Document:

<PAGE>

                              LMSI Venture Finance
                         2500 Sand Hill Road, Suite 101.
                              Menlo Park, CA 94025
                 Telephone; (650) 854-9450 o Fax: (650) 854-9457

July 28, 1999

                                                                         Revised
                                                                         -------
Mr. David J. Borges
Controller
Rosetta Inpharmatics, Inc.
12040 115th Avenue, NE
Kirkland, WA 98034
Dear David:

This will confirm approval of a time and line extension of $605,000 for Rosetta
Inpharmatics. The terms will be the same as Rosetta's prior line (5/13/98
proposal and subsequent credit approval) except that

         -        Equipment allotments have been changed to allow more soft
                  costs. The new allotments are lab and test equipment (> 32%);
                  computers, furniture, & similar (=34%); and soft costs
                  (leaseholds, software, & similar) (Greater than or equal to
                  34%)

         -        LMSI will retain a continuing lien on all equipment financed
                  or to be financed under Equipment Financing Agreements #10819
                  and #10821 until all of Rosetta's obligations under this new
                  financing are fulfilled. (With LMSI's prior approval, Rosetta
                  may sell or dispose of some items of equipment)

         -        The line expires 6/30/00, however, fundings after 12/31/99 are
                  contingent upon Rosetta closing a major corporate partnership
                  as represented.

Cynthia Murayama, Contract Manager, will be calling shortly to update
information and to expedite the few additional documents we need. Equipment
purchased since the expiration of Rosetta's prior line may be financed under
this line. Please send any invoices you have accumulated.

We are delighted to be able to continue working with you and with Rosetta!

Best regards,

/s/ Barbara Kaiser

Barbara B.. Kaiser
EVP/ General Manager

<PAGE>

                         Lease Management Services, Inc.
                         2500 Sand Hill Road. Suite 101
                               Menlo Park CA 94025
                  Telephone (650) 854-9450 o Fax (650) 854-9457

April 24, 1998
Revised: May 13, 1998

Mr. John J. King, II                                               CONFIDENTIAL
Chief Operating Officer
Rosetta Inpharmatics, Inc.
12040 115th Avenue NE
Kirkland, WA 98034

Dear John:

We are pleased to present the following equipment financing proposal to Rosetta
Inpharmatics, Inc.:

         BORROWER:         Rosetta Inpharmatics, Inc.

         LENDER:           Lease Management Services, Inc.

         EQUIPMENT:        A master line of credit for $1,500,000 equipment per
                           the attached list, including:

                    Greater than or equal to  $750,000   lab & scientific
                                                         equipment

                    Less than or equal to      500,000   computers, furniture &
                                                         similar

                    Greater than or equal to   250,000   leaseholds, software &
                                                         similar
                                            -------
                                          $1,500,000

                           Previously-purchased and used equipment may be
                           included in this line. All equipment is subject to
                           Lenders final approval.

TERM &
PAYMENT:

                           OPTION 1: Forty-two (42) months at 2.604% of
                           equipment cost, payable monthly in advance for each
                           loan schedule, plus a 15% balloon at end of term.
                           [Subject to satisfactory credit review, the balloon
                           may be paid over 9 months at 1.740% per month.]

                           OPTION 2: Forty-eight (48) months at 2.615% of
                           equipment cost, payable monthly in advance for each
                           loan schedule, plus a $1.00 payment at end of term.

                                      -2-
<PAGE>

                           The yield in this transaction will be adjusted
                           relative to any increase in comparable term U.S.
                           Treasury maturities. The payment factor for each
                           schedule will be set at the time it is documented and
                           will be FIXED for the term. The payment factors above
                           are based on the average of the Federal Reserve 3-
                           and 5-year treasuries (5.575%) for the week ending
                           4/17/98.

STRUCTURE:                 Secured loan. Borrower retains title and keeps
                           depreciation. Borrower will grant Lender a first
                           security interest in the equipment to be financed.

WARRANT:                   In consideration for this financing, Borrower will
                           grant to Lender a warrant to purchase Borrower's
                           common or preferred stock. The warrant will be for
                           2.5% of equipment cost at the lower of $5.20 per
                           share or Borrower's next round (> $2MM new - equity)
                           share price. The exercise price will be the lower of
                           $5.20 per share or the price half-way between the
                           price per share of Borrower's Series A and next round
                           financing. The warrant will be for the greater of
                           7,000 shares or the number of shares based pro rata
                           on the actual amount of equipment financed. The
                           warrant may be exercised by cash or net issue and
                           will include standard anti-dilution provisions. The
                           exercise period shall end 72 months from the date of
                           issue.

