Document:

<B><P ALIGN="CENTER"> Exhibit 10.156 </P>
<P ALIGN="CENTER">AXYS 468 LITTLEFIELD LLC</P>
</FONT><P ALIGN="CENTER">OPERATING AGREEMENT</P>
<P ALIGN="JUSTIFY">This Operating Agreement </B>(&quot;this Agreement&quot;)<B>
</B>is made as of May 4, 2001 by and between <B>Axys Pharmaceuticals, Inc.,
</B>a Delaware corporation (&quot;API&quot;)<B> </B>and <B>Axys 468 Littlefield
LLC</B>, a California limited liability company (the &quot;Company&quot;), with
respect to the operation of the Company.  Capitalized terms used in this
Agreement not otherwise defined herein have the meanings given to them in
Section&nbsp;6.</P>
<P ALIGN="JUSTIFY">The parties hereby agree as follows:</P>
<OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Formation Of
Company</FONT>.</LI></P>
<OL>

<FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Formation</FONT>.  </B>On May 4,
2001, the Company was organized as a California limited liability company under
and pursuant to the California Act by the filing of the Articles with the
Secretary of State of the State of California.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Principal Place Of
Business</FONT>.  </B>The principal place of business of the Company will be 180
Kimball Way, South San Francisco, California.  The Company may locate its other
places of business at any other place or places as the Manager may from time to
time deem advisable.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Term</FONT>.  </B>The term of
the Company commenced on May 4, 2001 upon the filing of the Articles with the
Secretary of State of the State of California and shall be of continuing
duration, unless the Company is dissolved in accordance with the provisions of
this Agreement or the California Act.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Company Purposes</FONT>. </B>The
purpose of the Company shall be to (i) invest in, develop, manage, and operate
the real property commonly known as 468 Littlefield Avenue, South San Francisco,
California (the &quot;Property&quot;), directly or through ownership interests
in other entities; and (ii) engage in any other lawful acts or activities for
which limited liability companies may be organized under the laws of the State
of California.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Tax
Classification</FONT>.</B>&#9;For U.S. federal and state tax purposes only, it
is intended that the Company's existence as a separate entity from its sole
Member, API, be disregarded pursuant to Code Section 7701 and the Treasury
Regulations promulgated thereunder and applicable state tax law (the "check-the-
box regulations").  Accordingly, the Manager will cause the Company to file such
elections and informational returns and perform such actions as may be required
under the check-the-box regulations. </LI></P></OL>

<P ALIGN="JUSTIFY">If at some future date the Member deems it advisable for
additional Persons to become Members of the Company, the Company and the Member
will cause this Agreement (including this Section 1.5) to be amended pursuant to
Section 7.3.</P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Manager And
Officers</FONT>.</LI></P>
<OL>

<FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Authority Of Manager.
</B></FONT>Except with respect to the matters as to which the approval of the
Member is expressly required hereunder, the Manager will have full and exclusive
authority to manage the business and affairs of the Company and to perform all
acts as may be necessary or appropriate for the conduct of the Company's
business.<B> </B>Unless authorized to do so by this Agreement or by the Manager,
no Member, agent or employee of the Company will have any power or authority to
bind the Company in any way, to pledge its credit or to render it liable for any
purpose.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Tenure, Election And
Qualifications Of Manager</FONT>.  </B>There will be one (1) Manager.  The
initial Manager will be API.  The Manager will hold office until the earliest of
(1)&nbsp;the election and qualification of its successor; and (2)&nbsp;its
dissolution, resignation or removal.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Resignation</FONT>.  </B>The
Manager may resign at any time by giving written notice to the Member.  The
resignation of a Manager will take effect upon receipt of notice thereof or at
such later time as will be specified in such notice; unless otherwise specified
therein, the acceptance of such resignation will not be necessary to make it
effective.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Removal</FONT>.</B>  The Manager
may be removed at any time, with or without cause, by the Member.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Vacancies</FONT>.</B>  Any
vacancy occurring in the office of Manager will be filled by the affirmative
vote of the Member.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Appointment Of Officers</FONT>.
</B>The Manager may appoint officers of the Company, including, but not limited
to:  (a)&nbsp;a president; (b)&nbsp;one or more vice presidents; (c)&nbsp;a
secretary and (d)&nbsp;a chief financial officer.  The Manager may delegate a
portion of the day-to-day management responsibilities to any such officers, and
such officers will have the authority to contract for, negotiate on behalf of
and otherwise represent the interests of the Company as authorized by the
Manager in any job description created by the Manager.  </LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Salaries</FONT>.</B>  The
Manager shall receive no salary or other compensation from the Company unless
approved by the Member; <I>provided, however,</I> the foregoing shall not
prevent any employee of or consultant to the Company from receiving salary or
other compensation from the Company with respect to his, her or its services as
an employee or consultant.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Other Compensation</FONT>.</B>
Each Member agrees and acknowledges that the Company shall pay to Manager as an
operating expense of the Property a construction management fee of $360,000 for
construction of improvements on the Property, which fee shall be paid to Manager
in equal monthly installments during the term of the construction loan from
Cupertino National Bank &amp; Trust.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Member Approval Of Certain
Matters</FONT>.</LI></P>
</B><P ALIGN="JUSTIFY">The Company will not take any of the following actions
without the written approval of the Member:</P>
<OL>

<P ALIGN="JUSTIFY"><LI>Any action for which Member approval is required under
the California Act;</LI></P>
<P ALIGN="JUSTIFY"><LI>Any action expressly described elsewhere in this
Agreement as requiring Member approval; and</LI></P>
<P ALIGN="JUSTIFY"><LI>Any transaction or series of related transactions outside
the normal course of business:</LI></P>
<OL TYPE="a">

