obtains a levy or attachment under
                           process of law against Tenant's leasehold interest
                           which is not fully released and terminated within
                           thirty (30) days thereafter.

         E.       Abandonment Default. Tenant abandons the Premises and does not
cure such breach within fifteen (15) days after written notice from Landlord.

         13.      LANDLORD REMEDIES.

         A.       Termination of Lease or Possession. If Tenant Defaults,
Landlord may elect by notice to Tenant either to terminate this Lease or to
terminate Tenant's possession of the Premises without terminating this Lease. In
either case, Tenant shall immediately vacate the Premises and deliver possession
to Landlord, and Landlord may repossess the Premises and may, at Tenant's sale
cost, remove any of Tenant's signs and any of its other property, without
relinquishing its right to receive Rent or any other right against Tenant.
Without limiting the generality of the foregoing, upon the termination of this
Lease or the termination of Tenant's right of possession, it shall be lawful for
the Landlord, without formal demand or notice of any kind, to re-enter the
Premises by summary dispossession proceedings or any other action or proceeding
authorized by law and to remove Tenant and all persons and property therefrom.

         B.       Lease Termination Damages. Except as otherwise provided in
Section 13C, if Tenant abandons the Premises prior to the end of the term
hereof, or if Tenant's right to possession is terminated by Landlord because of
a Default by Tenant under this Lease, this Lease shall terminate. Upon such
termination, Landlord may recover from Tenant the following, as provided in
Section 1951.2 of the California Civil Code: (i) the worth at the time of award
of the

                                      22.

<PAGE>

unpaid Rent and other charges under this Lease that had been earned at the time
of termination; (ii) the worth at the time of award of the amount by which the
unpaid Rent and other charges under this Lease which would have been earned
after termination until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; (iii) the worth at the
time of award of the amount by which the unpaid Rent and other charges under
this Lease for the balance of the term of this Lease after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; and (iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or that in the ordinary course of things would be
likely to result therefrom. As used herein, the following terms are defined: (a)
The "worth at the time of award" of the amounts referred to in Sections (i) and
(ii) is computed by allowing interest at the lesser of 15% per annum or the
maximum lawful rate. The "worth at the time of award" of the amount referred to
in Section (iii) is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus 1%.

         C.       Continuation of Lease. Even if Tenant his abandoned the
Premises, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all its rights
and remedies under this Lease, including the right to recover Rent as it becomes
due. This remedy is intended to be the remedy described in California Civil Code
Section 1951.4, and the following provision from such Civil Code Section is
hereby repeated: "The Lessor has the remedy described in California Civil Code
Section 1951.4 (lessor may continue lease in effect after lessee's breach and
abandonment and recover rent as it becomes due, if lessee has right to sublet or
assign, subject only to reasonable limitations)." Any such payments due Landlord
shall be made upon demand therefor from time to time and Tenant agrees that
Landlord may file suit to recover any sums falling due from time to time.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect in writing to terminate this Lease for such previous breach.

         D.       Possession Termination Damages. If Landlord terminates
Tenant's right to possession without terminating the Lease and Landlord takes
possession of the Premises itself, Landlord may relet any part of the Premises
for such Rent, for such time, and upon such terms as Landlord in its sole
discretion shall determine, without any obligation to do so prior to renting
other vacant areas in the Building. Any proceeds from reletting the Premises
shall first be applied to the expenses of reletting, including redecoration,
repair, alteration, advertising, brokerage, legal, and other reasonably
necessary expenses. If the reletting proceeds after payment of expenses are
insufficient to pay the full amount of Rent under this Lease, Tenant shall pay
such deficiency to Landlord monthly upon demand as it becomes due. Any excess
proceeds shall be retained by Landlord.

         E.       Landlord's Remedies Cumulative. All of Landlord's remedies
under this Lease shall be in addition to all other remedies Landlord may have at
law or in equity. Waiver by Landlord of any breach of any obligation by Tenant
shall be effective only if it is in writing, and shall not be deemed a waiver of
any other breach, or any subsequent breach of the same obligation. Landlord's
acceptance of payment by Tenant shall not constitute a waiver of any breach by
Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or
termination of the Lease or of Tenant's right to possession, the acceptance
shall not affect such notice or termination. Acceptance of payment by Landlord
after commencement of a legal proceeding or

                                      23.

<PAGE>

final judgment shall not affect such proceeding or judgment. Landlord may
advance such monies and take such other actions for Tenant's account as
reasonably may be required to cure or mitigate any Default by Tenant. Tenant
shall immediately reimburse Landlord for any such advance, and such sums shall
bear interest at the default interest rate until paid.

         F.       CONSENT TO JURISDICTION. EACH PARTY SHALL BRING ANY ACTION
AGAINST THE OTHER IN CONNECTION WITH THIS LEASE IN A FEDERAL OR STATE COURT
LOCATED IN SAN DIEGO, CALIFORNIA, CONSENTS TO THE JURISDICTION OF SUCH COURTS,
AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING TRANSFERRED FROM SUCH COURTS ON THE
GROUND OF IMPROPER VENUE OR INCONVENIENT FORUM.

         G.       Attorney's Fees. In the event Landlord or Tenant commences any
litigation to enforce this Lease, the unsuccessful party shall pay the
successful party all statutory and reimbursable costs and expenses, including,
without limitation, reasonable attorney's and expert witness fees and costs and
court costs, incurred by the successful party in all trial, appellate,
post-judgment collection and bankruptcy proceedings related to such litigation.

         14.      SURRENDER. Upon termination of this Lease or Tenant's right to
possession, Tenant shall return the Premises to Landlord in good order and
condition, ordinary wear and casualty damage excepted. The Removable Property,
Personalty, Alterations and other improvements required to be removed by Tenant
upon the expiration or earlier termination of this Lease or Tenant's right of
possession as provided in Section 5(E) shall be removed by Tenant in a good and
workmanlike manner and Tenant restore the Premises to its condition prior to
their installation.

         15.      HOLDOVER. If Tenant retains possession of any part of the
Premises after the Term, Tenant shall become a month-to-month tenant for the
entire Premises upon all of the terms of this Lease as might be applicable to
such month-to-month tenancy, except that Tenant shall pay all of Base Rent,
Operating Cost Share Rent and Tax Share Rent at one hundred twenty-five percent
(125%) of the rate in effect immediately prior to such holdover, computed on a
monthly basis for each full or partial month Tenant remains in possession.
Tenant shall also pay Landlord all of Landlord's direct and consequential
damages. No acceptance of Rent or other payments by Landlord under these
holdover provisions shall operate as a waiver of Landlord's right to regain
possession or any other of Landlord's remedies.

         16.      SUBORDINATION TO GROUND LEASES AND MORTGAGES.

         A.       Subordination. Subject to the mutual execution and delivery by
Tenant and the ground lessor or mortgagee of the subordination document next
described, this Lease shall be subordinate to any present or future ground lease
or mortgage respecting the Project, and any amendments to such ground lease or
mortgage, at the election of the ground lessor or mortgagee as the case may be,
effected by notice to Tenant in the manner provided in this Lease. The
subordination shall be effective upon such notice, but at the request of
Landlord or ground lessor or mortgagee, Tenant shall, within ten (10) days of
the request, execute and deliver to the requesting party any reasonable
documents provided to evidence the subordination. The subordination documents
shall provide that, so long as Tenant is not in Default under this Lease,

                                      24.

<PAGE>

Lender shall (i) not Disturb Tenant and (ii) be bound by Landlord's obligation
to fund the Landlord's Contribution.

         B.       Termination of Ground Lease or Foreclosure of Mortgage. If any
ground lease is terminated or mortgage foreclosed or deed in lieu of foreclosure
given and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall
thereby become the owner of the Project, Tenant shall attorn to such ground
lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and
this Lease shall continue in effect as a direct lease between Tenant and such
ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or
purchaser shall be liable as Landlord only during the time such ground lessor or
mortgagee or purchaser is the owner of the Project. At the request of Landlord,
ground lessor or mortgagee, Tenant shall execute and deliver within ten (10)
days of the request any document furnished by the requesting party to evidence
Tenant's agreement to attorn.

         C.       Notice and Right to Cure. Tenant agrees to send by registered
or certified mail to any ground lessor or mortgagee identified in any notice
from Landlord to Tenant a copy of any notice of default sent by Tenant to
Landlord. If Landlord fails to cure such default within the required time period
under this Lease, but ground lessor or mortgagee begins to cure within ten (10)
days after such period and proceeds diligently to complete such cure, then
ground lessor or mortgagee shall have such additional time as is necessary to
complete such cure, including any time necessary to obtain possession if
possession is necessary to cure, and Tenant shall not begin to enforce its
remedies so long as the cure is being diligently pursued.

         D.       Definitions. As used in this Section 16, "mortgage" shall
include "trust deed" and "mortgagee" shall include "trustee", "mortgagee" shall
include the mortgagee of any ground lessee, and "ground lessor", "mortgagee",
and "purchaser at a foreclosure sale" shall include, in each case, all of its
successors and assigns, however remote.

         17.      ASSIGNMENT AND SUBLEASE.

         A.       In General. Except as otherwise provided herein with respect
to Permitted Transfers (as hereinafter defined), Tenant shall not, without the
prior consent of Landlord in each case, (i) make or allow any assignment or
transfer, by operation of law or otherwise, of any part of Tenant's interest in
this Lease, (ii) grant or allow any lien or encumbrance, by operation of law or
otherwise, upon any part of Tenant's interest in this Lease, (iii) sublet any
part of the Premises, or (iv) permit anyone other than Tenant and its employees
to occupy any part of the Premises (any such transaction in (i), (ii), (iii) or
(iv) being referred to as a "Transfer" and the assignee, sublessee, transferee,
occupant, lien holder, as applicable, in connection therewith is referred to as
a "Transferee"), and any such unconsented Transfer shall be void. Tenant shall
remain primarily liable for all of its obligations under this Lease,
notwithstanding any Transfer. No consent granted by Landlord shall be deemed to
be a consent to any subsequent Transfer. Tenant shall pay all of Landlord's
reasonable attorneys' fees, not to exceed One Thousand Dollars ($1,000) per
proposed Transfer, and other expenses reasonably incurred by Landlord, not to
exceed Five Hundred Dollars ($500) per proposed Transfer, in connection with any
consent requested by Tenant or in reviewing any proposed Transfer. If Tenant
shall assign this Lease or sublet the Premises in its entirety, except in any
Permitted Transfer, any rights of Tenant to renew this Lease, extend the Term or
purchase the Premises shall be extinguished thereby and

                                      25.

<PAGE>

will not be transferred to the Transferee, all such rights being personal to the
Tenant named herein. Notwithstanding anything to the contrary contained in this
Lease, Landlord's consent shall not be necessary for any Transfer to any
Affiliate of the originally named Tenant, Novartis Institute for Functional
Genomics, Inc., Novartis AG or Affiliate thereof and/or Novartis Research
Foundation or Affiliate thereof (each, a "Permitted Transferee"); provided that
(a) Tenant shall provide Landlord with reasonable prior notice of such Transfer,
and (b) no Default exists as of the date of such Transfer (a transfer to a
Permitted Transferee meeting these requirements being a "Permitted Transfer").
In the event of the assumption of this Lease by a Novartis Transferee (as
hereinafter defined) in accordance with the terms of this Section 17, then so
long as (x) the Novartis Transferee is the Tenant under this Lease, and (y) the
Novartis Transferee's most recent Financial Statement (as hereinafter defined)
shows such Novartis Transferee's equity (meaning assets less liabilities and all
references to "equity" in Sections 17 and 33 of this Lease mean assets less
liabilities) to be not less than $1 billion, Landlord shall not require a Letter
of Credit as security for this Lease (and if at any time that a Novartis
Transferee ceases to be the Tenant under this Lease, or the Novartis
Transferee's most recent Financial Statement shows such Novartis Transferee's
equity to be less than $1 billion, a Letter of Credit or Replacement Guaranty
(as defined in Section 33) in the form and amount required by Section 33 shall
concurrently therewith be delivered to Landlord). As used herein, "Novartis
Transferee" means a Permitted Transferee having a equity of not less than $1
billion as shown on its most recent Financial Statement, and "Financial
Statement" means a balance sheet prepared in accordance with generally accepted
accounting principles, consistently applied, audited and certified by an
independent certified public accountant, which Financial Statement shall be
prepared and delivered to Landlord not less frequently than annually as provided
in Section 34.

         B.       Landlord's Consent. Landlord will not unreasonably withhold
its consent to any proposed Transfer. It shall be reasonable for Landlord to
withhold its consent to any Transfer if (i) Tenant is in Default under this
Lease, (ii) the proposed Transferee is a tenant in the Project or an Affiliate
of such a tenant or is a party that Landlord has identified as a prospective
tenant in the Project, (iii) the financial responsibility, nature of business,
and character of the proposed Transferee are not all reasonably satisfactory to
Landlord, provided that, without limiting Landlord's right to reasonably approve
the financial condition of any other Transferee, the financial condition of any
proposed subtenant shall not be subject to Landlord's approval, (iv) the purpose
for which the Transferee intends to use the Premises (or a portion thereof) is
not in keeping with a first-class office and biotechnology and scientific
research and development building or are in violation of the terms of this
Lease, (v) the proposed Transferee is a government entity (provided that this
clause (v) shall not be applicable to any sublease to a publicly funded academic
or research institution), or (vi) the proposed assignment is for less than the
entire Premises or for less than the remaining Term of the Lease. The foregoing
shall not exclude any other reasonable basis for Landlord to withhold its
consent to, any proposed Transfer.