COVENANT:                  No additional collateral will be required except in
                           the event Borrower's unrestricted cash, excluding
                           long-term debt, falls below the appropriate benchmark
                           below. In that event, Borrower will provide to Lender
                           a cash security deposit equivalent to 12.5% of
                           original, aggregate equipment cost, but in no event
                           to exceed the remaining gross receivable.

                           PRE-IPO BENCHMARK: unrestricted cash, excluding
                           long-term debt, must be equal to the greater of
                           $2,000,000 or 6 months' cash needs. ["6 months' cash
                           needs" will be defined as the cash bum for the 3
                           months just completed, multiplied by a factor of
                           2.3.]

                           POST-IPO BENCHMARK: unrestricted cash, excluding
                           long-term debt, must be equal to the greater of
                           $5,000,000 or 10 months' cash needs. ["10 months'
                           cash needs" will be defined as the cash burn for the
                           3 months just completed, multiplied by a factor of
                           3.6.]

                           Interest will be accrued at 5.0% annually and will be
                           paid with the return of the deposit.

                           This deposit will be released when Borrower's
                           unrestricted cash, excluding long-term debt, recovers
                           and is greater than the appropriate benchmark above
                           for at least one quarter and continues to remain
                           greater. (Or, will be returned immediately if
                           Borrower's new equity or other non-refundable cash is
                           great enough to dearly keep Borrower above the
                           appropriate benchmark for at least three quarters.)

                                      -3-
<PAGE>

                           Verification of achievement of benchmarks is to be
                           acceptable to Lender. Return of deposits prior to end
                           of term is contingent upon receipt of all payments
                           and financials to date as agreed, no default under
                           any financial obligation, and no material adverse
                           change.

CONTINGENCIES:

                           1)       Standard documentation satisfactory to
                                    Borrower and Lender.

                           2)       Releases against this credit line are
                                    contingent upon Borrower providing evidence
                                    of reasonable performance against the 1998
                                    Budget or subsequent Board-approved plan
                                    acceptable to Lender. This credit line,
                                    unless extended in writing, expires 5/31/99.

                           3)       Throughout the loan term, Borrower will
                                    provide monthly financials within 30 days of
                                    each month-end, and annually, an audited
                                    statement within 90 days of fiscal year end
                                    or at such time as Borrower's Board receives
                                    the audit All such financial statements are
                                    to be prepared using generally accepted
                                    accounting principles.

                           4)       Invoices must be less than 45 days old ~
                                    funded within 45 days of credit approval.

                                    All equipment is to be located at Borrower's
                                    Seattle area facilities unless Lender gives
                                    prior approval to do otherwise.

                                    Custom equipment; upgrades to equipment to
                                    which Lender does not have clear title or
                                    first security interest; disposables; and
                                    "soft costs" such as sales tax, freight, and
                                    installation are excluded from this line.

                           5)       Subject to final approval by Lender's Credit
                                    Committee.

                           6)       This is a statement of mutual intent and not
                                    an agreement to finance. The terms set forth
                                    above are not therefore binding until a loan
                                    agreement is executed between Borrower and
                                    Lender for specific items of equipment.

COMMITMENT
FEE:                       $10,000.00 commitment fee. This fee shall be fully
                           credited pro-rata to schedules as financed. All or a
                           portion of said fee will be forfeited If this
                           transaction is approved by Lender and not executed by
                           Borrower as called for in this proposal. However, in
                           the event Borrower uses the line in good faith but
                           does not use the entire line, then any remaining fee
                           will be applied to any new line agreed to by Borrower
                           and Lender prior to

                                      -4-
<PAGE>

                           9/30/98. The entire fee will be returned to Borrower
                           promptly in the event Len4er fails to approve this
                           transaction.

If the terms of this proposal meet with your approval, please sign and return
with your commitment fee, and we will proceed. Unless previously accepted, this
proposal will expire 5/16/98.

We look forward to meeting your equipment financing needs and continuing a
mutually rewarding relationship.

----------------------------- --------------------------------------------------
Sincerely,                    ACCEPTED:  Rosetta Inpharmatics, Inc.