<P ALIGN="JUSTIFY"><LI>that results in the sale of substantially all of the
assets of the Company; or</LI></P>
<P ALIGN="JUSTIFY"><LI>in which new equity securities of, or equity securities
in, the Company are issued.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Capital Contributions.
</B></FONT>The Member will contribute the property set forth in <I>Schedule A
</I>hereto as its Capital Contribution.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Records And
Reports</FONT>.</LI></P>
<OL>

<FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Records And Reports</FONT>.  </B>At
the expense of the Company, the Manager will maintain in the principal office of
the Company records and accounts of all operations and expenditures of the
Company for a period of five (5) years from the end of the Fiscal Year during
which the last entry was made on such record.  At a minimum the Company will
keep the following records:</LI></P>
<OL TYPE="a">

<P ALIGN="JUSTIFY"><LI>A current list of the full name and last known business
address of the Manager and the Member;</LI></P>
<P ALIGN="JUSTIFY"><LI>A copy of the Articles, together with executed copies of
any written powers of attorney pursuant to which this Agreement and any
certificate and all amendments thereto have been executed;</LI></P>
<P ALIGN="JUSTIFY"><LI>Copies of the Company's federal, foreign, state and local
income tax returns and reports, if any, for the three (3) most recent
years;</LI></P>
<P ALIGN="JUSTIFY"><LI>Copies of this Agreement and all amendments
thereto;</LI></P>
<P ALIGN="JUSTIFY"><LI>True and full information regarding the status of the
business and financial condition of the Company, including financial statements
of the Company for the three (3) most recent years; and</LI></P>
<P ALIGN="JUSTIFY"><LI>True and full information regarding the amount of cash
and a description and statement of the agreed value of any other property or
services contributed by the Member and that the Member has agreed to contribute
in the future, and the date on which such Person became a Member.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Member Access To Records</FONT>.
</B>Upon written request of the Member, setting forth the purpose for such
request, the Member will have the right, during ordinary business hours, to
inspect and copy such Company documents at the Member's expense1.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Returns And Other
Elections</FONT>.  </B>The Manager will cause the preparation and timely filing
of all tax returns required to be filed by the Company pursuant to the Code and
all other tax returns deemed necessary and required in each jurisdiction in
which the Company does business.  Copies of such returns, or pertinent
information therefrom, will be furnished to the Member within a reasonable time
after the end of the Company's Fiscal Year.  All elections permitted to be made
by the Company under federal or state laws will be made by the Manager in his,
her or its discretion.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Accounting Principles</FONT>.
</B>The books and records of the Company will be determined in accordance with
generally accepted accounting principles consistently applied under the accrual
method of accounting.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Dissolution</FONT>.</LI></P>
<OL>

<FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Dissolution Events</FONT>.  </B>The
Company will be dissolved upon the occurrence of any of the following events
(each, a &quot;Dissolution Event&quot;):</LI></P>
<OL TYPE="a">

<P ALIGN="JUSTIFY"><LI>the affirmative vote of the Member;</LI></P>
<P ALIGN="JUSTIFY"><LI>the entry of a decree of judicial dissolution under the
California Act; or</LI></P>
<P ALIGN="JUSTIFY"><LI>the withdrawal, bankruptcy or dissolution of the
Member.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Winding Up</FONT>.  </B>The
Company will cease to carry on its business, except insofar as may be necessary
for the winding up of its business, upon the occurrence of a Dissolution Event,
but its separate limited liability company existence will continue until a
Certificate of Dissolution has been filed with the Secretary of State of the
State of California or until a decree dissolving the Company has been entered by
a court of competent jurisdiction.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Liquidation</FONT>.  </B>In
settling accounts in dissolution, the assets of the Company will be applied in
the following order:</LI></P>
<OL TYPE="a">

<P ALIGN="JUSTIFY"><LI>to creditors, in the order of priority as provided by
law, and the balance</LI></P>
<P ALIGN="JUSTIFY"><LI>to the Member.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Dissolution</FONT>.</LI></P>
<OL TYPE="a">

</B><P ALIGN="JUSTIFY"><LI>When all debts, liabilities and obligations have been
paid and discharged or adequate provisions have been made therefor and all of
the remaining property and assets have been distributed to the Member, a
Certificate of Dissolution will be executed in such form as is prescribed by the
Secretary of State of the State of California and same is filed
therewith.</LI></P>
<P ALIGN="JUSTIFY"><LI>Upon the acceptance of the Certificate of Dissolution,
the existence of the Company will cease, except for the purpose of suits, other
proceedings and appropriate action as provided in the California Act.  The
Manager will thereafter be a trustee for the Member and creditors of the Company
and as such will have authority to distribute any Company property discovered
after dissolution, convey real estate and take such other action as may be
necessary on behalf of and in the name of the Company.</LI></P></OL>
</OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Definitions.</LI></P>
</B></FONT><P ALIGN="JUSTIFY">The following terms used in this Agreement have
the following meanings unless otherwise expressly provided elsewhere in this
Agreement:</P>
<OL>

<B><P ALIGN="JUSTIFY"><LI>&quot;Agreement&quot; </B>mean<B> </B>this
Agreement.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Articles&quot; </B>means the Company's Articles
of Organization, as the same exists or may hereafter be amended.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;California Act&quot; </B>means the California
Beverly-Killea Limited Liability Company Act, as the same exists or may
hereafter be amended.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Capital Contribution&quot; </B>means<B> </B>any
contribution to the capital of the Company in cash or property by the
Member.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Code&quot; </B>means the Internal Revenue Code
of 1986, as the same exists or may hereafter be amended.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Company&quot; </B>means AXYS 468
Littlefield<FONT SIZE=3> LLC</FONT>, a California limited liability
company.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Dissolution Event&quot; </B>means any of the
events specified in Section 6.1.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Fiscal Year&quot; </B>means the Company's fiscal
year.  The Company's fiscal year will be the same fiscal year as that of the
Member. </LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Manager&quot; </B>means the Person elected by
the Member pursuant to this Agreement and the California Act and shall initially
mean API.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Member&quot; </B>means, as of a given time, each
person that is a member of the Company at such time and shall initially mean
API.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Person&quot; </B>means any individual or
partnership, limited liability company, corporation, joint venture, trust, or
other business association or entity, and the heirs, executors, administrators,
legal representatives, successors, and assigns of such individual or entity
where the context so permits.</LI></P>
<B><P ALIGN="JUSTIFY"><LI>&quot;Treasury Regulations&quot; </B>means the Income
Tax Regulations, including any temporary regulations, promulgated under the
Code, as the same exists or may be amended from time to time.</LI></P></OL>