         C.       Procedure. Tenant shall notify Landlord of any proposed
Transfer at least thirty (30) days prior to its proposed effective date. The
notice shall include the name and address of the proposed Transferee, its
corporate affiliates in the case of a corporation and its partners in a case of
a partnership, an execution copy of the proposed assignment or sublease, and
sufficient information to permit landlord to determine the financial
responsibility and character of the proposed assignee or subtenant. As a
condition to any effective assignment of this Lease, the

                                      26.

<PAGE>

assignee shall execute and deliver in form satisfactory to Landlord, at least
fifteen (15) days prior to the effective date of the assignment, an assumption
of all of the obligations of Tenant under this Lease. As a condition to any
effective sublease, subtenant shall execute and deliver in form satisfactory to
Landlord, at least fifteen (15) days prior to the effective date of the
sublease, an agreement to comply with all of Tenant's obligations under this
Lease, and at Landlord's option, an agreement (except for the economic
obligations which subtenant will undertake directly to Tenant) to attorn to
Landlord under the terms, of the sublease in the event this Lease terminates
before the sublease expires.

         D.       Change of Management or Ownership. Any change in "Control" (as
defined in Section 26(C)) of Tenant, other than a change in Control in which a
Permitted Transferee acquires Control of Tenant (which shall not require
Landlord's consent), shall constitute an assignment and transfer of this Lease
which requires Landlord's prior consent as provided in this Section 17.

         E.       Excess Payments. Except for a Permitted Transfer, if Tenant
shall Transfer this Lease for consideration in excess of the pro-rata portion of
Rent applicable to the space subject to the Transfer, then Tenant shall pay to
Landlord as Additional Rent fifty percent (50%) of any such excess immediately
upon receipt, net, however, of (i) Tenant's actual out of pocket costs of such
Transfer and (ii) any unamortized cost of Tenant Improvements benefiting the
Transferee and paid for by Tenant directly.

         18.      CONVEYANCE BY LANDLORD. Landlord shall not sell or assign its
interest in the Premises before the Completion Date for Phase I and Phase II
occurs and before paying all of Landlord's Contribution which Landlord is
required to pay under Appendix C; provided that the foregoing shall not prohibit
any encumbrance or other hypothecation of Landlord's interest in the Premises.
Thereafter, if Landlord shall at any time transfer its interest in the Project
or this Lease, Landlord shall be released of any obligations to the extent, but
only to the extent, arising from and after such transfer, and Tenant shall look
solely to Landlord's successors for performance of such obligations. Subject to
the provisions of Section 16, this Lease shall not be affected by any such
transfer.

         19.      ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days
of receiving a request from the other party, execute, acknowledge in recordable
form, and deliver to the other party or its designee a certificate stating,
subject to a specific statement of any applicable exceptions, that the Lease as
amended to date is in full force and effect, that the Tenant is paying Rent and
other charges on a current basis, and that to the best knowledge of the
certifying party, the other party has committed no uncured defaults and has no
offsets or claims. The certifying party may also be required to state the date
of commencement of payment of Rent, the Commencement Date, the Termination Date,
the Base Rent, the current Operating Cost Share Rent and Tax Share Rent
estimates, the status of any improvements required to be completed by Landlord,
and such other matters as may be reasonably requested. Failure to deliver such
statement within the time required shall be conclusive evidence against the
non-certifying party that this Lease, with any amendments identified by the
requesting party, is in full force and effect, that there are no uncured
defaults by the requesting party, that not more than one month's Rent has been
paid in advance, and that the non-certifying party has no claims or offsets
against the requesting party.

                                      27.

<PAGE>

         20.      OFFSET. If, within thirty (30) days after written notice from
Tenant, Landlord fails to pay any sum Landlord owes Tenant (i) under any final,
nonappealable judgment of a court of competent jurisdiction in Tenant's favor
due to Landlord's default under this Lease after all applicable notice, grace
and cure periods have elapsed, or (ii) for any portion of Landlord's
Contribution that Landlord is obligated to pay under Appendix C and Landlord has
failed to pay towards the Tenant Improvements (and for which Landlord claims no
offset or reduction), Tenant shall have the right to deduct such sums from the
Rent next due Landlord until Tenant or the applicable party has been fully paid
and Landlord shall be relieved of the obligation to pay such sum to the extent
of Tenant's offset.

         21.      FORCE MAJEURE. Neither Landlord nor Tenant shall be in default
under this Lease to the extent such party is unable to perform any of its
obligations on account of any strike or labor problem, energy shortage,
governmental pre-emption or prescription, flood, earthquake, national emergency,
any other cause of any kind beyond the reasonable control of such party,
excluding financial inability, or, without limiting the provisions of Appendix
C, governmental failure or refusal to grant any permit or approval not arising
from the acts or omissions of such party ("Force Majeure"). Without limiting the
foregoing, in the event of any material shortages the applicable party shall use
reasonable efforts to obtain substitute materials, to the extent substitute
materials of comparable cost and quality, and meeting all applicable
Governmental Requirements, can be obtained.

         22.      [INTENTIONALLY OMITTED]

         23.      NOTICES. All notices, consents, approvals and similar
communications to be given by one party to the other under this Lease
(including, without limitation, any notice required by law to be given by
Landlord to Tenant as a condition to the filing of an action alleging an
unlawful detainer of the Premises and any three (3) day notice under Section
1161 et seq. of the California Code of Civil Procedure), shall be given in
writing and mailed or personally delivered as follows:

         A.       Landlord. To Landlord as follows:

                  CarrAmerica Realty Corporation
                  3611 South Harbor Boulevard
                  Suite 230
                  Santa Ana, California 92704
                  Attn: Dwight Merriman

                  with a copy to:

                  CarrAmerica Realty Corporation
                  1850 K Street, N.W.
                  Suite 500
                  Washington, D.C. 20006
                  Attn: Lease Administration

or to such other person at such other address as Landlord may designate by
notice to Tenant.

                                      28.

<PAGE>

         B.       Tenant. To Tenant as follows:

                  Prior to the Commencement Date for Phase I:
                  Novartis Agricultural Discovery Institute, Inc.
                  3050 Science Park Road
                  San Diego, California 92121
                  Attn:  Mr. Robert Powderly

                  After the Commencement Date for Phase I:
                  Novartis Agricultural Discovery Institute, Inc.
                  3115 Merryfield Road
                  San Diego, California 92121
                  Attn: Mr. Robert Powderly

                  with a copy to:

                  Novartis Corporation
                  564 Morris Avenue
                  Summit, New Jersey 07901
                  Attn: Julie Kane, Esq.

or to such other person at such other address as Tenant may designate by notice
to Landlord.

         Mailed notices shall be sent by United States certified or registered
mail, postage prepaid, return receipt requested, or by a reputable, receipted
national overnight courier service (e.g., Federal Express or UPS). Mailed
notices shall be deemed to have been given when such notice is accepted or
refused, as evidenced by the written receipt.

         24.      QUIET POSSESSION. Subject to the provisions of Section 16, so
long as Tenant shall perform all of its obligations under this Lease, Tenant
shall enjoy peaceful and quiet possession of the Premises against any party
claiming through the Landlord.

         25.      REAL ESTATE BROKER. Tenant represents to Landlord that Tenant
has not dealt with any real estate broker with respect to this Lease except for
any broker(s) listed in the Schedule, and no other broker is in any way entitled
to any broker's fee or other payment in connection with this Lease. Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind in connection with this Lease.

         26.      MISCELLANEOUS

         A.       Successors and Assigns. Subject to the limits on Tenant's
assignment contained in Section 17, the provisions of this Lease shall be
binding upon and inure to the benefit of all successors and assigns of Landlord
and Tenant.

         B.       Date Payments Are Due. Except for payments to be made by
Tenant under this Lease which are due upon demand, Tenant shall pay to Landlord
any amount for which Landlord renders a statement of account within ten (10)
days of Tenant's receipt of Landlord's statement.

                                      29.

<PAGE>

         C.       Meaning of "Landlord", "Re Entry", "including" and
"Affiliate". The term "Landlord" means only the owner of the Project and the
lessor's interest in this Lease from time to time. The words "re-entry" and
"re-enter" are not restricted to their technical legal meaning. The words
"including" and similar words shall mean "without limitation." The word
"Affiliate" shall mean a person or entity Controlling, Controlled by or under
common Control with the applicable entity. "Control" (with correlative meanings
for the terms "Controlling" and "Controlled by") shall mean the power directly
or indirectly, by contract or otherwise, to direct the management and policies
of the applicable entity.

         D.       Time of the Essence. Time is of the essence of each provision
of this Lease.

         E.       No Option. This document shall not be effective for any
purpose until it has been executed and delivered by both parties; execution and
delivery by one party shall not create any option or other right in the other
party.

         F.       Severability. The unenforceability of any provision of this
Lease shall not affect any other provision.

         G.       Governing Law. This Lease shall be governed in all respects by
the laws of the state in which the Project is located, without regard to the
principles of conflicts of laws.

         H.       Lease Modification. Tenant agrees to modify this Lease in any
way requested by a mortgagee which does not cause increased expense to Tenant or
otherwise materially adversely affect Tenant's interests under this Lease.

         I.       No Oral Modification. No modification of this Lease shall be
effective unless it is a written modification signed by both parties.

         J.       Landlord's Right to Cure. If Landlord breaches any of its
obligations under this Lease, Tenant shall notify Landlord in writing and shall
take no action respecting such breach so long as Landlord immediately begins to
cure the breach and diligently pursues such cure to its completion. Landlord may
cure any Default by Tenant; any expenses incurred shall become Additional Rent
due from Tenant on demand by Landlord.

         K.       Captions. The captions used in this Lease shall have no effect
on the construction of this Lease.

         L.       Authority. Landlord and Tenant each represents to the other
that it has full power and authority to execute and perform this Lease.

         M.       Landlord's Enforcement of Remedies. Landlord may enforce any
of its remedies under this Lease either in its own name or through an agent.

         N.       Entire Agreement. This Lease, together with all Appendices and
Addenda, constitutes the entire agreement between the parties (and all
Appendices and Addenda are hereby incorporated into and form a part of this
Lease). No representations or agreements of any kind have been made by either
party which are not contained in this Lease.

                                      30.

<PAGE>

         O.       Landlord's Title. Landlord's title shall always be paramount
to the interest of the Tenant, and nothing in this Lease shall empower Tenant to
do anything which might in any way impair Landlord's title.

         P.       Light and Air Rights. Landlord does not grant in this Lease
any rights to light and air in connection with the Project. Landlord reserves to
itself, the Land, the Building below the improved floor of each floor of the
Premises, the Building above the ceiling of each floor of the Premises, the
exterior of the Premises and the areas on the same floor outside the Premises,
along with the areas within the Premises required for the installation and
repair of utility lines and other items.

         Q.       Singular and Plural. Wherever appropriate in this Lease, a
singular term shall be construed to mean the plural where necessary, and a
plural term the singular. For example, if at any time two parties shall
constitute Landlord or Tenant, then the relevant term shall refer to both
parties together.

         R.       No Recording by Tenant. Tenant shall not record in any public
records any memorandum or any portion of this Lease.

         S.       Exclusivity. Landlord does not grant to Tenant in this Lease
any exclusive right except the right to occupy its Premises.

         T.       No Construction Against Drafting Party. The rule of
construction that ambiguities are resolved against the drafting party shall not
apply to this Lease.

         U.       Survival. All obligations of Landlord and Tenant under this
Lease shall survive the termination of this Lease.

         V.       Rent Not Based on Income. No rent or other payment in respect
of the Premises shall be based in any way upon net income or profits from the
Premises. Tenant may not enter into or permit any sublease or license or other
agreement in connection with the Premises which provides for a rental or other
payment based on net income or profit.

         W.       Property Manager and Service Providers. Landlord may perform
any of its obligations under this Lease through its employees or third parties
hired by the Landlord.

         X.       Late Charge and Interest on Late Payments. Without limiting
the provisions of Section 12A, if Tenant fails to pay any installment or payment
of Rent within five (5) business days after the same becomes due and payable,
then Tenant shall pay a late charge equal to the greater of five percent (5%) of
the amount of such payment or $250; provided that such late charge shall not
accrue in any Lease Year unless Landlord shall have twice notified Tenant of its
failure to pay any Rent when due during such Lease Year. In addition, interest
shall be paid by Tenant to Landlord on any late payments of Rent from the date
due until paid at the rate and on the terms provided in Section 2D(2). Such late
charge and interest shall constitute Additional Rent due and payable by Tenant
to Landlord upon the date of payment of the delinquent payment referenced above.

                                      31.

<PAGE>

         27.      UNRELATED BUSINESS INCOME. If Landlord is advised by its
counsel at any time that any part of the payments by Tenant to Landlord under
this Lease may be characterized as unrelated business income under the United
States Internal Revenue Code and its regulations, then Tenant shall enter into
any amendment proposed by Landlord to avoid such income, so long as the
amendment does not require Tenant to pay more for, or accept fewer, services
from Landlord than this Lease provides and does not otherwise diminish or limit
Tenant's use and occupancy of the Premises under this Lease.