/s/ Barbara B. Kaiser         By: /s/
                                  ------------------------------------------
Barbara B. Kaiser             Title: SR. V.P. & C.O.O.
EVP/General Manager                  ---------------------------------------
                              Date: MAY 14, 1998
                                    ----------------------------------------
----------------------------- --------------------------------------------------

Pricing:

         Option 1:
                  ------
         Option 2:   X
                  ------

                                      -5-<PAGE>

                         Lease Management Services, Inc.

                          EQUIPMENT FINANCING AGREEMENT

                                  Number 10821

THIS EQUIPMENT FINANCING AGREEMENT NUMBER 10821 ("Agreement") is dated as of the
date set forth at the foot hereof and is between LEASE MANAGEMENT SERVICES,
INC., ("Secured Party") and ACACIA BIOSCIENCES, INC., ("Debtor").

1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this Agreement
cover each item of machinery, equipment and other property (individually an
"Item" or "Item of Equipment" and collectively the "Equipment") described in a
schedule now or hereafter executed by the parties hereto and made a part hereof
(individually a "Schedule" and collectively the "Schedules"). Debtor hereby
grants Secured Party a security interest in and to all Debtor's right, title and
interest in arid to the Equipment under the Uniform Commercial Code, such grant
with respect to an Item of Equipment to be as of Debtor's execution of a related
Equipment Financing Commitment referencing this Agreement or, if Debtor then has
no interest in such Item, as of such subsequent time as Debtor acquires an
interest in the Item. Such security interest is granted by Debtor to secure
performance by Debtor of Debtor's obligations to Secured Party hereunder and
under any other agreements under which Debtor has or may hereafter have
obligations to Secured Party. Debtor will ensure that such security interest
will be and remain a sole and valid first lien security interest subject only to
the lien of current taxes and assessment not in default but only if such taxes
are entitled to priority as a matter of law.

2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this Agreement
respecting an Item of Equipment, except the obligation to pay installment
payments with respect thereto which will commence as set forth in Paragraph 3
below, commence upon the grant to Secured Party of a security interest in the
Item. Debtor's obligations hereunder with respect to an Item of Equipment and
Secured Party's security interest therein will continue until payment of all
amounts due, and performance of all terms and conditions required hereunder
provided, however, that if this Agreement is in default said obligations and
security interest will continue during the continuance of said default. Upon
termination of Secured Party's security interest in an Item of Equipment,
Secured Party will execute such release of interest with respect thereto as
Debtor reasonably requests.

3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances Secured
Party makes on account of the Equipment in installment payments in the amounts
and at the times set forth in the Schedules, whether or not Secured Party has
rendered an invoice therefor, at the office of Secured Party set forth at the
foot hereof; or to such person and/or at such other place as Secured Party may
from time to time designate by notice to Debtor. Any other amounts required to
be paid Secured Party by Debtor hereunder are due upon Debtor's receipt of
Secured Party's invoice therefor and will be payable as directed in the invoice.
<PAGE>

Payments under this Agreement may be applied to Debtor's then accrued
obligations to Secured Party in such order as Secured Party may choose.

4. NET AGREEMENT; NO OFFSET, SURVIVAL. This Agreement is a net agreement, and
Debtor will not be entitled to any abatement of installment payments or other
payments due hereunder or any reduction thereof under any circumstance or for
any reason whatsoever. Debtor hereby waives any and all existing and future
claims, as offsets, against any installment payments or other payments due
hereunder and agrees to pay the installment payments and other amounts due
hereunder as and when due regardless of any offset or claim which may be
asserted by Debtor or on its behalf. The obligations and liabilities of Debtor
hereunder will survive the termination of the Agreement.

5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT. DEBTOR
ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND ACQUIRED
SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT AND WILL NOT
BE THE VENDOR OF ANY EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND WILL NOT
MAKE ANY AGREEMENT, REPRESENTATION OR WARRANTY WITH RESPECT TO THE
MERCHANTABILITY, CONDITION, .QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE
OR VALUE OF THE EQUIPMENT OR ANY OTHER MATTER WITH RESPECT THERETO IN ANY
RESPECT WHATSOEVER.

6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR OTHER
SIJPPL1ER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN CONNECTION
WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED PARTY IS NOT BOUND BY
A REPRESENTATION OF ANY SUCH PARTY AND, AS CONTEMPLATED IN PARAGRAPH 21 BELOW,
THE ENTIRE AGREEMENT OF SECURED PARTY AND DEBTOR CONCERNING THE FINANCING OF THE
EQUIPMENT IS CONTAINED IN THIS AGREEMENT AS IT MAY BE AMENDED ONLY AS PROVIDED
IN THAT PARAGRAPH.