<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>General
Provisions</FONT>.</LI></P>
<OL>

<FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Notices</FONT>.  </B>Any notice,
demand or communication required or permitted to be given by any provision of
this Agreement will be deemed to have been sufficiently given or served for all
purposes if delivered personally to the party or to an executive officer of the
party to whom the same is directed or, if sent by registered or certified mail,
postage and charges prepaid, addressed to the intended recipient's address as it
appears in the Company's records.  Except as otherwise provided herein, any such
notice will be deemed to be given three (3) business days after the date on
which the same was deposited in a regularly maintained receptacle for the
deposit of United States mail, addressed and sent as set forth above.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Governing Law</FONT>.  </B>This
Agreement, and the application and interpretation hereof, will be governed
exclusively by the California Act.  </LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Amendments</FONT>.  </B>Any
amendment to this Agreement will not be effective unless signed by the
Member.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Execution Of Additional
Instruments</FONT>.  </B>The<B> </B>Member hereby agrees to execute such other
and further statements of interest and holdings, designations, powers of
attorney and other instruments necessary to comply with any laws, rules or
regulations.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Waivers</FONT>.  </B>The failure
of any party to seek redress for violation of or to insist upon the strict
performance of any covenant or condition of this Agreement will not prevent a
subsequent act from being a violation of this Agreement.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Rights And Remedies
Cumulative</FONT>.  </B>The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party will not
preclude or waive the right to use any or all other remedies.  Such rights and
remedies are given in addition to any other rights the parties may have by law,
statute, ordinance or otherwise.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Severability</FONT>.  </B>If any
provision of this Agreement or the application thereof to any person or
circumstance is held to be invalid, illegal or unenforceable to any extent, the
remainder of this Agreement and the application thereof will not be affected and
will be enforceable to the fullest extent permitted by law.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Heirs, Successors And
Assigns</FONT>.  </B>Each and all of the covenants, terms, provisions and
agreements herein contained will be binding upon and inure to the benefit of the
parties and, to the extent permitted by this Agreement, their respective heirs,
legal representatives, successors and assigns.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Creditors</FONT>.  </B>None of
the provisions of this Agreement will be for the benefit of or enforceable by
any creditor of the Company.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Counterparts</FONT>.  </B>This
Agreement may be executed in counterparts, each of which will be deemed an
original but all of which will constitute one and the same instrument.</LI></P>
<B><FONT COLOR="#0000ff"><P ALIGN="JUSTIFY"><LI>Attorneys' Fees</FONT>.  </B>In
the event any dispute among the parties results in litigation, the prevailing
party or parties in such dispute will be entitled to recover from the losing
party or parties all fees, costs and expenses of enforcing any right or rights
of the prevailing party or parties under this Agreement including, without
limitation, reasonable fees of attorneys and accountants.</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">The parties hereto have executed this Agreement as of the
date first above written.</P>
<U><P ALIGN="JUSTIFY"></P></U>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="50%" VALIGN="TOP">
<B><P>Axys Pharmaceuticals Inc., </B>a Delaware corporation</P><DIR>
<DIR>

<P>By: /s/ Douglas Altschuler</P>
<P>Name: Douglas Altschuler</P>
<P>Title: Vice President and General Counsel</P>
<P>&#9;</P>
<B><P ALIGN="JUSTIFY"></DIR>
</DIR>
</B></TD>
<TD WIDTH="50%" VALIGN="TOP">
<B><P>Axys 468 Littlefield LLC, </B>a California limited liability
company</P><DIR>

<P>By:<B>&#9;</B>Axys Pharmaceuticals, Inc., a Delaware corporation</P></DIR>

<P><B>&#9;</B>Its: Manager</P></DIR>
<P ALIGN="JUSTIFY">&#9;By: /s/ Douglas Altschuler</P><DIR>
<DIR>

<P>&#9;Name: Douglas Altschuler</P></DIR>
</DIR>

<P ALIGN="JUSTIFY">&#9;Title: Vice President and General Counsel</P>
<B><P ALIGN="JUSTIFY">&#9;</P>
</B><P ALIGN="JUSTIFY"></P>
<B><P ALIGN="JUSTIFY">&nbsp;</P>
</B><P>&nbsp;</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P>
<B><P ALIGN="CENTER">Schedule A</P>
<P ALIGN="CENTER">CAPITAL CONTRIBUTION</P></B>
<TABLE BORDER CELLSPACING=1 CELLPADDING=7 WIDTH=517>
<TR><TD WIDTH="55%" VALIGN="BOTTOM">
<B><P ALIGN="CENTER">Name of Member</B></TD>
<TD WIDTH="45%" VALIGN="BOTTOM">
<B><P ALIGN="CENTER">Capital</P>
<P ALIGN="CENTER">Contribution</B></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">Axys Pharmaceuticals, Inc.</P>
<P ALIGN="JUSTIFY">180 Kimball Way</P>
<P ALIGN="JUSTIFY">South San Francisco, CA 94080</P>
<P ALIGN="JUSTIFY"></TD>
<TD WIDTH="45%" VALIGN="TOP">
<P>Assignment of Ground Lease dated October 30, 1998, the Property, and transfer
of all improvements located thereon.</P>
<B><P ALIGN="CENTER"></B></TD>
</TR>
</TABLE>