         28.      HAZARDOUS SUBSTANCES.

         A.       Tenant shall be entitled to use, bring on, produce, store, use
and dispose of Hazardous Substances necessary to Tenant's use of the Premises
for the Sole Permitted Use ("Permitted Hazardous Substances"), in compliance
with all applicable Environmental Laws and the terms of this Lease, including,
without limitation, all of the provisions of this Section 28. Tenant shall not
cause or permit any Hazardous Substances which are not Permitted Hazardous
Substances to be brought upon, produced, stored, used, discharged or disposed of
in or near the Project unless Landlord has consented thereto in its sole
discretion. If any lender or governmental agency shall require testing for
Hazardous Substances in the Premises, Tenant shall pay for such testing.

         B.       "Hazardous Substances" means (a) any chemical, compound,
material, mixture or substance that is now or hereafter defined or listed in, or
otherwise classified pursuant to, any Environmental Laws as a "hazardous
substance", "hazardous material", "hazardous waste", "extremely hazardous
waste", "acutely hazardous waste", "radioactive waste", "infectious waste",
"biohazardous waste", "toxic substance", "pollutant", "toxic pollutant", or
"contaminant", as well as any formulation not mentioned herein intended to
define, list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "EP toxicity", or "TCLP toxicity"; (b) petroleum, natural gas, natural
gas liquids, liquefied natural gas, synthetic gas usable for fuel (or mixtures
of natural gas and such synthetic gas) and ash produced by a resource recovery
facility utilizing a municipal solid waste stream, and drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas, or geothermal resources; (c) "hazardous
substance" as defined in Section 25281(f) of the California Health and Safety
Code; (d) "waste" as defined in Section 13050(d) of the California Water Code;
(e) asbestos in any form; (f) urea formaldehyde foam insulation; (g)
polychlorinated biphenyls (PCBs); (h) radon; and (i) any other chemical,
material, or substance exposure to which is limited or regulated by any
Governmental Agency because of its quantity, concentration, or physical or
chemical characteristics, or which poses a significant present or potential
hazard to human health or safety or to the environment if released into the
workplace or the environment. "Hazardous Substances" shall not include ordinary
office supplies and repair, maintenance and cleaning supplies maintained in
reasonable and necessary quantities and used in accordance with all
Environmental Laws. "Environmental Laws" means any and all present and future
federal, state and local laws, ordinances, regulations, policies and any other
requirements of any Governmental Agency relating to health, safety, the
environment or to any Hazardous Substances, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA), the Resource Conservation Recovery Act (RCRA), the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the

                                      32.

<PAGE>

Endangered Species Act, the Clean Water Act, the Occupational Safety and Health
Act, the California Environmental Quality Act and the applicable provisions of
the California Health and Safety Code, California Labor Code and the California
Water Code, each as hereafter amended from time to time, and the present and
future rules, regulations and guidance documents promulgated under any of the
foregoing. "Governmental Agency" means any governmental or quasi-governmental
agency or authority having jurisdiction over the Project.

         C.       "Hazardous Substances" shall not include insignificant amounts
of substances typically found or used in general office applications and
Permitted Hazardous Substances so long as (a) such substances are maintained
only in such quantities as are reasonably necessary for Tenant's use of the
Premises for the Sole Permitted Use, (ii) such substances are used strictly in
accordance with the manufacturers' instructions therefor and all applicable
Environmental Laws, (iii) such substances are not disposed of in or about the
Project in a manner which would constitute a release or discharge thereof, and
(iv) all such substances are removed from the Project by Tenant upon the
expiration or earlier termination of this Lease.

         D.       If Tenant receives notice of, or if Tenant or any of its
Agents cause, an actual or alleged release or discharge of any Hazardous
Substances in or about the Premises or the Project that violates, or is
reportable under, any Environmental Laws, Tenant shall, within five (5) days
after receipt of such notice or occurrence of such event notify Landlord thereof
in writing and furnish Landlord with copies of all notices and other
communications received by Tenant in connection therewith. In the event Tenant
is required to maintain any hazardous materials license or permit in connection
with any use conducted by Tenant or any equipment operated by Tenant in the
Premises, copies of each such license or permit, each renewal thereof, and any
communication relating to suspension, renewal or revocation thereof shall be
furnished to Landlord within five (5) days after Landlord's written request.
Compliance by Tenant with this Section 28(D) shall not relieve Tenant of any
other obligation of Tenant pursuant to this Section 28.

         E.       Upon any violation of the foregoing covenants and in all
events upon any expiration or earlier termination of the Lease, Tenant shall be
obligated, at Tenant's sole cost, to clean up and remove from the Project all
Hazardous Substances, including, without limitation, Permitted Hazardous
Substances, introduced into the Project by Tenant or any third party for whom
Tenant is responsible. Such clean-up and removal shall include all testing and
investigation required by any Governmental Agency and preparation and
implementation of any remedial action plan required by any Governmental Agency.
All such clean-up and removal activities of Tenant shall, in each instance, be
conducted to the satisfaction of all Governmental Agencies and in compliance
with all applicable Environmental Laws. Landlord's right of entry pursuant to
Section 11 of this Lease shall include the right (but not the obligation) to
enter and inspect the Premises for violations of Tenant's covenant herein and to
supervise any of Tenant's clean up and removal activities.

         F.       Subject to the provisions of Section 5(A) relating to
Alterations which include Hazardous Substances, to the extent permitted by then
applicable law, Tenant shall protect, indemnify, defend and hold harmless
Landlord, the partners of any entity constituting Landlord and Landlord's
partners, officers, employees, agents, lenders and attorneys from and against
any and all claims, liabilities, losses, actions, costs and expenses (including
attorneys' fees and costs

                                      33.

<PAGE>

defense) incurred by such indemnified persons, or any of them, as the result of
(i) the introduction into the Project by Tenant, its employees, agents,
licensees, invitees, contractors or any other person or entity for whom Tenant
is responsible of any Hazardous Substance, (ii) the usage by Tenant or anyone
for whom Tenant is responsible of Hazardous Substances in or about the Project,
(iii) the discharge or release in or about the Project by Tenant or anyone for
whom Tenant is responsible of any Hazardous Substance, (iv) any injury to or
death of persons or damage to or destruction of property resulting from the use
by Tenant or anyone for whom Tenant is responsible of Hazardous Substances in or
about the Project, and (v) any failure of Tenant or anyone for whom Tenant is
responsible to observe the foregoing covenants. Payment shall not be a condition
precedent to enforcement of the foregoing indemnification provision.

         G.       Upon any Default under Section 12(A) or 12(C), as applicable,
relating to any of the foregoing covenants, Landlord shall be entitled to
exercise all remedies available to a landlord against the defaulting tenant,
including but not limited to those set forth in Section 13 of this Lease.
Without limiting the generality of the foregoing, Tenant expressly agrees that
upon any such Default Landlord may, at its option (i) immediately terminate this
Lease, or (ii) continue this Lease in effect until compliance by Tenant with its
clean-up and removal covenant (notwithstanding the expiration of the term of
this Lease). No action by landlord hereunder shall impair the obligations of
Tenant pursuant to this Section 28.

         29.      EXCULPATION. Landlord shall have no personal liability under
this Lease; its liability shall be limited to its equity in the Project, and
shall not extend to any other property or assets of the Landlord provided that
Landlord maintains at least Two Million Dollars ($2,000,000) equity (the
"Minimum Equity") in the Project. Notwithstanding the foregoing, in the event
Landlord does not maintain the Minimum Equity in the Project, Tenant shall have
recourse for Landlord's liability under this Lease to (a) Landlord's equity in
the Project, and (b) Landlord's assets or other property up to a maximum amount
equal to the Minimum Equity less Landlord's equity in the Project.
Notwithstanding anything to the contrary set forth in this Section 29, (i) to
the extent Landlord receives insurance or condemnation proceeds in connection
with the Premises or Common Areas, and if Landlord is obligated to use such
proceeds for the restoration of the Premises and/or Common Areas under the terms
of this Lease and fails to so use such proceeds as required by this Lease,
Tenant shall have recourse to such proceeds for Landlord's failure to use such
proceeds as required by the terms of this Lease, and (ii) if Landlord draws upon
the Letter of Credit (as hereinafter defined) in violation of the terms of this
Lease, Tenant shall have recourse to the proceeds of such wrongful draw for
Landlord's failure to draw upon the Letter of Credit in accordance with the
terms of this Lease. In no event shall any officer, director, employee, agent,
shareholder, partner, member or beneficiary of Landlord be personally liable for
any of Landlord's obligations hereunder.

         30.      SIGNAGE. Subject to Landlord's reasonable prior written
approval of the location, design, size, color, material, composition and plans
and specifications therefor, Tenant may, at its sole cost and expense, construct
and maintain signs on the Building (the "Building Sign") to the extent permitted
by all Governmental Requirements. If Landlord grants its approval, Tenant shall
erect the Building Sign in accordance with the approved plans and
specifications, in a good and workmanlike manner, in accordance with all
applicable Governmental Requirements, now in force or hereafter enacted, of any
governmental entity or agency having jurisdiction over the Premises, and after
Tenant has received all requisite

                                      34.

<PAGE>

approvals thereunder (the "Sign Requirements"), and in a manner so as not to
unreasonably interfere with the construction or use of the Building, Common
Areas or other portions of the Project while such construction is taking place,
and thereafter, Tenant shall maintain the Building Sign in a good, clean and
safe condition and in accordance with the Sign Requirements, including all
repairs and replacements thereto.

         31.      REASONABLE CONSENT. Whenever Landlord or Tenant is required or
permitted to approve or consent to any matter under this Lease (including,
without limitation, Appendix C attached hereto), the approving party shall not
unreasonably withhold, condition or delay giving its approval or consent, unless
this Lease specifies the approving party may give or withhold its consent or
approval in its sole discretion. Without limiting any party's obligations or
rights under this Lease, the approving party shall not impose as a condition to
any consent that may not be unreasonably withheld under this Lease, any
requirement that the party seeking such consent incur any cost which is not
commercially reasonable and which is not contemplated by the terms of this
Lease.

         32.      ARBITRATION.

         A.       Disputes To Be Resolved By Binding Arbitration.
Notwithstanding anything to the contrary set forth in this Lease, the submission
to arbitration in accordance with the terms of this Section 32 is the sole and
exclusive method, means, and procedure to resolve any claims, disputes, or
disagreements arising under this Lease with respect to (i) the reasonableness of
any action or judgment (including, without limitation, withholding, conditioning
or delaying consent or approval) that either party makes in any instance where
that party has expressly agreed in this Lease to be reasonable in taking that
action or making that judgment, or (ii) the nature of and/or responsibility for
any Delay (as defined in Appendix C) under Appendix C. The provisions of this
Section 32 shall not apply with respect to any claim, dispute or disagreement
except for those expressly identified above.

         B.       Selection of Arbitrator. Any dispute to be arbitrated pursuant
to the provisions of this Exhibit shall be determined by binding arbitration
before a panel of three arbitrators, and under the commercial arbitration rules
then in effect (the "Arbitration Rules") of the American Arbitration Association
("AAA"). Such arbitration shall be initiated by the parties, or either of them,
within ten (10) days after either party sends written notice (the "Arbitration
Notice") of a demand to arbitrate by registered or certified mail to the other
party and to the San Diego regional office of the AAA. The Arbitration Notice
shall contain a description of the subject matter of the arbitration, the
dispute with respect thereto, the amount involved, if any, and the remedy or
determination sought. Each party shall designate an arbitrator from the AAA's
list of available arbitrators within ten (10) days after the initiation of the
arbitration and within three (3) business days thereafter the two designated
arbitrators shall select a third arbitrator. If either party fails to select an
arbitrator, or if the two arbitrators fail to select the third arbitrator, the
panel of three arbitrators shall be selected in accordance with the Arbitration
Rules. Each arbitrator selected hereunder shall have substantial experience in
commercial real estate matters generally, including specific experience related
to commercial leases. The panel of arbitrators selected hereunder is sometimes
referred to herein as the "Arbitrator".

                                      35.

<PAGE>

         C.       Pre-Decision Arbitration Procedures. The Arbitrator shall
schedule a pre-hearing conference to resolve procedural matters, arrange for the
exchange of information, obtain stipulations, and narrow the issues. The parties
will submit proposed discovery schedules to the Arbitrator at the pre-hearing
conference. The scope and duration of discovery will be within the sole
discretion of the Arbitrator. The Arbitrator shall have the discretion to order
a pre-hearing exchange of information by the parties, including, without
limitation, production of requested documents, exchange of summaries of
testimony of proposed witnesses, and examination by deposition of parties and
third party witnesses. This discretion shall be exercised so as to limit the
scope of discovery to the amount of discovery which the Arbitrator determines to
be reasonable under the circumstances.

         D.       Arbitration Hearing. The arbitration shall be conducted in San
Diego, California. Any party may be represented by counsel or other authorized
representative. The parties may offer such evidence as is relevant and material
to the dispute. The Arbitrator shall be the judge of relevance and materiality.

         E.       Governing Law. In rendering a decision, the Arbitrator shall
determine the rights and obligations of the parties according to the laws of
California and the terms and provisions of this Lease.