7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering the
Equipment or any Items thereof will conclusively establish that such Equipment
has been included under and will be subject to all the terms and conditions of
this Agreement. If Debtor has not furnished Secured Party with an executed
Schedule by the Earlier of fourteen (14) days after receipt thereof or
expiration of the commitment period set forth in the applicable Equipment
Financing Agreement, Secured Party may terminate its obligation to advance funds
as to the applicable Equipment.

8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control at the
Equipment Location designated in the applicable Schedule, or at such other
location to which such Item may have been moved with the prior written consent
of Secured Party. Whenever requested by Secured Party, Debtor will advise

                                      -2-
<PAGE>

Secured Party as to the exact location of an Item of Equipment. Secured Party
will have the right to inspect the Equipment and observe its use during normal
business hours, subject to Debtor's security procedures and to enter into and
upon the premises where the Equipment may be Located for such purpose. The
Equipment will at all times be used solely for commercial or business purposes
and operated in a careful and proper manner and in compliance with all
applicable laws, ordinances, rules and regulations, all conditions and
requirements of the policy or policies of insurance required to be carried by
Debtor under the terms of this Agreement and all manufacturer's instructions and
warranty requirements. Any modifications or additions to the Equipment required
by any such governmental edict or insurance policy will be promptly made by
Debtor.

9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written consent of
Secured Party, Debtor will not make any alterations, additions or improvements
to any Item of Equipment which detract from its economic value or functional
utility, except as may be required pursuant to Paragraph 8 above, Secured
Party's security interest in the Equipment will include all modifications and
additions thereto and replacements and substitutions therefor, in whole or in
part. Such reference to replacements and substitutions will not grant Debtor
greater rights to replace or substitute than are provided in Paragraph 11 below
or as may be allowed upon the prior written consent of Secured Party.

10. MAINTENANCE. Debtor will maintain the Equipment in good repair, condition
and working order. Debtor will also cause each Item of Equipment for which a
service contract is generally available to be covered by such a contract which
provides coverage's typical to property of the type involved and is issued by a
competent servicing entity.

11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of; damage to or destruction of an Item of Equipment ("Casualty
Occurrence"). Debtor will give Secured Party prompt notice thereof and will
thereafter place such Item in good repair, condition and working order,
provided, however, that if such Item is determined by Secured Party to be Lost,
stolen, destroyed or damaged beyond repair, is requisitioned or suffers a
constructive total loss as defined in any applicable insurance policy carried by
Debtor in accordance with Paragraph 14 below, Debtor, at Secured Party's option,
will (a) replace such Item with like Equipment in good repair, condition and
working order whereupon such replacement equipment will be deemed such Item for
all purposes hereof or (b) pay Secured Party the "Casualty Value" of such Item
which will equal the total of (i) all installment payments and other amounts due
from Debtor to Secured Party at the time of such payment and (ii) future
installment payments due with respect to such Item with each such payment
including any final uneven payment discounted at a rate equal to the discount
rate of the Federal Reserve Bank of San Francisco from the date due to the date
of such payment.

Upon such replacement or payment, as appropriate, this Agreement and Secured
Party's security interest will terminate with, and only with, respect to the
Item of Equipment so replaced or as to which such payment is made in accordance
with Paragraph 2 above.

                                      -3-
<PAGE>

12. TITLING; REGISTRATION. Each item of Equipment subject to title registration
laws will at all times be titled and/or registered by Debtor as Secured Party's
agent and attorney-in-fact with full power and authority to register (but
without power to affect title to) the Equipment in such manner and in such
jurisdiction or jurisdictions as Secured Party directs. Debtor will promptly
notify Secured Party of any necessary or advisable retitling and/or
reregistration of an Item of Equipment in a jurisdiction other than the one in
which such Item is then titled and/or registered. Any and all documents of title
will be furnished or caused to be furnished Secured Party by Debtor within sixty
(60) days of the date any titling or registering or restating or reregistering,
as appropriate, is directed by Secured Party.