<B><P ALIGN="JUSTIFY">&nbsp;</P>
</B><P ALIGN="JUSTIFY">&nbsp;</P></BODY>
</HTML><B><P Align="CENTER">    Exhibit 10.157 </P>
<P ALIGN="CENTER">CONSTRUCTION LOAN AGREEMENT</P>
</B><P ALIGN="JUSTIFY">This <B>CONSTRUCTION LOAN AGREEMENT</B>
(&quot;<I>Agreement</I>&quot;) is made and entered into as of June 21, 2001 by
and between <B>AXYS 468 LITTLEFIELD LLC</B>, a California limited liability
company (&quot;<I>Borrower</I>&quot;), and <B>CUPERTINO NATIONAL BANK</B>, a
California banking corporation (&quot;<I>Lender</I>&quot;).</P>
<B><P ALIGN="CENTER">RECITALS</P>
</B><P ALIGN="JUSTIFY">A.&#9;Borrower, as successor in interest to Guarantor (as
defined below), owns the leasehold estate created by that certain Ground Lease
(as defined below) of the real property (&quot;<I>Land</I>&quot;) described in
the attached <U>Exhibit A</U>, incorporated by this reference.</P>
<P ALIGN="JUSTIFY">B.&#9;Borrower proposes to construct on the Land the
Improvements (as defined below) in accordance with the Plans and Specifications
(as defined below).</P>
<P ALIGN="JUSTIFY">C.&#9;Borrower wishes to borrow from Lender up to the sum of
Eleven Million and 00/100 Dollars ($11,000,000.00) (the &quot;Loan&quot;) to be
used by Borrower for construction of the Improvements, subject to the terms of
this Agreement.</P>
<P ALIGN="JUSTIFY">D.&#9;The Loan is to be evidenced by the Term Note Secured by
Construction Leasehold Deed of Trust (the &quot;<I>Note</I>&quot;) in the
original principal amount of Eleven Million and 00/100 Dollars ($11,000,000.00)
dated the date hereof made by Borrower payable to the order of Lender, repayment
of which is to be secured by the Construction Leasehold Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing<I>
</I>dated the date hereof covering the Land and the Improvements (the
&quot;<I>Deed of Trust</I>&quot;) executed by Borrower in favor of <B>GREATER
BAY BANCORP</B>, a Delaware corporation (&quot;<I>Trustee</I>&quot;), in trust
for the benefit of Lender, and any further security that Lender now or from time
to time may require.</P>
<P ALIGN="JUSTIFY">E.&#9;Repayment of the Loan and completion of the
Improvements are to be guaranteed by Guarantor pursuant to the Guaranty
Agreement dated as of the date hereof executed by Guarantor in favor of Lender
(the &quot;<I>Guaranty</I>&quot;).</P>
<B><P ALIGN="CENTER">AGREEMENT</P>
<P ALIGN="JUSTIFY">NOW, THEREFORE</B>, for good and valuable consideration the
receipt and adequacy of which are acknowledged, the parties agree as
follows:</P>
<OL>