         F.       Arbitration Award. The Arbitrator shall issue the award as
soon as reasonably possible following the conclusion of the arbitration hearing,
but in no event later than thirty (30) days after the conclusion of the
arbitration hearing. The Arbitrator's award shall be based on the evidence
introduced at the hearing, including all logical and reasonable inferences
therefrom. The Arbitrator may make any determination, and/or grant any remedy or
relief that is just and equitable; provided, however, in no event may the
Arbitrator award punitive damages. The award must be based on, and accompanied
by, a written statement of decision explaining the factual and legal basis for
the award as to each of the principal controverted issues. The award shall be
conclusive and binding, and it may thereafter be confirmed as a judgment by any
California court of applicable jurisdiction, subject to challenge only on one or
more of the following grounds: (i) the award was procured by corruption, fraud
or other undue means; (ii) there was corruption in any of the arbitrators; (iii)
the rights of the appealing party were substantially prejudiced by misconduct of
a neutral arbitrator; (iv) the arbitrators exceeded their powers and the award
cannot be corrected without affecting the merits of the decision upon the
controversy submitted; (v) the rights of the appealing party were substantially
prejudiced by the refusal of the arbitrators to postpone any hearing upon
sufficient cause being shown therefor or by the refusal of the arbitrators to
bear evidence material to the controversy or by other conduct of any arbitrator
contrary to the Arbitration Rules; (vi) any other grounds which permit appeal
under the Arbitration Rules; or (vii) based upon the Arbitrator's incorrect
application of California statutory or common law. The validity and
enforceability of the Arbitrator's decision is to be determined exclusively by
the California courts pursuant to the provisions of this Lease.

         G.       Attorneys' Fees and Costs. The Arbitrator may award costs,
including, without limitation, reasonable attorneys' fees, and expert and
witness fees and costs, to the prevailing party, if any, as determined by the
Arbitrator in the Arbitrator's discretion. The Arbitrator's fees and costs shall
be paid by the non-prevailing party as determined by the Arbitrator in his

                                      36.

<PAGE>

discretion. A party shall be determined by the Arbitrator to be the prevailing
party if its proposal for the resolution of dispute is the closer to that
adopted by the Arbitrator.

         H.       Temporary Restraining Order. The provisions of this Section 32
shall not prevent either party from obtaining a temporary restraining order, to
the extent available under applicable law and in a court of competent
jurisdiction as provided in Section 13(F) of this Lease, pending the issuance of
the Arbitrator's award in accordance with this Section 32.

         33.      SECURITY DEPOSIT. Tenant shall deposit with Landlord on the
date of this Lease security (the "Security Deposit") for the performance of all
of its obligations under this Lease, in the form of a letter of credit in the
face amount $15,000,000 (the "Letter of Credit"). The Letter of Credit shall (i)
be in form set forth in Appendix G attached hereto or otherwise in form and
substance satisfactory to Landlord, (ii) name Landlord as beneficiary, and (iii)
be drawable on a Permitted Issuer (as hereinafter defined). As used herein,
"Permitted Issuer" means a financial institution which (a) is a national
association or bank chartered by the United States or in one of the states of
the United States, in either case, the accounts of which are FDIC insured, or a
foreign bank incorporated in any jurisdiction governed by the Organization for
Economic Cooperation and Development, (b) has a minimum capital and surplus of
$500 million, and (c) maintain at all times until the L/C Termination Date a
branch office in California or Connecticut at which Landlord may draw on the
Letter of Credit (and if at any time such Permitted Issuer fails to meet these
conditions, Tenant shall within ten (10) days thereafter deliver to Landlord a
substitute Letter of Credit meeting the requirements of this Section 33 issued
by a Permitted Issuer).

         If Tenant does not provide Landlord with a substitute Letter of Credit
complying with all of the requirements hereof at least ten (10) days before the
stated expiration date (except the L/C Termination Date (as hereinafter deemed))
of the current Letter of Credit, Landlord shall have the right to draw upon the
current Letter of Credit and hold the funds drawn as the Security Deposit,
subject to the provisions of this Section 33.

         In the event Landlord obtains a final, nonappealable judgment against
Tenant in connection with any Default by Tenant under this Lease (a "Final
Judgment"), which Final Judgment is not satisfied by Tenant in full within five
(5) days after the same becomes final and nonappealable, Landlord shall be
entitled to draw upon the Letter of Credit (or use the proceeds of the Letter of
Credit if they are then held by Landlord as a result of Tenant's failure to
renew the Letter of Credit before the stated expiration date as provided herein)
and use such amount to satisfy such Final Judgment. As a requirement for such
draw on the Letter of Credit Landlord shall only be obligated to deliver the
Letter of Credit to the Permitted Issuer, certify under penalty of perjury to
the Permitted Issuer that Landlord has obtained a Final Judgment which has not
been satisfied in full by Tenant and deliver to the Permitted Issuer a certified
copy of the Final Judgment as entered in the applicable court records.

         At the end of the fifth Lease Year the face amount of the Letter of
Credit shall be reduced to $10,000,000 if (a) no Default has then occurred and
is continuing, and (b) Tenant's then most recent Financial Statement shows
Tenant's equity to be not less than $25,000,000. At the end of the seventh Lease
Year the face amount of the Letter of Credit shall be reduced to $5,000,000 if
(x) no Default has then occurred and is continuing, and (y) Tenant's then most
recent Financial

                                      37.

<PAGE>

Statement shows Tenant's equity to be not less than $25,000,000. Any draws on
the Letter of Credit prior to the end of the fifth or seventh Lease Year, as
applicable, shall not reduce the foregoing Letter of Credit face amounts.

         Except as expressly provided in Section 17, the Letter of Credit shall
remain outstanding in accordance with the terms of this Section 33 through the
later to occur of (the "L/C Termination Date") (a) the date which is thirty (30)
days after the Term of this Lease (including any Renewal Term (as hereinafter
defined), and (b) if any litigation is commenced as a result of a Default under
this Lease, the date which is forty five (45) days after a Final Judgment is
reached with respect thereto.

         Tenant hereby waives any restriction on the use or application of the
Security Deposit by Landlord set forth in California Civil Code Section 1950.7.
All claims of Tenant to the Security Deposit shall be prior to the claim of any
creditor of Landlord, except a trustee in bankruptcy. To the extent any portion
of the Security Deposit is used, Tenant shall within five (5) days after demand
from Landlord reinstate the Security Deposit to its full amount (whether by
delivery of a new Letter of Credit in the amount so used meeting the
requirements of this Section 33 or by amending the Letter of Credit then held by
Landlord to increase the face amount by the amount so used). Nothing contained
in this Section 33 shall waive or impair any of Landlord's rights or remedies in
the event of a Default by Tenant or modify any party's obligation of good faith
and fair dealing under applicable law. If Tenant shall perform all of its
obligations under this Lease (or Landlord shall use any portion of the Security
Deposit to cure any Default by Tenant) and return the Premises (including,
without limitation, all personal property required to remain in the Premises
pursuant to Section 5(D)) to Landlord at the end of the Term in accordance with
the terms of this Lease, Landlord shall return any unused Security Deposit and
Letter of Credit to Tenant within two (2) weeks after the L/C Termination Date.
The Security Deposit shall not serve as an advance payment of Rent or a measure
of Landlord's damages for any Default under this Lease.

         If Landlord transfers its interest in the Premises or this Lease,
Landlord may transfer the Security Deposit to its transferee. Upon such
transfer, Landlord shall have no further obligation to return the Security
Deposit to Tenant, and Tenant's right to the return of the Security Deposit
shall apply solely against Landlord's transferee.

         So long as no Default has occurred and is continuing, Tenant may
substitute a guaranty of the payment and performance of all of Tenant's
obligations under this Lease from a Novartis Transferee (a "Replacement
Guaranty") for the Letter of Credit. Any such Replacement Guaranty shall be in
form and substance acceptable to Landlord (and if at any time that such Novartis
Transferee's most recent Financial Statement shows such Novartis Transferee's
equity to be less than $1 billion, a Letter of Credit or another Replacement
Guaranty in the form and amount required by this Section 33 shall concurrently
therewith be delivered to Landlord). Tenant shall pay all of Landlord's
reasonable attorney's fees and other expenses reasonably incurred by Landlord in
connection with any substitution or proposed substitution of such Replacement
Guaranty for the Letter of Credit.

                                      38.

<PAGE>

         34.      FINANCIAL STATEMENT. At any time that a Letter of Credit is
not required to be held by Landlord pursuant to Section 17 or 33, Tenant shall
deliver to Lender promptly after the preparation thereof, the applicable
Novartis Transferee's annual Financial Statement.

         IN WITNESS WHEREOF, the parties hereto have executed this Lease.

                                     LANDLORD:

                                     CARRAMERICA REALTY CORPORATION,
                                     a Maryland corporation

                                     By:  /s/ Philip L. Hawkins
                                          --------------------------------------
                                     Print Name:  Philip L. Hawkins
                                     Print Title: Chief Operating Officer

                                     TENANT:

                                     NOVARTIS AGRICULTURAL DISCOVERY INSTITUTE,
                                     INC., a Delaware corporation

                                     By:  /s/ R.E. Powderly
                                          --------------------------------------
                                     Print Name:  R.E. Powderly
                                     Print Title: Vice President & C.O.O.

                                      39.

<PAGE>

                                   APPENDIX A

                              PLAN OF THE PREMISES

                                 (SEE ATTACHED)

                                   APPENDIX A

                                   Page 1 of 1

<PAGE>

                                      [MAP]

<PAGE>

                                   APPENDIX B

                              RULES AND REGULATIONS

         1.       Tenant shall not place anything, or allow anything to be
placed near the glass of any window, door, partition or wall which may, in
Landlord's judgment, appear unsightly from outside of the Project.

         2.       The Project directory shall be available to Tenant solely to
display names and their location in the Project, which display shall be as
directed by Landlord.

         3.       The sidewalks, halls, passages, exits, entrances, elevators
and stairways shall not be obstructed by Tenant or used by Tenant for any
purposes other than for ingress to and egress from the Premises. Tenant shall
lend its full cooperation to keep such areas free from all obstruction and in a
clean and sightly condition and shall move all supplies, furniture and equipment
as soon as received directly to the Premises and move all such items and waste
being taken from the Premises (other than waste customarily removed by employees
of the Building) directly to the shipping platform at or about the time arranged
for removal therefrom. The halls, passages, exits, entrances, elevators,
stairways, and roof are not for the use of the general public and Landlord
shall, in all cases, retain the right to control and prevent access thereto by
all persons whose presence in the judgment of Landlord, reasonably exercised,
shall be prejudicial to the safety, character, reputation and interests of the
Project. Neither Tenant nor any employee or invitee of Tenant shall go upon the
roof of the Project.

         4.       The toilet rooms, urinals, wash bowls and other apparatuses
shall not be used for any purposes other than that for which they were
constructed, and no foreign substance of any kind whatsoever shall be thrown
therein, and to the extent caused by Tenant or its employees or invitees, the
expense of any breakage, stoppage or damage resulting from the violation of this
role shall be borne by Tenant.

         5.       Tenant shall not cause any unnecessary janitorial labor or
services by reason of Tenant's carelessness or indifference in the preservation
of good order and cleanliness.

         6.       Tenant shall not install or operate any refrigerating, heating
or air conditioning apparatus, or carry on any mechanical business without the
prior written consent of Landlord; use the Premises for housing, lodging or
sleeping purposes; or permit preparation or warming of food in the Premises
(warming of coffee and individual meals with employees and guests excepted).
Tenant shall not occupy or use the Premises or permit the Premises to be
occupied or used for any purpose, act or thing which is in violation of any
Governmental Requirements or which may be dangerous to persons or property.

         7.       Tenant shall not bring upon, use or keep in the Premises or
the Project any kerosene, gasoline or inflammable or combustible fluid or
material, or any other articles deemed hazardous to persons or property, or use
any method of heating or air conditioning other than that supplied by Landlord.

                                   APPENDIX B

                                   Page 1 of 4

<PAGE>

         8.       Landlord shall have sole power to direct electricians as to
where and how telephone and other wires are to be introduced. No boring or
cutting for wires is to be allowed without the consent of Landlord. The location
of telephones, call boxes and other office equipment affixed to the Premises
shall be subject to the approval of Landlord.

         9.       No additional locks shall be placed upon any doors, windows or
transoms in or to the Premises. Tenant shall not change existing locks or the
mechanism thereof. Upon termination of the lease, Tenant shall deliver to
Landlord all keys and passes for offices, rooms, parking lot and toilet rooms
which shall have been furnished Tenant.

                  In the event of the loss of keys so furnished, Tenant shall
pay Landlord therefor. Tenant shall not make, or cause to be made, any such keys
and shall order all such keys solely from Landlord and shall pay Landlord for
any keys in addition to the two sets of keys originally furnished by Landlord
for each lock.

         10.      Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.

         11.      No furniture, packages, supplies, equipment or merchandise
will be received in the Project or carried up or down in the freight elevator,
except between such hours and in such freight elevator as shall be designated by
Landlord. Tenant shall not take or permit to be taken in or out of other
entrances of the Building, or take or permit on other elevators, any item
normally taken in or out through the trucking concourse or service doors or in
or on freight elevators.