13. TAXES. Debtor will make all filings as to and pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges and
assessments based on the ownership or use of the Equipment and will pay as
directed by Secured Party or reimburse Secured Party for all other taxes,
including, but not limited to, gross receipt taxes (exclusive of federal and
state taxes based on Secured Party's net income, unless such net income taxes
are in substitution for or relieve Debtor from any taxes which Debtor would
otherwise be obligated to pay under the terms of this Paragraph 13), fees,
charges and assessments whatsoever, however designated, whether based on the
installment payments or other amounts due hereunder, levied, assessed or imposed
upon the Equipment or otherwise related hereto or to the Equipment, now or
hereafter levied, assessed or imposed under the authority of a federal, state,
or local taxing jurisdiction, regardless of when and by whom payable. Filings
with respect to such other amounts will, at Secured Party's option, be made by
Secured Party or by Debtor as directed by Secured Party.

14. INSURANCE. Debtor will procure and continuously maintain all risk insurance
against loss or damage to the Equipment from any cause whatsoever for not less
than the full replacement value thereof naming Secured Party as Loss Payee. Such
insurance must be in a form and with companies approved by Secured Party, must
provide at least thirty (30) days advance written notice to Secured Party of
cancellation, change or modification in any term, condition, or amount of
protection provided therein, must provide full breach of warranty protection and
must provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide Secured
Party with an original policy or certificate evidencing such insurance. In the
event of art assignment of this Agreement of which Debtor has notice, Debtor
will cause such insurance to provide the same protection to the assignee as its
interests may appear. The proceeds of such insurance, at the option of the
Secured Party or such assignee, as appropriate, will be applied toward (a)
repair or replacement of the appropriate Item or Items of Equipment, (b) payment
of the Casualty Value thereof and/or (c) payment of, or as provision for,
satisfaction of any other accrued obligations of Debtor hereunder. Debtor hereby
appoints Secured Party as Debtor's attorney-in-fact with full power and
authority to do all things, including, but not limited to, making claims,
receiving payments and endorsing documents, checks or drafts, necessary to
secure payments due under any policy contemplated hereby on account of a
Casualty Occurrence. Debtor and Secured Party contemplate that the jurisdictions
where the Equipment will be located will not impose any liability upon Secured
Party for personal injury and/or property damage resulting out of the
possession, use, operation or condition of the Equipment. In the event Secured
Party determines that such is not or may not be the case with respect to a given
jurisdiction, Debtor wilt provide

                                      -4-
<PAGE>

Secured Party with public liability and property damage coverage applicable to
the Equipment in such amounts and in such form as Secured Party requires.

15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due hereunder or
to perform any of its other obligations under this Agreement, Secured Party may,
at its option, but without any obligation to do so, pay such amounts or perform
such obligations, and Debtor will reimburse Secured Party the amount of such
payment or cost of such performance, plus interest at 1.5% per month.

16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnity, defend, protect, save and keep harmless Secured Party from and
against any and all liabilities, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including court costs and legal
expenses, of whatever kind and nature, imposed on, incurred by or asserted
against Secured Party (whether or not also indemnified against by any other
person) in any way relating to or arising out of this Agreement or the
manufacture, financing, ownership, delivery, possession, use, operation,
condition or disposition of the Equipment by Secured Party or Debtor, including,
without limitation, any claim alleging latent and other defects, whether or not
discoverable by Secured Party or Debtor, and any other claim arising out of
strict liability in tort, whether or not in either instance relating to an event
occurring while Debtor remains obligated under this Agreement, and any claim for
patent, trademark or copyright infringement, Debtor agrees to give Secured Party
and Secured Party agrees to give Debtor notice of any claim or liability hereby
indemnified against promptly following learning thereof.

17. DEFAULT. Any of the following will constitute an event of default hereunder:
(a) Debtor's failure to pay when due any installment payment or other amount due
hereunder, which failure continues for ten (10) days after the due date thereof;
(b) Debtor's default in performing any other obligation, term or condition of
this Agreement or any other agreement between Debtor and Secured Party or
default under any further agreement providing security for the performance by
Debtor of' its obligations hereunder provided such default has continued for
more than twenty (20) days, except as provided in (c) and (d) hereinbelow, or,
without limiting the generality of subparagraph (1) hereinbelow, default under
any lease or any mortgage or other instrument contemplating the provision of
financial accommodation applicable to the real property where an Item of
Equipment is located; (c) any writ or order of attachment or execution or other
legal process being levied on or charged against any Item of Equipment and not
being released or satisfied within ten (10) days; (d) Debtor's failure to comply
with its obligations under Paragraph 14 above or any transfer by Debtor in
violation of Paragraph 21 below; (e) a non-appealable judgment for the payment
of money in excess of $100,000 being rendered by a court of record against
Debtor which Debtor does not discharge or make provision for discharge in
accordance with the terms thereof within ninety (90) days from the date of entry
thereof, (f) death or judicial declaration of incompetency of Debtor, if an
individual; (g) the filing by Debtor of a petition under the Bankruptcy Code or
any amendment thereto or under any other insolvency law or law providing for the
relief of debtors, including, without limitation, a petition for reorganization,
arrangement or extension, or the commission by Debtor of an act of bankruptcy;
(h) the filing against Debtor of any such petition not dismissed or permanently
stayed within thirty (30) days of the filing thereof; (i) the voluntary or
involuntary making of an assignment of