<P ALIGN="CENTER"><LI></LI></P>
<B><P ALIGN="CENTER">DEFINED TERMS</P>
<OL>

<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513871685"></B><U>Definitions</U>.  All
capitalized terms not defined herein shall have the meanings set forth in the
Deed of Trust.  As used in this Agreement, the following terms shall have the
following meanings:</A></LI></P>
<P ALIGN="JUSTIFY">&quot;<I>Agreement</I>&quot; means this Construction Loan
Agreement, and all exhibits and addendums attached hereto as all of the
foregoing may be amended, supplemented, or modified from time to time.</P>
<P ALIGN="JUSTIFY">&quot;<I>Business Day</I>&quot; means any day excluding
Saturday, Sunday, and any day which is a legal holiday under the laws of the
State of California, or is a day on which banking institutions located in the
State of California are closed.  </P>
<P ALIGN="JUSTIFY">&quot;<I>Cash Collateral Account Agreement</I>&quot; means
the Cash Collateral Account Agreement dated the date hereof by and between
Borrower and Lender.</P>
<P ALIGN="JUSTIFY">&quot;<I>Change</I>&quot; has the meaning set forth in
Section 3.2.</P>
<P ALIGN="JUSTIFY">&quot;<I>Commitment Date</I>&quot; means the date Lender
issued its commitment to fund the loan.</P>
<P ALIGN="JUSTIFY">&quot;<I>Completion Date</I>&quot; means the earlier to occur
of: (a) Loan Maturity Date; or (b) the last day of the month in which Completion
of the Improvements occurs.</P>
<P ALIGN="JUSTIFY">&quot;<I>Completion of the Improvements</I>&quot; means that,
in Lender's sole judgment: (a) the Improvements will have been constructed in a
good and workmanlike manner in accordance with: (i) the Plans and
Specifications, (ii) construction progress schedule; and (iii) the current
Direct and Indirect Cost Breakdowns as furnished to Lender by Borrower, approved
in writing by Lender, without substantial deviation, unless approved by Lender;
(b) all notices of completion with respect to the Improvements will have been
filed, all statutory lien periods will have expired, and all endorsements,
including but not limited to endorsement nos. 100, 101.2, 102.5, and 116 to
Lender's title policy shall have been delivered to Lender; (c) all costs of
constructing the Improvements will have been paid, including, without
limitation, interest on the Note prior to the Completion Date; (d) all materials
and fixtures usually furnished and installed at this stage of construction shall
have been fully furnished and installed; and (e) all of the conditions specified
in Section 4.9 will have been satisfied.</P>
<P ALIGN="JUSTIFY">&quot;<I>Default Rate</I>&quot; means a rate of interest
three percentage points (3%) over the interest rate as stated in the Note.</P>
<P ALIGN="JUSTIFY">&quot;<I>Direct Cost Breakdown</I>&quot; means the direct
cost breakdown as set forth in the Disbursement Schedule.</P>
<P ALIGN="JUSTIFY">&quot;<I>Disbursement Schedule</I>&quot; has the meaning set
forth in Section 4.1</P>
<P ALIGN="JUSTIFY">&quot;<I>Environmental Indemnity</I>&quot; means the
Environmental Indemnity dated the date hereof executed by Borrower in favor of
Lender.</P>
<P ALIGN="JUSTIFY">&quot;<I>Extended Maturity Date</I>&quot; has the meaning set
forth in Section 2.3.</P>
<P ALIGN="JUSTIFY">&quot;<I>Event of Default</I>&quot; has the meaning set forth
in Section 6.1.</P>
<P ALIGN="JUSTIFY">&quot;<I>Financial Statements</I>&quot; means the financial
statements of Borrower and any other Persons as may be required by Lender from
time to time, including operating statements, balance sheets, and any other
financial reports and information that Lender may require.</P>
<P ALIGN="JUSTIFY">&quot;<I>Fixtures</I>&quot; means all fixtures located on or
within the Improvements or now or later installed in or used in connection with
any of the Improvements, including, but not limited to, all partitions, screens,
awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators,
cleaning and sprinkler systems, fire extinguishing apparatus and equipment,
water tanks, heating, ventilating, air conditioning and air cooling equipment,
built-in refrigerators, and gas and electric machinery, appurtenances, and
equipment, whether permanently affixed to the Land or the Improvements.</P>
<P ALIGN="JUSTIFY">&quot;<I>GAAP</I>&quot; means generally accepted accounting
principles as in effect from time to time in the United States of America,
applied on a consistent basis over the time period in question as to
classification of items and amounts.</P>
<P ALIGN="JUSTIFY">&quot;<I>General Contractor</I>&quot; means O'Neill
Construction or any other general contractor designated by Borrower as general
contractor and approved by Lender.</P>
<P ALIGN="JUSTIFY">&quot;<I>Governmental Authority</I>&quot; means (a) the
United States of America; (b) the State of California; (c) the County of San
Mateo, California; or (d) the City of South San Francisco, California, or other
political subdivision, agency, department, commission, board, bureau, or
instrumentality of any of them.</P>
<P ALIGN="JUSTIFY">&quot;<I>Governmental Requirement</I>&quot; means any law,
ordinance, order, rule, regulation, or requirement of a Governmental
Authority.</P>
<P ALIGN="JUSTIFY">&quot;<I>Ground Lease</I>&quot; means that certain Ground
Lease dated October 30, 1998 by and between Lessor and Borrower, as successor in
interest to Guarantor, as amended from time to time.</P>
<P ALIGN="JUSTIFY">&quot;<I>Guarantor</I>&quot; means AXYS Pharmaceuticals,
Inc., a Delaware corporation.</P>
<P ALIGN="JUSTIFY">&quot;<I>Impositions</I>&quot; means all real estate and
personal property taxes and other taxes and assessments, water and sewer rates
and charges, and all other governmental charges and any interest or costs or
penalties with respect to them, ground rent and charges for any easement or
agreement maintained for the benefit of the Property, general and special,
ordinary and extraordinary, foreseen or unforeseen, of any kind that at any time
may be assessed, levied, imposed, or become a lien on the Property or the rent
or income received from the Property, or any use or occupancy of the Property;
and any charges, expenses, payments, or assessments of any nature that are or
may become a lien on the Property or the rent or income received from it.</P>
<P ALIGN="JUSTIFY">&quot;<I>Improvements</I>&quot; means all buildings,
improvements, Fixtures and appurtenances on the Land, and all improvements,