         12.      Tenant shall cause all doors to the Premises to be closed and
securely locked and shall turn off all utilities, lights and machines before
leaving the Project at the end of the day.

         13.      Without the prior written consent of Landlord, Tenant shall
not use the name of the Project or any picture of the Project in connection
with, or in promoting or advertising the business of Tenant, except Tenant may
use the address of the Project as the address of its business.

         14.      Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Project's heating and air
conditioning, and shall refrain from attempting to adjust any controls, other
than room thermostats installed for Tenant's use. Tenant shall keep corridor
doors closed.

         15.      Tenant assumes full responsibility for protecting the Premises
from theft, robbery and pilferage, which may arise from a cause other than
Landlord's negligence, which includes keeping doors locked and other means of
entry to the Premises closed and secured.

         16.      Peddlers, solicitors and beggars shall be reported to the
office of the Project or as Landlord otherwise requests.

         17.      Tenant shall not advertise the business, profession or
activities of Tenant conducted in the Project in any manner which violates the
letter or spirit of any code of ethics

                                   APPENDIX B

                                   Page 2 of 4

<PAGE>

adopted by any recognized association at organization pertaining to such
business, profession or activities.

         18.      No bicycle or other vehicle shall be allowed in the Premises,
halls, freight docks, or any other parts of the Building. Tenant shall not make
or permit any noise, vibration or odor to emanate from the Premises, or do
anything therein tending to create, or maintain, a nuisance, or do any act
tending to injure the reputation of the Building.

         19.      Tenant acknowledges that Building security problems may occur
which may require the employment of extreme security measures in the day-to-day
operation of the Project.

         Accordingly:

                  (a)      Landlord may, at any time, or from time to time, or
for regularly scheduled time periods, as deemed advisable by Landlord and/or its
agents, in their sole discretion, require that persons entering or leaving the
Project or the Property identify themselves to watchmen or other employees
designated by Landlord, by registration, identification or otherwise.

                  (b)      Tenant agrees that it and its employees will
cooperate fully with Project employees in the implementation of any and all
security procedures.

                  (c)      Such security measures shall be the sale
responsibility of Landlord, and Tenant shall have no liability for any action
taken by Landlord in connection therewith, it being understood that Landlord is
not required to provide any security procedures and shall have no liability for
such security procedures or the lack thereof.

         20.      Tenant shall not do or permit the manufacture, sale, purchase,
use or gift of any fermented, intoxicating or alcoholic beverages without
obtaining written consent of Landlord.

         21.      Tenant shall not disturb the quiet enjoyment, of any other
tenant.

         22.      Tenant shall not provide any janitorial services or cleaning
without Landlord's written consent and then only subject to supervision of
Landlord and at Tenant's sole responsibility and by janitor or cleaning
contractor or employees at all times satisfactory to Landlord.

         23.      Landlord may retain a pass key to the Premises and be allowed
admittance thereto at all times to enable its representatives to examine the
Premises from time to time and to exhibit the same and Landlord may place and
keep on the windows and doors of the Premises at any time signs advertising the
Premises for Rent.

         24.      No equipment, mechanical ventilators, awnings, special shades
or other forms of window covering shall be permitted either wide or outside the
windows of the Premises without the prior written consent of Landlord, and then
only at the expense and risk of Tenant, and they shall be of such shape, color,
material, quality, design arid make as may be approved by Landlord.

                                   APPENDIX B

                                   Page 3 of 4

<PAGE>

         25.      Tenant shall not during the term of this Lease canvas or
solicit other tenants of the Building for any purpose.

         26.      Tenant shall not install or operate any phonograph, musical or
sound-producing instrument or device, radio receiver or transmitter, TV receiver
or transmitter, or similar device in the Building, nor install or operate any
antenna, aerial, wires or other equipment inside or outside the Building, nor
operate any electrical device from which may emanate electrical waves which may
interfere with or impair radio or television broadcasting or reception from or
in the Building or elsewhere, without in `each instance the prior written
approval of Landlord. The use thereof, if permitted, shall be subject to control
by Landlord to the end that others shall not be disturbed.

         27.      Tenant shall promptly remove all rubbish and waste from the
Premises.

         28.      Tenant shall not exhibit, sell or offer for sale, Rent or
exchange in the Premises or at the Project any article, thing or service, except
those ordinarily embraced within the use of the Premises specified in Section 6
of this Lease, without the prior written consent of Landlord.

         29.      Tenant shall list all furniture, equipment and similar
articles Tenant desires to remove from the Premises or the Building and deliver
a copy of such list to Landlord and procure a removal permit from the Office of
the Building authorizing Building employees to permit such articles to be
removed.

         30.      Tenant shall not overload any floors in the Premises, or any
public corridors or elevators in the Building.

         31.      Tenant shall not do any painting in the Premises, or mark,
paint, cut or drill into, drive nails or screws into, or in any way deface any
part of the Premises or the Building, outside or inside, without the prior
written consent of Landlord.

         32.      Whenever Landlord's consent, approval or satisfaction is
required under these Rules, then unless otherwise stated, any such consent,
approval or satisfaction must be obtained in advance, such consent or approval
may be granted or withheld in Landlord's sole discretion, and Landlord's
satisfaction shall be determined in its sole judgment.

         33.      Tenant and its employees shall cooperate in all file drills
conducted by Landlord in the Building.

                                   APPENDIX B

                                   Page 4 of 4

<PAGE>

                                   APPENDIX C

                          TENANT IMPROVEMENT AGREEMENT

         1.       IMPROVEMENTS

                  (a)      Landlord's only obligation with respect to
construction of improvements within the Premises shall be to construct the shell
improvements (the "Shell Improvements") substantially in accordance with
Landlord's plans and specifications therefor (the "Shell Plans"), as described
on Annex 1 attached hereto, as modified or amended by Landlord following the
date hereof in accordance with this Appendix C. The Shell Improvements
specifically exclude all of the following (which are collectively referred to as
the "Tenant Improvements"): the Greenhouse, any site modifications to the Shell
Improvements, HVAC, HVAC roof screens, electrical, bathrooms, lobbies, elevator
improvements, equipment enclosures, Schedule Sensitive Equipment (as defined
below), and any other interior tenant improvements shown in the Plans (as
defined below) and not shown in the Shell Plans. In the event that Tenant
desires to modify the Shell Plans, such modification shall be at Tenant's sale
cost and expense, including the processing of same by Shell Architect (as
hereinafter defined) and/or TI Architects (as hereinafter defined) under a
separate permit, but the costs and fees in connection therewith shall be a part
of the Landlord's Contribution. Amendments or modifications to the Shell Plans
after the dare hereof, other than amendments or modifications necessary to
comply with any Governmental Requirements or required by any applicable
Governmental Agency, shall be subject to Tenant's prior approval.

                  Tenant Improvements shall exclude the Personalty (as
hereinafter defined), all of which Tenant shall order and install at Tenant's
sole cost and expense. All Personalty shall be installed by Tenant in accordance
with the provisions of Section 5(A)(l) through (8), inclusive, applicable to
Alterations. "Personalty" shall mean any Tenant furniture, trade fixtures and
moveable equipment or machinery, excluding (a) Schedule Sensitive Equipment, (b)
fixtures and equipment shown in the Plans, and (c) modular laboratories,
laboratory benches, modular laboratory cabinetry (also known as "C frames") and
fume hoods (whether or not any such items are shown on the Plans).

                  Subject to and upon the conditions hereinafter set forth,
Landlord shall serve as construction manager pursuant to subparagraph (d) below,
and shall cause DPR or another general contractor acceptable to Landlord and
Tenant (the "General Contractor") to construct or cause to be constructed the
Tenant Improvements in the Premises in accordance with fully-engineered and
technically complete (including, without limitation, mechanical and electrical
components) construction drawings, plans and specifications approved by Tenant
and Landlord (the "Plans"; regarding Phase I and Phase II, the "Phase I Plans"
and the "Phase II Plans", respectively).

                  The Tenant Improvements shall be performed at the Tenant's
cost, subject to the Landlord's Contribution (hereinafter defined).
Notwithstanding the foregoing, Tenant shall deliver preliminary drawings for the
layout of the Premises and the Building core (such as elevator shafts,
electrical room, bathrooms, corridors, etc.) of the Building to Landlord no
later

                                   APPENDIX C

                                  Page 1 of 17

<PAGE>

than the date of this Lease. In the event that Tenant desires to make any
changes to such preliminary drawings, Tenant may do so provided such changes (i)
do not affect the Building core or any Schedule Sensitive Equipment or (ii) can
be implemented prior to the date the Phase I Plans or Phase II Plans, as
applicable, are required to be completed pursuant to this Appendix C. If any
party requires that any changes be made to the final, approved preliminary
drawings which do not comply with (i) or (ii) in the preceding sentence and are
not necessary to comply with any Governmental Requirements or required by any
applicable Governmental Agency, any Delay caused thereby shall be deemed to be a
Delay attributable to the party requesting such change.

                  (b)      Tenant shall cause the Plans to be prepared, at
Tenant's cost, by SPGA, registered professional architects, and Earl Walls &
Associates, registered professional engineers (SPGA and Earl Walls & Associates
being referred to herein individually as a "TI Architect" and collectively as
the "TI Architects"). With respect to Phase I, prior to close-of-business on
December 21, 1998, Tenant shall furnish the initial draft of the Phase I Plans
to Landlord for Landlord's review and approval, provided that Tenant shall
authorize Landlord to order the Phase I Schedule Sensitive Equipment as set
forth on Annex 2 attached hereto no later than the date shown on Annex 2 for
such items. With respect to Phase II, prior to close-of-business on December 21,
1998, Tenant shall furnish the initial draft of the Phase II Plans to Landlord
for Landlord's review and approval, provided Tenant shall authorize Landlord to
order the Phase II Schedule Sensitive Equipment as set forth on Annex 2 no later
than the date on Annex 2 shown for such item.

                  Landlord shall, within the time set forth on Annex 3 or Annex
4 attached hereto, depending on the subject Phase whose Plans are being
reviewed, either provide comments to such Plans or approve the same. Landlord
shall be deemed to have approved such Plans if it does not timely provide
comments on such Plans. If Landlord provides Tenant with comments to the initial
draft of the Plans, Tenant shall provide revised Plans to Landlord incorporating
Landlord's comments as soon as possible after receipt of Landlord's comments and
Landlord shall as soon as possible after receipt then either provide comments to
such revised Plans or approve such Plans. Landlord shall be deemed to have
approved such revised Plans if Landlord does not timely provide comments on such
Plans. The process described above shall be repeated, if necessary, until the
Plans have been finally approved by Landlord.

                  Tenant hereby agrees that the Plans for the Tenant
Improvements shall comply with all applicable Governmental Requirements. Tenant
acknowledges and agrees that since Tenant has contracted directly with Earl
Walls & Associates, (i) any failure by the TI Architects to meet the time
deadlines set forth on Annex 3 or Annex 4 which causes a Delay shall be deemed a
Tenant Delay, and (ii) any other Delay caused by either of the TI Architects
shall be a Tenant Delay. Landlord's approval of any of the Plans (or any
modifications or changes thereto) shall not impose upon Landlord or its agents
or representatives any obligation with respect to the design of the Tenant
Improvements or the compliance of such Tenant Improvements or the Plans with
applicable Governmental Requirements.

                  (c)      General Contractor shall act as contractor to
construct the Tenant Improvements. The construction contract with the General
Contractor shall be subject to

                                   APPENDIX C

                                  Page 2 of 17

<PAGE>

Tenant's prior approval. Landlord shall use commercially reasonable efforts to
cause the Tenant Improvements to be substantially completed, except for minor
"Punch List" items, on or before the Estimated Completion Date, in each case
subject to Tenant Delay and Force Majeure Delay. Landlord and Tenant shall
approve the General Contractor's subcontractors' bid list and subcontractors
selected, and all bidding shall be on a competitive basis with at least three
(3) bids required per trade (except as Landlord and Tenant shall otherwise
approve).

                  (d)      Landlord, or an agent of Landlord, shall provide
construction management services in connection with the construction of the
Tenant Improvements and the Change Orders (hereinafter deemed). Such project
management services shall be performed, at Tenant's cost, for a fee of three
percent (3%) of all costs (however denominated, and specifically including the
cost of all Schedule Sensitive Equipment but excluding the General Contractor's
fee for profit and overhead) related to the construction (but not design) of the
Tenant Improvements and the Change Orders, and such fee shall not be shared with
any construction consultant or project manager hired by Tenant (and any -such
consultant and/or manager shall not be paid out of the Landlord's Contribution).
Landlord shall periodically report to Tenant (but not less often than the
General Contractor applies to Landlord for progress payments) on the estimated
and actual expenses incurred for the Tenant Improvements, and shall make its
books and records with respect to the Premises reasonably available to Tenant
for verification of same.

         2.       CHANGE ORDERS. If, prior to the Commencement Date, Tenant
shall require improvements or changes (individually or collectively, "Change
Orders") to the Premises in addition to, revision of or substitution for the
Tenant Improvements, Tenant shall deliver to Landlord for its approval drawings,
plans and specifications for such Change Orders. If Landlord does not approve of
the drawing, plans and specifications for Change Orders, Landlord shall advise
Tenant of the revisions required. Tenant shall revise and redeliver the
drawings, plans and specifications to Landlord within five (5) business days of
Landlord's advice or Tenant shall be deemed to have abandoned its request for
such Change Orders. Tenant shall pay for all preparations and revisions of
drawings, plans and specifications, and the construction of all Change Orders,
subject to Landlord's Contribution.