                                      -5-
<PAGE>

substantial portion of its assets by Debtor for the benefit of creditors,
appointment of a receiver or trustee for Debtor or for any of Debtor's assets,
institution by or against Debtor or any other type of insolvency proceeding
(under the Bankruptcy Code or otherwise) or of any formal or informal proceeding
for dissolution, liquidation, settlement of claims against or winding up of the
affairs of Debtor, Debtor's cessation of business activities or the making by
Debtor of a transfer of all or a material portion of Debtor's assets or
inventory not in the ordinary course of business; (j) the occurrence of any
event described in parts (e), (f), (g), (h) or (i) hereinabove with respect to
any guarantor or other party liable for payment or performance of this
Agreement; (k) any certificate, statement, representation, warranty or audit
heretofore or hereafter furnished with respect hereto by or on behalf of Debtor
or any guarantor or other party liable for payment or performance of this
Agreement proving to have been false in any material respect at the time as of
which the facts therein set forth were stated or certified or having omitted any
substantial contingent or unliquidated liability or claim against Debtor or any
such guarantor or other party; (l) breach by Debtor of any lease or other
agreement providing financial accommodation under which Debtor or its property
is bound; or (m) a transfer of effective control of Debtor, if an organization.

18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a Secured Party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial Code
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and, without limiting
the foregoing, Secured Party may exercise any one or more of the following
remedies: (a) declare the Casualty Value or such lesser amount as may be set by
law immediately due and payable with respect to any or all Items of Equipment
without notice or demand to Debtor; (b) sue from time to time for and recover
all installment payments and other payments then accrued and which accrue during
the pendency of such action with respect to any or all Items of Equipment; (c)
take possession of and, if deemed appropriate, render unusable any or all Items
of Equipment, without demand or notice, wherever same may be located, without
any court order or other process of law and without liability for any damages
occasioned by such taking of possession and remove, keep and store the same or
use and operate or lease the same until sold; (d) require Debtor to assemble any
or all Items of Equipment at the Equipment Location therefor, or at such
location to which such Equipment may have been moved with the written consent of
Secured Party or such other location in reasonable proximity to either of the
foregoing as Secured Party designates; (e) upon ten (10) days notice to Debtor
or such other notice as may be required by law, sell or otherwise dispose of any
Item of Equipment, whether or not in Secured Party's possession, in a
commercially reasonable manner at public or private sale at any place deemed
appropriate and apply the new proceeds of such sale, after deducting all costs
of such sale, including, but not limited to, costs of transportation,
repossession, storage, refurbishing, advertising and brokers' fees, to the
obligations of Debtor to Secured Party hereunder or otherwise1 with Debtor
remaining liable for any deficiency and with any excess being returned to
Debtor; (f) upon thirty (30) days notice to Debtor, retain any repossessed or
assembled Items of Equipment as Secured Party's own property in full
satisfaction of Debtor's liability for the installment payments due hereunder
with respect thereto, provided that Debtor will have the right to redeem such
Items by payment in fill of its obligations to Secured Party hereunder or
otherwise or to require Secured Party to sell or otherwise dispose of such Items
in

                                      -6-
<PAGE>

the manner set forth in subparagraph (e) hereinabove upon notice to Secured
Party within such thirty (30) day period; or (g) utilize any other remedy
available to Secured Party under the Uniform Commercial Code or similar
provision of law or otherwise at law or in equity.