additions, and replacements, and other buildings and improvements, at any time
later constructed or placed on the Land.</P>
<P ALIGN="JUSTIFY">&quot;<I>Indirect Cost Breakdown</I>&quot; means the indirect
cost breakdown as set forth in the Disbursement Schedule.</P>
<P ALIGN="JUSTIFY">&quot;<I>Inspector</I>&quot; has the meaning set forth in
Section 3.5.</P>
<P ALIGN="JUSTIFY">&quot;<I>Lessor</I>&quot; means Littlefield Associates, a
California general partnership.</P>
<P ALIGN="JUSTIFY">&quot;<I>Letter of Credit</I>&quot; has the meaning set forth
in Section 2.4.1.</P>
<P ALIGN="JUSTIFY">&quot;<I>Loan Documents</I>&quot; means the Note, this
Agreement, the Security Documents, and all other documents executed by Borrower
or Guarantor (including guaranties) evidencing, securing, or relating to the
Loan, except the Environmental Indemnity.</P>
<P ALIGN="JUSTIFY">&quot;<I>Loan Extension Notice</I>&quot; has the meaning set
forth in Section 2.3.</P>
<P ALIGN="JUSTIFY">&quot;<I>Loan Fee</I>&quot; has the meaning set forth in
Section 8.21.1.</P>
<P ALIGN="JUSTIFY">&quot;<I>Loan Maturity Date</I>&quot; means the Maturity Date
as defined in the Note.</P>
<P ALIGN="JUSTIFY">&quot;<I>Loan Proceeds</I>&quot; means funds disbursed by
Lender pursuant to this Agreement to finance the construction of the
Improvements.</P>
<P ALIGN="JUSTIFY">&quot;<I>Materials</I>&quot; has the meaning set forth in
Section 4.5.</P>
<P ALIGN="JUSTIFY">&quot;<I>Person</I>&quot; means any natural person,
corporation, firm, partnership, association, trust, government, governmental
agency, or any other entity, whether acting in an individual, fiduciary, or
other capacity.</P>
<P ALIGN="JUSTIFY">&quot;<I>Plans and Specifications</I>&quot; means the final
set of architectural, structural, mechanical, electrical, grading, sewer, water,
street, and utility plans and specifications for the Improvements, including all
supplements, amendments, and modifications.</P>
<P ALIGN="JUSTIFY">&quot;<I>Potential Default</I>&quot; means an event that
would constitute an Event of Default but for any requirement of notice to be
given or period of grace or time to elapse.</P>
<P ALIGN="JUSTIFY">&quot;<I>Project Architect</I>&quot; has the meaning set
forth in Section 3.10.</P>
<P ALIGN="JUSTIFY">&quot;<I>Property</I>&quot; means Borrower's ground leasehold
interest in the Land, the Improvements, and the Fixtures, together with: (a) all
rights, privileges, tenements, hereditaments, rights-of-way, easements, and
appurtenances of the Land or the Improvements now or later belonging to the
Property and all right, title, and interest of Borrower in any streets, ways,
alleys, strips, or gores of land adjoining the Land; and (b) all of Borrower's
right, title, and interest in the Land, the Improvements, and the Fixtures,
including any award for any change of grade of streets affecting the Land, the
Improvements, or the Fixtures.</P>
<P ALIGN="JUSTIFY">&quot;<I>Security Documents</I>&quot; means the Deed of Trust
and Cash Collateral Account Agreement, together with all other documents or
instruments entered into between Borrower and Lender or by Borrower in favor of,
or for the benefit of, Lender that recite that they are to secure the Loan.</P>
<P ALIGN="JUSTIFY">&quot;<I>Take Out Lender</I>&quot; means a lender, that pays
in full the outstanding principal, <U>plus</U> all accrued and unpaid interest,
<U>plus</U> all costs and fees due and payable under the Note.</P>
<P ALIGN="JUSTIFY">&quot;<I>Title Company</I>&quot; means First American Title
Company.</P>
<P ALIGN="JUSTIFY">&quot;<I>Title Policy</I>&quot; means the ALTA Loan Policy
issued by Title Company.</P>
<P ALIGN="JUSTIFY">&quot;<I>Work</I>&quot; means the construction of the
Improvements.</P>
<U><P ALIGN="JUSTIFY"><LI>Accounting Terms</U>.  Unless otherwise indicated in
this Agreement or any other Loan Document, all accounting terms used in this
Agreement or any other Loan Document shall be construed, and all accounting and
financial computations hereunder or thereunder shall be computed, in accordance
with GAAP.  If GAAP changes during the term of this Agreement such that any
covenants contained herein would then be calculated in a different manner or
with different components, Borrower and Lender agree to negotiate in good faith
to amend this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating Borrower's financial condition to
substantially the same criteria as were effective prior to such change in GAAP;
provided, however, that, until Borrower and Lender so amend this Agreement, all
such covenants shall be calculated in accordance with GAAP as in effect
immediately prior to such change.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Headings</U>.  Headings in this Agreement and each of
the other Loan Documents are for convenience of reference only and are not part
of the substance hereof or thereof.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Plural Terms</U>.  All terms defined in this Agreement
or any other Loan Document in the singular form shall have comparable meanings
when used in the plural form and vice versa.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Other Interpretive Provisions</U>.  References in this
Agreement to &quot;Recitals,&quot; &quot;Sections,&quot; &quot;Exhibits&quot;
and &quot;Schedules&quot; are to recitals, sections, exhibits and schedules
herein and hereto unless otherwise indicated.  References in this Agreement and
each of the other Loan Documents to any document, instrument or agreement (a)
shall include all exhibits, schedules and other attachments thereto, (b) shall
include all documents, instruments or agreements issued or executed in
replacement thereof, and (c) shall mean such document, instrument or agreement,
or replacement or predecessor thereto, as amended, modified and supplemented
from time to time and in effect at any given time.  The words
&quot;hereof,&quot; &quot;herein&quot; and &quot;hereunder&quot; and words of
similar import when used in this Agreement or any other Loan Document shall
refer to this Agreement or such other Loan Document, as the case may be, as a
whole and not to any particular provision of this Agreement or such other Loan
Document, as the case may be.  The words &quot;include&quot; and
&quot;including&quot; and words of similar import when used in this Agreement or
any other Loan Document shall not be construed to be limiting or
exclusive.</LI></P></OL>