         3.       CONTRIBUTION. Landlord shall contribute an amount equal to
$7,975,900 ("Landlord's Contribution") toward the costs incurred for the Tenant
Improvements and Change Orders. Landlord has no obligation to pay for costs of
the Tenant Improvements or Change Orders in excess of Landlord's Contribution
(with all such excess costs being referred to as "Tenant's Contribution"). The
costs of the Tenant Improvements and Change Orders shall be paid by Landlord and
Tenant, with each payment prorated between Landlord and Tenant based on the
proportion of Landlord's Contribution and the total Tenant's Contribution,
respectively, to the total costs for the Tenant Improvements and Change Orders.
For the purposes of this Lease, the costs incurred for the Tenant Improvements
and Change Orders shall include, without limitation, hard construction costs,
architectural and engineering fees, all governmental and other regulatory fees
and costs associated with the Tenant Improvements and Change Orders (including,
without limitation, Common Areas and lobby improvements), costs of utility
connection and permitting and construction management fees. Tenant specifically
acknowledges that Landlord's Contribution is based on $100 per gross rentable
square foot, times the 79,759 gross rentable square feet in the Premises (the
Greenhouse specifically being excluded from the

                                   APPENDIX C

                                  Page 3 of 17

<PAGE>

calculation of Landlord's Contribution), and that all costs related to
construction of the Tenant Improvements and Change Orders in excess of
Landlord's Contribution shall be the sole responsibility of Tenant.

         4.       COMMENCEMENT DATE AND DELAY. As used herein, a "Delay" is any
action, inaction or event that actually delays the Substantial Completion of the
applicable Tenant Improvements, and a "Tenant Delay" is any Delay which is not a
Force Majeure Delay arising from any act or omission of Tenant, its employees,
agents or the TI Architects, including, without limitation, any of the
following:

                  (a)      Tenant's request for Change Orders that are actually
performed; or

                  (b)      Contractor's performance of any Change Orders; or

                  (c)      Tenant's request for materials, finishes or
installations (other than Building standard materials) requiring unusually long
lead times; or

                  (d)      Tenant's or either TI Architect's delay in preparing,
providing, reviewing, revising or approving drawings, plans and specifications
or any of the other deliveries set forth on, or taking any other action required
by, Annex 3 or Annex 4, beyond the periods set forth herein or therein; or

                  (e)      Tenant's or either TI Architect's delay in (i)
submitting the Phase I Plans or Phase II Plans to the City of San Diego for
approval beyond the dates set forth on Annex 3 or Annex 4, or (ii) promptly
obtaining any comments or corrections to the Phase I Plans or Phase II Plans
from the City of San Diego, or (iii) resubmitting corrected Phase I Plans or
Phase II Plans, as applicable, to the City of San Diego, not later than seven
days after the City's comments thereon; or

                  (f)      Tenant's or either TI Architect's delay in providing
the Schedule Sensitive Equipment Specifications (as hereinafter defined) for the
Phase I Schedule Sensitive Equipment or Phase II Schedule Sensitive Equipment
beyond the dates set forth in Annex 2 attached hereto, or Tenant's or either TI
Architect's delay in authorizing Landlord to order the Phase I Schedule
Sensitive Equipment or Phase n Schedule Sensitive Equipment beyond the dates set
forth in Annex 2 attached hereto (as used herein, "Schedule Sensitive Equipment
Specifications" means written comprehensive specifications for the Schedule
Sensitive Equipment adequate to allow Landlord to order the Schedule Sensitive
Equipment); or

                  (g)      Tenant's or either TI Architect's delay in ordering
the Phase l or Phase II air handlers, chillers and exhaust fans beyond the dates
set forth in Annex 2 attached hereto or any delay in the delivery of the Phase I
or Phase II air handlers, chillers or exhaust fans beyond the applicable
delivery dates set forth on Annex 2 attached hereto; or

                  (h)      Tenant delay in providing information critical to the
normal progression of the Premises. Tenant shall provide such information as
soon as reasonably possible, but in no event longer than one week after receipt
of such request for information from the Landlord; or

                                   APPENDIX C

                                  Page 4 of 17

<PAGE>

                  (i)      Tenant's delay in paying Landlord for costs of the
Tenant Improvements and/or Change Orders in excess of the Landlord's
Contribution;

                  (j)      Any other act or omission that causes a Delay and is
identified in this Lease as a Tenant Delay.

         Landlord shall use commercially reasonable efforts to provide Tenant
with an estimate based on the information then known to Landlord, of (i) any
Delay which may result from a Change Order requested by Tenant, and materials,
finishes or installations requiring unusually long lead times, with such
estimate provided at the time of Tenant's request for such Change Order or such
materials, finishes or installations, and (ii) any Tenant Delay arising under
clause (h) or (j) above, with such estimate provided within ten (10) days after
Landlord first obtains knowledge of such Tenant Delay; provided that if Landlord
fails to provide Tenant with such notice under this clause (ii) within such ten
(10) day period, then such delay shall not constitute a Tenant Delay, except to
the extent such delay continues after Landlord provides such notice (and if
Landlord delivers such notice within such ten (10) day period, such delay shall
constitute a Tenant Delay from the first date of such delay, including, without
limitation, the period prior to the delivery of such notice by Landlord). In no
event shall Landlord have any liability for the inaccuracy of any estimate of
any Delay for any reason and any such inaccuracy shall not modify or limit any
of the provisions of this Appendix C, including, without limitation, the
provisions of this Appendix C relating to Delay.

                  As used herein, "Landlord Delay" is any Delay which is not a
Force Majeure Delay arising from any act or omission of Landlord, its employees,
agents, General Contractor or Delawie, Wilkes ("Shell Architect") including,
without limitation:

                           (i)      Landlord's, General Contractor's or Shell
Architect's delay in preparing, providing, revising or approving drawings, plans
and specifications or any of the other deliveries set forth on, or taking any
other action required by, Annex 3 or Annex 4, beyond the periods set forth
herein or therein; or

                           (ii)     Landlord's request for Change Orders
(excluding any Change Orders necessary to comply with any Governmental
Requirements, required by any applicable Governmental Agency) whether or not any
such Change Orders are actually performed; or

                           (iii)    So long as Tenant has provided the
specifications for, and authorized Landlord to order, the Phase I Schedule
Equipment and Phase II Schedule Sensitive Equipment on or before the applicable
dates set forth on Annex 2 attached hereto, Landlord's delay in ordering the
Phase I Schedule Sensitive Equipment or Phase II Schedule Sensitive Equipment
(in each case excluding the air handlers, chillers and exhaust fans) beyond the
dates set forth on Annex 2 hereto; or

                           (iv)     any other act or omission that causes a
Delay and is identified in this Lease as a Landlord Delay.

                  As used herein, "Force Majeure Delay" is a Delay caused by
Force Majeure, up to five (5) "free" Landlord Delay days, up to five (5) "free"
Tenant Delay days, and any offsetting

                                   APPENDIX C

                                  Page 5 of 17

<PAGE>

Landlord Delays and Tenant Delays. Except as expressly provided in this Appendix
C to the contrary, any delay in the actual delivery of any Schedule Sensitive
Equipment, so long as such delay does not arise from a party's (i) delay in
providing specifications for, approving or placing an order for, such Schedule
Sensitive Equipment, (ii) failure to respond to any supplier's inquiries or
other requests, or (iii) acts or omissions, shall be a Force Majeure Delay.

                  Except as expressly provided herein, the Commencement Date for
each Phase shall be the date on which the Tenant Improvements for each Phase
have been Substantially Completed (as defined herein) (the "Completion Date").
To the extent Tenant Delays delay the Completion Date for a Phase beyond the
Estimated Completion Date, the Commencement Date for such Phase and Tenant's
obligation to pay Rent for such Phase shall be the Estimated Completion Date. To
the extent that Landlord Delays delay the Completion Date for a Phase beyond the
Estimated Completion Date, the Commencement Date shall be the Completion Date
and Tenant shall be entitled to one day of free Base Rent, Operating Cost Share
Rent and Tax Share Rent for each one day of Landlord Delay beyond the Estimated
Completion Date until the Completion Date for the applicable Phase. As used
herein, "Substantial Completion" of the Tenant Improvements for a Phase shall
mean that (a) a temporary or permanent certificate of occupancy for the
applicable Tenant Improvements has been issued by the City of San Diego, (b) all
major Building systems (excluding the Removable Property and Personalty and in
Phase I, the deionized water (water purification) system, but including, without
limitation, electrical, mechanical, plumbing, fume hoods and HVAC systems
required to operate the applicable Phase as shown on the applicable Plans) are
in good working order and the HVAC has been properly balanced to Tenant's
specifications, and (c) Shell Architect and the mechanical engineer shall have
delivered certifications with respect to the applicable Tenant Improvements in
the form attached to this Appendix as Annex 5.

                   Each day of Landlord Delay and each day of Tenant Delay shall
for the purposes of this Lease offset and nullify each other.

                   Landlord and Tenant shall meet within five (5) days after the
Completion Date for each Phase to prepare a punch list of items (the "Punch List
Items") to be corrected. Tenant shall allow Landlord reasonable access to the
Premises for the purposes of completing the Punch List Items and Landlord shall
use diligent efforts to correct the Punch List Items within forty-five (45) days
after the parties prepare such punch list; provided that if such Punch list
Items cannot reasonably be completed within such forty-five (45) day period,
such period shall be extended for as long as reasonably necessary to complete
such Punch List Items, up to a maximum of one hundred twenty (120) days, so long
as Landlord is using diligent efforts to complete such Punch List Items.

         5.       ACCESS BY TENANT PRIOR TO COMMENCEMENT OF TERM. So long as
Landlord in its sole good faith discretion determines that the entry by Tenant
and/or its Agents on the Premises prior to the Phase I Commencement Date will
not result in any Delay, Landlord shall grant Tenant and its Agents a license to
enter the Premises prior to the Phase I Commencement Date to prepare the
Premises for Tenant's use and occupancy conditioned upon Tenant's and its
agents':

                                   APPENDIX C

                                  Page 6 of 17

<PAGE>

                  (a)      working in harmony with Landlord and Landlord's
agents, contractors, workmen, mechanics and suppliers;

                  (b)      obtaining in advance Landlord's approval of the
contractors proposed to be used by Tenant and depositing with Landlord waivers
of lien from the contractor and all subcontractors and suppliers of material;
and

                  (c)      furnishing Landlord, prior to such entry, evidence
that Tenant and its contractors maintain the insurance required by this Lease

         Landlord shall have the right to withdraw such license upon twenty-four
(24) hours' written notice to Tenant in the event of any breach of the foregoing
provisions which is not cured within such twenty-four (24) hour period or in the
event any such entry by Tenant or its agents is determined by Landlord acting in
good faith to be likely to result in any Delay. Any entry and occupation
permitted under this Section shall be governed by Section 5, Section 8(A) and
8(B) and all other terms of the Lease.

         6.       MISCELLANEOUS.

         The parties acknowledge and agree that construction of Phase II will be
in process after Tenant has taken occupancy of Phase I. Terms used in this
Appendix C shall have the meanings assigned to them in the Lease. The terms of
this Appendix C are subject to the terms of the Lease.