No right or remedy conferred herein is exclusive of any other right or remedy
conferred herein or by law; but all such remedies are cumulative of every other
right or remedy conferred hereunder or at law or in equity, by statute or
otherwise, and may be exercised concurrently or separately from time to time.
Any sale contemplated by subparagraph (e) of this Paragraph 18 may be adjourned
from time to time by announcement at the time and place appointed for such sale,
or for any such adjourned sale, without further published notice, Secured Party
may bid and become the purchaser at any such sale. Any sale of an Item of
Equipment, whether under said subparagraph or by virtue of judicial proceedings,
will operate to divest all right, title, interest, claim and demand whatsoever;
either at law or in equity, of Debtor in and to said item and will be a
perpetual bar to any claim against such Item, both at law and in equity, against
Debtor and all persons claiming by, through or under Debtor.

19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this Agreement and such proceedings are discontinued or abandoned for any
reason or are determined adversely, then and in every such case Debtor and
Secured Party will be restored to their former positions and rights hereunder.

20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorney's fees and court costs and sales costs not offset
against sales proceeds under Paragraph 18 above, incurred by Secured Party in
exercising any of its rights or remedies hereunder or enforcing any of the
terms, conditions or provisions hereof. This obligation includes the payment or
reimbursement of all such amounts whether an action is ultimately filed and
whether an action is ultimately dismissed.

21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor will
not sell, lease, pledge or hypothecate, except as provided in this Agreement,
any Item of Equipment or any interest therein or assign, transfer, pledge, or
hypothecate this Agreement or any interest in this Agreement or permit the
Equipment to be subject to any lien, charge or encumbrance of any nature except
the security interest of Secured Party contemplated hereby. Debtor's interest
herein is not assignable and will not be assigned or transferred by operation of
law. Consent to any of the foregoing prohibited acts applies only in the given
instance and is not a consent to any subsequent like act by Debtor or any other
person.

All rights of Secured Party hereunder may be assigned, pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without notice
to Debtor but always, however, subject to the rights of Debtor under this
Agreement. If Debtor is given notice of any such assignment, Debtor will
acknowledge receipt thereof in writing. In the event Secured Party assigns this
Agreement or the installment payments due or to become due hereunder or any
other interest herein, whether as security for any of its indebtedness or
otherwise, no breach or default by Secured Party hereunder or pursuant to any
other agreement between Secured Party and Debtor, should there be one, will
excuse performance by Debtor of any provision hereof; it being

                                      -7-
<PAGE>

understood that in the event of such default or breach by Secured Party that
Debtor will pursue any rights on account thereof solely against Secured Party.
No such assignee, unless such assignee agrees in writing, will-be obligated to
perform any duty, covenant or condition required to be performed by Secured
Party in connection with this Agreement.

Subject always to the foregoing, this Agreement inures to the benefit of, and is
binding upon, the heirs, legatees, personal representative, successors and
assigns of the parties hereto.

22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with labels,
plates, decals or other markings stating that Secured Party has an interest in
the Equipment, Debtor will affix and keep the same prominently displayed on the
Equipment or will otherwise mark the Equipment or its then location or
locations, as appropriate, at Secured Party's request to indicate Secured
Party's security interest in the Equipment. The Equipment is, and at all times
will remain, personal property notwithstanding that the Equipment or any Item
thereof may now be, or hereafter become, in any manner affixed or attached to,
or embedded in, or permanently resting upon real property or any improvement
thereof or attached in any manner to what is permanent as by means of cement,
plaster, nails, bolts, screws or otherwise. If requested by Secured Party,
Debtor will obtain and deliver to Secured Party waivers of interest or liens in
recordable form satisfactory to Secured Party from au persons claiming any
interest in the real property on which an Item of Equipment is or is to be
installed or located.

23. LATE CHARGES. Time is of the essence in this Agreement and if any
Installment Payment is not paid within ten (10) days after the due date thereof;
Secured Party shall have the right to add and collect, and Debtor agrees to pay;
(a) a late charge on and in addition to, such Installment Payment equal to five
percent (5%) of such Installment Payment or a lesser amount if established by
any state or federal statute applicable thereto, and (b) interest on such
Installment Payment from thirty (30) days after the due date until paid at the
highest contract rate enforceable against Debtor under applicable law but never
to exceed eighteen percent (18%) per annum.

24. NON-WAIVER. No covenant or condition of this Agreement can be waived except
by the written consent of Secured Party. Forbearance or indulgence by Secured
Party in regard to any breach hereunder will not constitute a waiver of the
related covenant or condition to be performed by Debtor.