<P ALIGN="CENTER"><LI><BR>
<BR>
<B>LOAN AND LETTER OF CREDIT</LI></P>
<OL>

</B><U><P ALIGN="JUSTIFY"><LI>Loan</U>.  Lender agrees to lend to Borrower, and
Borrower agrees to borrow from Lender, up to Eleven Million and 00/100 Dollars
($11,000,000.00), to finance the construction of the Improvements and for other
purposes specified in the Loan Documents, subject to the terms, conditions,
representations, warranties, and covenants in this Agreement.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Disbursements</U>.  Lender agrees to disburse the Loan
Proceeds in the manner and subject to the limitations in this Agreement.
Interest will accrue on disbursed Loan Proceeds at the applicable rate specified
in the Note with respect to each disbursement from the date on which the
disbursement is made until repaid.  All Loan Proceeds will be evidenced by the
Note and will be secured by the Deed of Trust and other applicable Security
Documents.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref514047074"><A
NAME="_Ref514148360"><U>Extension of the Loan Maturity Date</U>.  Subject to the
terms and conditions of the Cash Collateral Security Agreement, Lender agrees to
extend the Loan Maturity Date set forth in the Note, subject to Lender receiving
from Borrower, at least thirty (30) days before the Loan Maturity Date, written
notice requesting an extension (the &quot;<I>Loan Extension
Notice</I>&quot;)</A> for an additional term up to three (3) months (the
&quot;<I>Extended Maturity Date</I>&quot;) subject, however, to satisfaction of
all of the following conditions no later than the Loan Maturity
Date:</A></LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI>All covenants and obligations of Borrower and Guarantor
under the Loan Documents and the Environmental Indemnity shall have been
performed and all representations and warranties contained herein shall be true
and correct as of the Loan Maturity Date.</LI></P>
<P ALIGN="JUSTIFY"><LI>No Event of Default shall have occurred.</LI></P>
<P ALIGN="JUSTIFY"><LI>Lender shall have determined, in Lender's sole
discretion, that no conditions exist that might materially adversely affect: (a)
the ability of Borrower or Guarantor to perform any of its obligations under the
Loan Documents and Environmental Indemnity; (b) the business or financial
condition of Borrower or Guarantor; (c) the business or financial condition,
operations, or value of the Improvements or the Property; or (d) the priority of
Lender's lien in the Improvements and the Property.</LI></P>
<P ALIGN="JUSTIFY"><LI>Borrower shall have executed and delivered to Lender a
replacement note or such other documentation as Lender may require, in form and
content satisfactory to Lender, specifying the Extended Maturity Date.</LI></P>
<P ALIGN="JUSTIFY"><LI>Borrower shall have delivered to Lender such other
documents and assurances as Lender shall require, including, without limitation
if requested by Lender, an endorsement to Lender's title insurance policy, at
Borrower's expense, assuring Lender that the extension will not affect the
priority of Lender's lien in the Improvements and the Property.</LI></P>
<P ALIGN="JUSTIFY"><LI>Borrower shall have paid to Lender concurrently with the
delivery of the Loan Extension Notice a fee in the amount of Twenty Seven
Thousand Five Hundred and 00/100 Dollars ($27,500.00).</LI></P></OL>

<U><P ALIGN="JUSTIFY"><LI>Standby Letter of Credit</U>.</LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI><A NAME="_Ref514050187"><U>Issuance</U>.  Subject to, and
upon the terms and conditions contained herein, at the request of Borrower,
Lender shall issue an irrevocable standby letter of credit (the &quot;<I>Letter
of Credit</I>&quot;) for the account of Borrower and for the benefit of Take Out
Lender, containing terms and conditions acceptable to Lender.  Each draft paid
by Lender under the Letter of Credit shall be repaid by Borrower in accordance
with the terms of the Letter of Credit.  </LI></P>
<U><P ALIGN="JUSTIFY"><LI>Cash Collateral</U>.  Borrower's reimbursement
obligation under the Letter of Credit shall be cash secured as set forth in the
Cash Collateral Account Agreement.</LI></P>
<P ALIGN="JUSTIFY"><LI></A><U>Amount of Letter of Credit</U>.  Except in
Lender's discretion, the amount of the Letter of Credit shall not at any time
exceed Two Million and 00/100 Dollars ($2,000,000.00).  Notwithstanding the
foregoing, if the balance of the Deposit Account (as defined in the Cash
Collateral Agreement) is less than Two Million and 00/100 Dollars
($2,000,000.00), then the amount of the Letter of Credit shall be equal to the
balance of the Deposit Account as of the date of issuance of the Letter of
Credit.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Letter of Credit Agreement</U>.  The Letter of Credit
shall be subject to the additional terms and conditions of the Letter of Credit
Agreement and related documents, if any, required by Lender in connection with
the issuance thereof (each, a &quot;<I>Letter of Credit
Agreement</I>&quot;).</LI></P></OL>

<U><P ALIGN="JUSTIFY"><LI>Subleases</U>.  Upon request of Lender, for purposes
of facilitating a take out loan, Borrower shall enter into a sublease for the
Property with Guarantor or its successor in interest, and on such terms that are
reasonably acceptable to Lender.</LI></P></OL>