                                   APPENDIX C

                                  Page 7 of 17

<PAGE>

                                     ANNEX 1

                                   SHELL PLANS

SHELL          August 5, 1998              BID SET# 2

               September 22, 1998          AS 1 NO.1

SPEC           May 15, 1998                PROJECT MANUAL & SPECIFICATIONS

                                   APPENDIX C

                                  Page 8 of 17
<PAGE>

                                     ANNEX 2

                          SCHEDULE SENSITIVE EQUIPMENT

                                 (see attached)

                                   APPENDIX C
                                  Page 9 of 17

<PAGE>

                              CARRAMERICA - NOVARUS
                         LA JOLLA SPECTRUM - BUILDING A

                          SCHEDULE SENSITIVE EQUIPMENT
          BASED UPON 5/8/99 PHASE 1 MOVE-IN AND 7/1/99 PHASE 1 MOVE-IN

<TABLE>
<CAPTION>
         ITEM                              SPECIFICATIONS      ORDER DATE        DELIVERY DATE       RESPONSIBILITY
         ----                              --------------      ----------        -------------       --------------
<S>                                        <C>                 <C>               <C>                 <C>
HVAC EQUIPMENT
   Air Handlers                               12/21/98          12/22/98           03/22/99              Tenant
   Chillers                                   12/01/98          12/22/98           03/22/99              Tenant
   Cooling Towers                             12/01/98          12/22/98           03/29/99             Landlord
   HW Boilers                                 12/01/98          12/22/98           03/29/99             Landlord
   Steam Boilers                              12/21/98          01/08/98           03/29/99             Landlord
   Exhaust Fans                               12/21/98          12/22/98           03/18/99              Tenant

PLUMBING EQUIPMENT
   Air Compressor & Dryer                     12/01/98          12/23/98           03/18/99             Landlord
   Vacuum Pump                                12/01/98          12/23/98           03/18/99             Landlord
   Clean Water System                         12/21/98          01/15/99           03/31/99             Landlord

ELECTRICAL EQUIPMENT
   Emergency Generator                        12/21/98          12/22/98           03/30/99             Landlord
   Primary Distribution Gear                  12/21/98          01/08/99           04/01/99             Landlord
   MCCS/Xfrmers/Panel Boards                  12/21/98          01/08/99           04/01/99             Landlord
   Light Fixtures                             12/21/98          01/08/99           04/15/99             Landlord

LAB SYSTEMS
   Lab Furnishings                            12/03/98          01/03/99           03/17/99             Landlord
   C-Frame                                    12/03/98          01/03/99           03/03/99             Landlord
   New Fume Hoods                             11/03/98          01/03/99           03/22/99             Landlord
   New Hood VAV Components                    12/30/98          01/03/99           03/22/99             Landlord
   Lab Fixtures                               11/03/98          01/03/99           03/22/99             Landlord

ARCHITECTURAL
   Carpet                                     01/04/99          01/22/99           03/16/99             Landlord
   Sheet Vinyl                                01/04/99          01/22/99           02/23/99             Landlord
   Ceramic Tile                               01/04/99          01/22/99           04/01/99             Landlord
   Other Finishes                             01/04/99          01/22/99           04/01/99             Landlord
   Door Frames                                01/04/99          01/22/99           03/26/99             Landlord
   Doors                                      01/04/99          01/22/99           03/26/99             Landlord
   Hardware                                   01/04/99          01/22/99           03/26/99             Landlord

CONVEYING
   Elevators                                  10/19/98          12/22/98           04/15/99             Landlord
</TABLE>

                                   APPENDIX C
                                  Page 10 of 17

<PAGE>

                                     ANNEX 3

                PHASE I TENANT IMPROVEMENT CONSTRUCTION SCHEDULE

                                 (see attached)

                                   APPENDIX C
                                  Page 11 of 17

<PAGE>

                        LA JOLLA SPECTRUM TECHNOLOGY PARK
                    Tenant Improvement Construction Schedule
                                  Building "A"
                                     Phase I

<TABLE>
<S>                                                                                   <C>
Lease Execution                                                                       December 21, 1998
Final Space Plan completed by Tenant's Architect                                      December 17, 1998
Landlord Approves Final Space Plan                                                    December 18, 1998
Tenant's Architect commences Tenant Improvement Construction Documents                November 10, 1998
Landlord's Architect commences Site/Shell Modification Construction Documents         November 24, 1998
Tenant approves Site/Shell Modification Construction Documents                        December 7, 1998
Tenant's Architect completes and delivers Site/Shell Modification Mechanical,
  Electrical & Plumbing Construction Documents to Landlord's Architect                December 18, 1998
Landlord's Architect submits Site/Shell Modification Construction Documents to City
  for Permit                                                                          December 21, 1998
Tenant's Architect completes Tenant Improvement Construction Documents                December 21, 1998
Landlord approves Tenant Improvement Construction Documents                           December 23, 1998
Tenant's Architect submits Tenant Improvement Construction Documents to City for
  Permit                                                                              December 23, 1998
Pre-Permit Construction Commences                                                     December 23, 1998
(Based On Approved Allowance For Plan Check Overrides)
Landlord receives Permit for Site/Shell Modifications                                 January 22, 1999
Landlord receives Permit for Tenant Improvements                                      February 1, 1999
Landlord Completes Phase I Tenant Improvements                                        May 8, 1999
</TABLE>

                                   APPENDIX C
                                  Page 12 of 17

<PAGE>

                                     ANNEX 4

                PHASE II TENANT IMPROVEMENT CONSTRUCTION SCHEDULE

                                 (see attached)

                                   APPENDIX C
                                  Page 13 of 17

<PAGE>

                        LA JOLLA SPECTRUM TECHNOLOGY PARK

                    Tenant Improvement Construction Schedule
                                  Building "A"
                                    Phase II

<TABLE>
<S>                                                                                   <C>
Lease Execution                                                                       December 21, 1998
Final Space Plan completed by Tenant's Architect                                      December 17, 1998
Landlord approves of Final Space Plan                                                 December 18, 1998
Tenant's Architect commences Tenant Improvement Construction Documents                November 10, 1998
Tenant's Architect completes Tenant Improvement Construction Documents                December 21, 1998
Landlord approves Construction Documents                                              December 23, 1998
Tenant's Architect submits Tenant Improvement Construction Documents to City for
  Permit                                                                              December 23, 1998
Landlord Receives Permit for Tenant Improvements                                      February 1, 1999
Landlord Completes Phase II Tenant Improvements                                       July 1, 1999
</TABLE>

                                   APPENDIX C
                                  Page 14 of 17

<PAGE>

                                     ANNEX 5

                          SHELL ARCHITECT CERTIFICATION

                                 (see attached)

                                   APPENDIX C
                                  Page 15 of 17

<PAGE>

                        ARCHITECTURAL FIELD VISIT REPORT
                           RE: SUBSTANTIAL COMPLETION

This Architectural Field Visit Report is provided to our client, CarrAmerica at
its request, regarding the Project known as ____________________________________
located at ___________________________________________________________________,
the undersigned, of Delawie Wilkes Rodrigues Barker & Bretton Associates AIA,
made an Architectural Field Visit on __________________,1998, during which time
I made a visual observation of the status of the construction of the shell and
interior improvements in order to report as to whether such construction is
substantially complete.

Preparation for the Architectural Field Visit consisted of a general overview of
the following plans and specifications for the Project:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

To the extent any or any part of such plans and specifications were prepared by
other than Delawie Wilkes Rodrigues Barker & Bretton Associates AIA (hereinafter
Delawie), this general overview does not mean or imply that Delawie has or
undertakes any professional responsibility with respect to such plans and/or
specifications. Delawie is entitled to rely on the accuracy and completeness of
all of the above information provided or prepared by others.

The Architectural Field Visit itself consisted of _______ Hours, during which I
observed the status of the construction of the shell and interior improvements.
No invasive techniques were used. The observation was only as to what was
visually apparent without uncovering, testing, inspection or evaluation of any
portion of the Project, including without limit the mechanical/electrical
system, the sanitary facilities or structural components.

Based upon this limited field visit, it is my professional opinion that the
architectural components of the Project's shell and interior improvements are
substantially complete. Substantial completion status is with regard to the
adequacy of the status of the Project for occupancy purposes only. This opinion
does not modify or obviate any punch list items identified, or yet to be
identified, which are to be provided or performed in order for final completion
of the Project. Nothing herein is intended as a representation of the quality of
the work performed, the construction means, methods, techniques or safety
precautions. This Architectural Field Report merely represents a professional
opinion of the status of the architectural components of the Project based upon
a general overview of the above-referenced plans and specifications and a
limited field Investigation.

_____________________________________      _____________________________________
Name                                       Date

                                   APPENDIX C
                                  Page 16 of 17

<PAGE>

                             MEP FIELD VISIT REPORT
                           RE: SUBSTANTIAL COMPLETION

         This Mechanical, Electrical and Plumbing (MEP) Report is provided to
our client, CarrAmerica, at its request regarding the Project known as La Jolla
Spectrum located at 3115, 3215 Merryfield Row, San Diego, California, 92121.

         ___________________, the undersigned, of TKG Consulting Engineers, Inc.
(TKG), made a Field Visit on ____________________, 1998 during which time I made
a visual observation of the status of the construction of the shell and interior
improvements in order to report as to whether such construction is substantially
complete.

         Preparation for the Field Visit, consisted of a general overview or the
following plans and specification for the Project:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

         To the extent any or any part of such plans and specifications were
prepared by other than TKG, this general overview does not mean or imply that
TKG has or undertakes any professional responsibility with respect to such plans
and/or specifications. TKG is entitled to rely on the accuracy and completeness
of all of the above information provided or prepared by others.

         The Field Visit itself consisted of _____ hours, during which I
observed the status of the construction of the shell and interior improvements
including review of electrical, mechanical, plumbing, fume hoods and HVAC
systems required to operate the applicable phase of improvements as shown on the
applicable plans are in good working order and the HVAC has been properly
balanced to tenant's specifications.

         Based upon this limited Field Visit, it is my professional opinion that
the MEP components of the Project's shell and interior improvements are
substantially complete. Substantial completion status is with regard to the
adequacy of the status of the Project for occupancy purposes only. This opinion
does not modify or obviate any punch list items identified, or yet to be
identified, which are to be provided or performed in order for final completion
of the Project. Nothing herein is intended as a representation of the quality of
the work performed, the construction means, methods, techniques or safety
precautions. This Field Report merely represents a professional opinion of the
status of the architectural components of the Project based upon a general
overview of the above referenced plans and specifications and a limited field
visit.

_____________________________________      _____________________________________
Name                                       Date

                                   APPENDIX C
                                  Page 17 of 17

<PAGE>

                                   APPENDIX D

                         COMMENCEMENT DATE CONFIRMATION

Landlord: CarrAmerica Realty Corporation, a Maryland corporation

Tenant:  Novartis Agricultural Discovery Institute, Inc., a Delaware corporation

         This Commencement Date Confirmation is made by Landlord and Tenant
pursuant to that certain Lease dated as of December 18, 1998 (the "Lease") for
the first and second floors in the building commonly known as Building A of the
La Jolla Spectrum Technology Park, 3115 Merryfield Row, San Diego, California
(the "Premises"). This Confirmation is made pursuant to Item 9 of the Schedule
to the Lease.

         1.       Lease Commencement Date, Termination Date. Landlord and Tenant
hereby agree that the Commencement Date for Phase ___________ is
_______________, 199__, and the Termination Date of the Lease is
___________________, ____.

         2.       Acceptance of Premises. Tenant has inspected Phase ____
Premises and affirms that Phase ___ Premises is acceptable in all respects in
its current "as is" condition, subject to the attached punchlist items to be
corrected in accordance with the terms of the Lease.'

         3.       Incorporation. This Confirmation is incorporated into the
Lease, and forms an integral part thereof. This Confirmation shall be construed
and interpreted in accordance with the terms of the Lease for all purposes.

                                TENANT:

                                Novartis Agricultural Discovery Institute, Inc.,
                                a Delaware corporation

                                By:________________________________________

                                Name:______________________________________

                                Title:_____________________________________

                                   APPENDIX D
                                   Page 1 of 2

<PAGE>

                                     LANDLORD:

                                     CarrAmerica Realty Corporation, a Maryland
                                     corporation

                                     By:________________________________________

                                     Name:______________________________________

                                     Title:_____________________________________

                                   APPENDIX D
                                   Page 2 of 2

<PAGE>

                                   APPENDIX E

                               REMOVABLE PROPERTY

                                 (see attached)

                                   APPENDIX E
                                   Page 1 of 2

<PAGE>

From:             Frank Schillinger, EWA

Distribution:     Earl L. Walls
                  Jay Martin

Project:          Novartis-CarrAmerica Building A

EWA #:            9839

Per your request we provide the following summary of NADI & NIFG owner furnished
equipment for CarrAmerica Building A:

TENANT FURNISHED CONTRACTOR INSTALLED

<TABLE>
<CAPTION>
ITEM NUMBER       EQUIPMENT DESCRIPTION
<S>               <C>
E-1               20 x 20 x 38 sterilizer, single door, recessed one wall with integral steam
                  generator
E-2               24 x 36 x 35 sterilizer, single door, recessed one wall with
                  remote generator
E-3               Glassware washer
E-4               Modular stainless steel wall panel system
E-5               20 x 20 x 38 stabilizer, double door pass thru, with remote generator
E-6               6'-0" biological safety cabinet, class II type B-3
E-7               6'-0" horizontal laminar flow cabinet
E-10              4'-0" Biological safety cabinet, class II type B-3
E-11              4 degree C cold rooms, walk in
E-12              Conviron MTW120, plant growth chambers, walk-in
</TABLE>

TENANT FURNISHED, TENANT INSTALLED

<TABLE>
<CAPTION>
ITEM NUMBER       EQUIPMENT DESCRIPTION
<S>               <C>
E-8               Bruker 400 MHz, normal bore NMR
E-9               Bruker 7 tests, Apex II-70; mass spectrometer
NO NUMBER         All benchtop mounted equipment:

                      Water baths, Shakers, Rotovaps, HPLC, LC, GC, UV
                      Vis, Sonicators Scintillation Counters,
                      Fluorimeters, Analytical Balances, Microscopes
                      Speedvac, Gel Dryers, Ovens, PCR machines,
                      Fermentors, Phosphorimager, Auto processors.

NO NUMBER         Floor mounted movable equipment:
                      All Centrifuges (high speed, ultra speed),
                      Incubator shakers, Incubators, Refrigerator
                      (upright, chest), Freezers (upright, chest).
</TABLE>

                                   APPENDIX E
                                   Page 2 of 2

<PAGE>

                                  APPENDIX F-1

                                     PHASE I

       (Phase I of the Premises is the shaded area on the attached pages.)