25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party hereunder
Debtor will execute and deliver to Secured Party such financing statements and
similar documents as Secured Party requests. Debtor authorizes Secured Party
where permitted by law to make filings of such financing statements without
Debtor's signature. Debtor further will furnish Secured Party (a) on a timely
basis, Debtor's future financial statements, including Debtor's most recent
annual report, balance sheet and income statement, prepared in accordance with
generally accepted accounting principles, which reports, Debtor warrants, shall
fully and fairly represent the true financial condition of Debtor (b) any other
information normally provided by Debtor to the public and (c) such other
financial data or information relative to this Agreement and the Equipment,
including, without limitation, copies of vendor proposals and purchase orders
and

                                      -8-
<PAGE>

agreements, listings of serial numbers or other identification data and
confirmations of such information, as Secured Party may from time to time
reasonably request. Debtor wilt procure and/or execute, have executed,
acknowledge, have acknowledged, deliver to Secured Party, record and file such
other documents and showings as Secured Party deems necessary or desirable to
protect its interest in and rights under this Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all filing, search, title report, legal and other fees incurred by
Secured Party in connection with any documents to be provided by Debtor pursuant
to this Paragraph or Paragraph 22 and any further similar documents Secured
Party may procure.

26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial data
and other information which Debtor has submitted, or will submit, to Secured
Party in connection with this Agreement is, or will be at time of delivery, as
appropriate, a true and complete statement of the matters therein contained.
Debtor further certifies and warrants: (a). this Agreement has been duly
authorized by Debtor and when executed and delivered by the person signing on
behalf of Debtor below will constitute the legal, valid and binding obligation,
contract and agreement of Debtor enforceable against Debtor in accordance with
its respective terms: (b) this Agreement and each and every showing provided by
or on behalf of Debtor in connection herewith may be relied upon by Secured
Party in accordance with the terms thereof notwithstanding the failure of Debtor
or other applicable party to ensure proper attestation thereto, whether by
absence of a seal or acknowledgment or otherwise; (c) Debtor has the right,
power and authority to grant a security interest in the Equipment to Secured
Party for the uses and purposes herein set forth and (d) each Item of Equipment
will, at the time such Item becomes subject hereto, be in good repair, condition
and working order.

27. ENTIRE AGREEMENT. This instrument with exhibits and related documentation
constitutes the entire agreement between Secured Party and Debtor and will not
be amended, altered or changed except by a written agreement signed by the
parties.

28. NOTICES. Notices under this Agreement must be in writing and must be mailed
by United States mail, certified mail with return receipt requested, duly
addressed, with postage prepaid, to the party involved at its respective address
set forth at the foot hereof or at such other address as each party may provide
on notice to the other from time to time. Notices will be effective when
deposited. Each party will promptly notify the other of any change in that
party's address.

29. GENDER, NUMBER: JOINT AND SEVERAL LIABILITY. Whenever the context of this
Agreement requires, the neuter gender includes the feminine or masculine and the
singular number includes the plural; and whenever the words "Secured Party are
used herein, they include all assignees of Secured Party, it being understood
that specific reference to "assignee" in Paragraph 14 above is for further
emphasis. If there is more than one Debtor named in this Agreement, the
liability of each will be joint and several.

30. TITLES. The titles to the Paragraphs of this Agreement are solely for the
convenience of the parties and are not an aid in the interpretation of the
instrument.

                                      -9-
<PAGE>

31. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in
accordance with the laws of the State of California, Venue for any action
related to the Agreement will be in an appropriate court in San Mateo County,
California, to which Debtor consents, or in another court selected by Secured
Party which has jurisdiction over the parties. In the event any provision hereof
is declared invalid, such provision will be deemed severable from the remaining
provisions of this Agreement, which will remain in full force and effect.

32. TIME. Time is of the essence of this Agreement and for each and all of its
provisions.

In WITNESS WHEREOF, the undersigned have executed this Agreement as of September
25, 1997.

DEBTOR:
ACACIA BIOSCIENCES, INC.
4136 Lakeside Drive
Richmond, CA 94806

By:      /s/ Julie C. Neumann
         --------------------------
Title:   Director, Finance & Admin.

SECURED PARTY:
LEASE MANAGEMENT SERVICES, INC.
2500 Sand Hill Road, Suite 101
Menlo Parlc CA 94025

By:      /s/ Barbara B. Karian
         --------------------------
Title:   EVP/General Manager

                                      -10-

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