                                  APPENDIX F-1
                                   Page 1 of 4

<PAGE>

                                      [MAP]

                                  APPENDIX F-1
                                   Page 2 of 4

<PAGE>

                                      [MAP]

                                  APPENDIX F-1
                                   Page 3 of 4

<PAGE>

                                      [MAP]

                                  APPENDIX F-1
                                   Page 4 of 4

<PAGE>

                                  APPENDIX F-2

                                    PHASE II

    (Phase II of the Premises is the area not shaded on the attached pages.)

                                  APPENDIX F-2
                                   Page 1 of 2

<PAGE>

                                   APPENDIX G

                              LETTER OF CREDIT FORM

                                 (see attached)

                                   APPENDIX G
                                  Page 1 of ___

<PAGE>

                                   APPENDIX H

                               LANDLORD INSURANCE

<TABLE>
<CAPTION>
              Type                                           Policy Limit
              ----                                           ------------
<S>                                                      <C>
Commercial General Liability                                 $200,000,000

Rental Loss, Broad Form Property Insurance,              Full replacement cost
Boiler & Machinery

Earthquake and Flood                                         $300,000,000

Workers' Compensation or similar and                        Statutory Limit
Employer's Liability
</TABLE>

                                   APPENDIX H
                                   Page 1 of 1

<PAGE>

                                   ADDENDUM 1

                    ATTACHED TO AND MADE A PART OF THE LEASE
                        DATED DECEMBER 18, 1998, BETWEEN
                  CARRAMERICA REALTY CORPORATION AS "LANDLORD"
                                       AND
           NOVARTIS AGRICULTURAL DISCOVERY INSTITUTE, INC. AS "TENANT"

                                EXTENSION OPTION

         1.       Provided that as of the time of the giving of the Extension
Notice and the Commencement Date of the Extension Term (as such terms are
defined below), (x) Tenant is the Tenant originally named herein, Novartis
Institute for Functional Genomics, Inc., or any Permitted Transferee of either,
(y) such Tenant (together with any Permitted Transferee) actually occupies all
of the Premises initially demised under this Lease and any space added to the
Premises, and (z) no Default by Tenant exists, or would exist but for the
passage of time or the giving of notice, or both, then such Tenant shall have
the right to extend the Term for an additional term of five (5) years (such
additional term is hereinafter called the "Extension Term") commencing on the
day following the expiration of the Term (hereinafter referred to as the
"Commencement Date of the Extension Term"). Tenant must give Landlord notice
(hereinafter called the "Extension Notice") of its election to extend the Term
of this Lease at least nine (9) months, but not more than fifteen (15) months,
prior to the scheduled expiration date of the Term.

         2.       The Base Rent payable by Tenant to Landlord during the
Extension Term shall be equal to an amount equal to ninety-five percent (95%) of
the Fair Market Rent, as defined and determined pursuant to Paragraphs 3, 4, and
5 below.

         3.       The term "Fair Market Rent" shall mean the amount, expressed
as an annual rent per gross rentable square foot of the Premises, which is the
then prevailing market rate for a comparable term to the Extension Term
commencing on the first day of the Extension Term for tenants of comparable size
and creditworthiness for comparable space in the Building and other first class
biotech buildings which include (and which comparable space includes) not less
than 70% wet laboratory space, in the Torrey Pines Scientific Research Zone in
San Diego, without taking into account any concessions, if any, then being
offered to such tenants other than free rent. Fair Market Rent shall not be
reduced by reason of any costs or expenses saved by Landlord by reason of
Landlord's not having to find a new tenant for the Premises (including without
limitation brokerage commissions, cost of improvements necessary to prepare the
space for such tenant's occupancy, rent concession, or lost rental income during
any vacancy period). Fair Market Rent means only the rent component defined as
Base Rent in the Lease and does not include reimbursements and payments by
Tenant to Landlord with respect to Additional Rent, Operating Expenses and other
items payable or reimbursable by Tenant under the Lease. In addition to its
obligation to pay Base Rent (as determined herein), Tenant shall continue to pay
and reimburse Landlord as set forth in the Lease with respect to such Additional
Rent, Operating Expenses and other items with respect to the Premises during the
Extension Term. The appraisal

                                   ADDENDUM 1
                                   Page 1 of 3

<PAGE>

process described below shall be limited to the determination of the Base Rent
and shall not affect or otherwise reduce or modify the Tenant's obligation to
pay or reimburse Landlord for such Additional Rent, Operating Expenses and other
reimbursable items.

         4.       Landlord shall notify Tenant of its determination of the Fair
Market Rent (which shall be made in Landlord's sole discretion and shall in any
event be not less than the Base Rent in effect as of the expiration of the Term)
for the Extension Term, and Tenant shall advise Landlord of any objection within
ten (10) days of receipt (as defined in Section 23 of the Lease) of Landlord's
notice. Failure to respond within the 10-day period shall constitute Tenant's
acceptance of such Fair Market Rent. If Tenant objects, Landlord and Tenant
shall commence negotiations to attempt to agree upon the Fair Market Rent within
thirty (30) days of Landlord's receipt (as defined in Section 23 of the Lease)
of Tenant's notice. If the parties cannot agree upon the Fair Market Rent, each
acting in good faith but without any obligation to agree, then the Term shall
not be extended and shall terminate on its scheduled termination date and Tenant
shall have no further right hereunder or any remedy by reason of the parties'
failure to agree; provided that if Tenant or Landlord invokes the appraisal
procedure provided below to determine the Fair Market Rent, the results of such
process shall be binding upon the parties and upon satisfaction of each of the
conditions set forth in Paragraph 1 above, the Lease shall be extended in
accordance with the terms hereof.

         5.       Appraisal to determine the Fair Market Rent shall be conducted
by three (3) appraisers, one (1) to be selected by Landlord, one (1) to be
selected by Tenant, and the third (3rd) to be selected by the first two
appraisers; all appraisers must be fully-licensed and/or qualified in the State
of California and have at least ten (10) years experience in appraising
properties such as the Property. Each such appraiser shall prepare an appraisal
of the Property based on the matters set forth in Paragraph 3 above. The two (2)
appraisals closest to one another shall be averaged, which amount shall be the
new Base Rent. Either party may elect to appraise by sending written notice to
the other party within five (5) days after the expiration of the 30-day
negotiating period provided in Paragraph 4 above, invoking the binding appraisal
provisions of this paragraph. The cost of the appraisers shall be paid by party
selecting its appraiser, and the cost of the third appraiser shall be shared
equally by the parties. If the appraisal process has not determined the Fair
Market Rent as of the end of the Term, Tenant shall pay one hundred ten percent
(110%) of the Base Rent in effect under the Lease as of the end of the Term
until the Fair Market Rent is determined as provided herein. Upon such
determination, Landlord and Tenant shall make the appropriate adjustments to the
payments between them.

         6.       The parties consent to the jurisdiction of any appropriate
court to enforce the appraisal provisions of this Addendum and to enter judgment
upon the decision of the appraisers.

         7.       Except for the Base Rent as determined above, Tenant's
occupancy of the Premises during the Extension Term shall be on the same terms
and conditions as are in effect immediately prior to the expiration of the
initial Term; provided, however, Tenant shall have no further right to extend
the Term pursuant to this Addendum or to any allowances, credits or abatements
or options to expand, contract, renew or extend the Lease.

                                   ADDENDUM 1
                                   Page 2 of 3

<PAGE>

         8.       If Tenant does not send the Extension Notice within the period
set forth in Paragraph 1 above, Tenant's right to extend the Term shall
automatically terminate. Time is of the essence as to the giving of the
Extension Notice and the notice of Tenant's objection under Paragraph 4 above.

         9.       Landlord shall have no obligation to refurbish or otherwise
improve the Premises for the Extension Term. The Premises shall be tendered on
the Commencement Date of the Extension Term in "as is" condition.

         10.      If the Lease is extended for the Extension Term, then Landlord
shall prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Term and the other provisions applicable thereto.

         11.      If Tenant exercises its right to extend the term of the Lease
for the Extension Term pursuant to this Addendum, the word "Term" as used in the
Lease shall be construed to include, when practicable, the Extension Term,
except as provided in Paragraph above.

                                   ADDENDUM 1
                                   Page 3 of 3

<PAGE>

                                   ADDENDUM 2

                    ATTACHED TO AND MADE A PART OF THE LEASE
                        DATED DECEMBER 18, 1998, BETWEEN
                  CARRAMERICA REALTY CORPORATION, AS "LANDLORD"
                                       AND
          NOVARTIS AGRICULTURAL DISCOVERY INSTITUTE, INC., AS "TENANT"

                              RIGHT OF FIRST OFFER

         1.       Grant of Right of First Offer. In the event Landlord intends
to sell or to make the Premises available for purchase to unrelated third
parties, Landlord shall give Tenant written notice of this intention and of the
intended offering sale price of the Premises (the "Price Notice"). In the event
Tenant desires to purchase the Premises at the offering sale price indicated by
Landlord, Tenant shall give to Landlord a written notice of such desire (the
"Interest Notice") within seven (7) days of receipt (as defined in Section 23 of
the Lease) by Landlord of the Price Notice. If no Interest Notice is timely
given by Tenant, then Tenant shall have no further rights under this Paragraph
1. In the event an Interest Notice is timely given by Tenant, then Landlord and
Tenant shall negotiate during the ten (10) day period following the receipt (as
defined in Section 23 of the Lease) by Landlord of Tenant's Interest Notice in a
good faith attempt to execute a definitive purchase and sale agreement whereby
Landlord would sell to Tenant and Tenant would purchase from Landlord the
Premises at the price stated in the Price Notice. However, neither party shall
have any obligation to execute a purchase and sale agreement not acceptable to
such party, in its sole and absolute discretion. In the event the parties fail
to execute a mutually agreeable purchase and sale agreement within the ten (10)
day period allowed, or in the event such a purchase and sale agreement is
executed but is subsequently terminated without consummation of the sale, Tenant
shall have no further rights under this Paragraph 1.

         2.       Limitation of Rights. The notification and negotiation rights
allowed to Tenant pursuant to Paragraph 1 are allowed on a "one time" basis
only, and (b) Landlord shall have no obligation to re-notify Tenant of any
changes in its sales intentions or offering price, nor to re-notify Tenant of
subsequent sales efforts if the Landlord does not sell the Premises following
the first Price Notice.

         3.       Exclusions. The rights of Tenant under this Right of First
Offer are limited to notification and negotiation in anticipation of Landlord
offering the Premises for purchase by unrelated third parties. There shall be no
notification or negotiation rights of Tenant in any other case whatsoever,
including but not limited to cases of (a) a conveyance by Landlord to an
affiliated party and any conveyance in connection with a merger or other
corporate transaction, (b) a conveyance by Landlord to a lender who then holds a
lien on the Premises, (c) a conveyance in connection with a foreclosure sale,
(d) a conveyance or taking in connection with a condemnation, (e) a conveyance
which is part of a financing transaction (for example, a sale and master lease
back), (f) a conveyance by any subsequent owner of the Premises other than the
Landlord originally named herein, or (g) a sale or offering in which Landlord
packages the

                                   ADDENDUM 2
                                   Page 1 of 2

<PAGE>

Premises with one or more other properties owned by Landlord and/or any
affiliate of Landlord for sale as a group, on the open market or otherwise, to
one or more third parties. No transfer of any or all of the ownership interests
in Landlord (for example, shares of stock), a merger or other corporate
reorganization shall be deemed a conveyance or sale of the Premises.

         4.       Personal Nature of Rights. The rights granted pursuant to this
Right of First Offer are personal to Novartis Agricultural Discovery Institute,
Inc., Novartis Institute for Functional Genomics, Inc. and any Permitted
Transferee thereof succeeding to its interest as Tenant and may be exercised
only during the Lease Term or any Extension Term.

         5.       Estoppel Certificate. Tenant shall execute and deliver to
Landlord, within ten days of request made from time to time, a certificate
stating to the extent applicable (a) that Tenant has no further rights under
this Right of First Offer and that the Lease is thereby amended by deleting the
provisions of this Right of First Offer, or (b) those rights which Tenant still
possesses under this Right of First Offer. In the event Tenant fails to execute
and deliver such a certificate, then Landlord may issue such a certificate and
the same shall be binding upon Tenant, except only to the extent of specific
objections, if any, made by Tenant in a written notice delivered to Landlord
within five (5) days of delivery to Tenant of such a certificate issued by
Landlord.

         6.       Sale Terms. Once Landlord has delivered a notice to Tenant of
an intended offering of the Premises and Tenant's rights with respect to such
offering have ended (from failure to deliver a notice of interest within seven
(7) days, from failure to execute a purchase and sale agreement within ten (10)
days, or from failure to consummate a sale on the terms set forth in the
purchase and sale agreement), Landlord shall be free to market the Premises and
to sell the same without challenge by Tenant as to any defect in the notice or
negotiations. It is intended that Landlord and any third party whomsoever shall
be conclusively entitled to rely upon the lapse of the rights granted under this
Right of First Offer and that Tenant shall have no claim or right to assert that
any lower price or different terms than those communicated to Tenant give rise
to an additional right of Tenant to pursue a purchase of the Premises. Landlord
shall have the right to market and sell the Premises on any terms desired, from
time to time, after complying with the notice and negotiation requirements of
Paragraph 1 above.

         7.       Tenant Default. Tenant shall not be entitled to notification
or to exercise its rights hereunder at any time a Default exists.

                                   ADDENDUM 2
                                   Page 2 of 2

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