<P ALIGN="CENTER"><LI><BR>
<BR>
<B>CONSTRUCTION AND COMPLETION OF IMPROVEMENTS</LI></P>
<OL>

</B><U><P ALIGN="JUSTIFY"><LI>Construction</U>.  Borrower will diligently
proceed with construction of the Improvements in accordance with the Plans and
Specifications as approved by Lender.  Completion of the Improvements will occur
on or before the Loan Maturity Date.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513872566"><A NAME="_Ref513882402"><U>Extra
Work; Changes in Plans and Specifications</U>.  Subject to Section 4.3, all
requests for changes in the Plans and Specifications or construction contract
(individually, a &quot;<I>Change</I>&quot;, and collectively,
&quot;<I>Changes</I>&quot;), other than minor changes involving no extra cost,
must be in writing, signed by Borrower and the Project Architect, and delivered
to Lender for its approval, which approval shall not be unreasonably withheld.
Borrower shall obtain any required permits or authorizations from any
Governmental Authority having jurisdiction prior to approving or requesting any
Change.</LI></P>
<P ALIGN="JUSTIFY"><LI></A></A><U>Contractors and Contracts</U>.  On demand by
Lender, Borrower will furnish to Lender from time to time correct lists of all
contractors and subcontractors employed in connection with the Work.  Each list
will show the name, address, and telephone number of each contractor or
subcontractor, a general statement of the nature of the work to be done, the
labor and materials to be supplied, the names of material suppliers, if known,
and the approximate dollar value of the labor, work, and materials with respect
to each.  Lender may contact directly each contractor, subcontractor, and
material supplier to verify the facts disclosed by the list or for any other
purpose.  All contracts let by Borrower or its contractors relating to the Work
will require them to disclose to Lender information sufficient to make that
verification.  All estimated direct costs of the Work will be covered by firm
contracts or orders with contractors, subcontractors, or material suppliers
acceptable to Lender.  All those contracts and orders will be subject to the
approval of Lender, and no contract or order may be amended or altered without
the prior written approval of Lender.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Purchase or Lease of Materials</U>.  No materials,
equipment, furniture, fixtures, or any other part of the Improvements will be
purchased or leased for or installed on the Property under any security
agreement, lease, or other arrangement in which the seller or lessor reserves or
purports to reserve any rights in them or any right to remove or repossess any
of these items or to consider them personal property after their incorporation
in the Work, unless specifically authorized by Lender in advance in
writing.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513879107"><U>Inspection</U>.  Lender,
through its officers, agents, contractors, or employees, will have the right at
any time, with notice to Borrower and without notice to Borrower upon an Event
of Default, to enter on the Property and inspect the Improvements and the Work;
and to examine the books, records, accounting data, plans, shop drawings,
specifications, and other documents of Borrower pertaining to the Work and to
make extracts or copies.  All these documents will be made available to Lender,
its officers, agents, contractors, and employees promptly on written demand.
Lender may cause periodic inspections to be made by an inspector or inspectors
(&quot;<I>Inspector</I>&quot;) consulting with Lender in connection with the
Work.  Borrower agrees to cooperate fully (and to cause the General Contractor
to cooperate fully) with the Inspector and to permit all appropriate access to
the Property and to all relevant books and records.  The cost of that service
will be borne by Borrower and will be paid within thirty (30) days of receipt of
any invoice or paid from available Loan Proceeds.</A></LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513885663"><U>Protection Against Lien
Claims</U>.  Borrower agrees to pay and discharge promptly and fully all claims
for labor done and materials and services furnished in connection with the Work,
diligently to file or produce the filing of a valid Notice of Completion on
completion of the Work, diligently to file or procure the filing of a Notice of
Cessation in the event of a cessation of labor on the Work for a continuous
period of (30) days or more, and to take all other reasonable steps to forestall
the assertion of claims of lien against the Property or any part of it.
Borrower will require the general contractor to obtain a lien waiver with
respect to each payment by or to the general contractor and each of the various
subcontractors and material suppliers (and the major subcontractors and
submaterial suppliers under them), and Lender, at any time, at its option, may
require that: (a) Borrower make any payments for which disbursements are made
under this Agreement by joint check made payable to the general contractor and
subcontractor or sub-subcontractor for whose account the payment is to be made,
as joint payees; or (b) all contractors, material suppliers, and laborers
employed in connection with the Work will be paid directly by disbursement on a
form or order approved by Lender and countersigned by Borrower.  Nothing here
will require Borrower to pay any claims for labor, materials, or services that
Borrower in good faith disputes and that Borrower, at its own expense, is
currently and diligently contesting, provided that Borrower will, in that case
and in each other case where a claim of lien has been filed, within ten (10)
days after the filing of any claim of lien: (i) record in the office of the
Recorder of the County where the Property is located a surety bond sufficient to
release the claim of lien; (ii) make a deposit of cash in the amount of one
hundred and fifty percent (150%) of the claim of lien with Lender; (iii) deliver
to Lender a specific title insurance policy endorsement under which the Title
Company insures Lender that the claim of lien is not valid; or (iv) deliver to
Lender any other assurance as may be acceptable to Lender.</A></LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513883098"><U>Performance and Payment
Bonds</U>.  Borrower will procure and deliver to Lender, and will require
General Contractor and all subcontractors to procure and deliver to Lender, dual
obligee performance and labor and material payment bonds in form, substance, and
amount satisfactory to Lender that Lender may require by notice to Borrower.
Borrower will deliver to Lender an original of each bond for Lender's
approval.</A></LI></P>
<U><P ALIGN="JUSTIFY"><LI>Security Instruments</U>.  From time to time Borrower
will execute and deliver to Lender a security instrument naming Lender as
secured party covering all contracts entered into in connection with the Work
and all other property of any kind owned by Borrower and used, or to be used, in
the use and enjoyment of the Property and concerning which Lender may have any
doubt as to its being subject to the lien of the Security Documents.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513879626"><U>Surveys</U>.  Upon request by
Lender, and at Borrower's expense, Borrower will furnish to Lender, immediately
on completion of the foundation work and immediately on completion of the
Improvements, respectively, a survey of the Property by a registered surveyor
approved by Lender, in form and substance satisfactory to Lender, bearing the
surveyor's certificate addressed to Lender and Title Company that: (a) confirms
the legal description and area of the Property; (b) shows the location of all
improvements, roads, fences, easements, zoning setback lines, height
restrictions, or other space limitations; (c) shows utility lines to point of
connection with the public system; (d) shows adjoining public and private
streets and the distance to and names of nearest intersecting streets; (e) shows
all encroachments on the Property; (f) certifies that the Plans and
Specifications provide that the foundations and the Improvements, respectively,
will be, and to the extent constructed are, located entirely within the setback
lines and the property lines, and will not, and to the extent constructed do
not, encroach on any other property, easement, or public or private right-of-
way, or breach or violate any covenant, condition, or restriction of record, or
any building or zoning ordinance; and (g) shows any other details that Lender
may reasonably request.  The final survey will also enumerate and locate all
parking spaces.</A></LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513880756"><U>Project Architect</U>.  An
architect approved in writing by Lender (&quot;<I>Project Architect</I>&quot;)
will be retained by Borrower, at Borrower's expense, to furnish periodic reports
on the progress of the Work, including an estimate of the time and cost required
to complete the Work according to the Plans and
Specifications.</A></LI></P></OL>

<P ALIGN="CENTER"><LI><BR>
<BR>
<B>LOAN DISBURSEMENT PROCEDURES</LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI><A NAME="_Ref515962139"><A
NAME="_Ref517616579"></B><U>Application for Advances</U>.  Borrower shall apply
for advances from the Loan according to the disbursement schedule attached
hereto as <U>Exhibit B</U> (the &quot;<I>Disbursement Schedule</I>&quot;).</A>
Each application shall be stated on a standard AIA payment request form or other
form approved by Lender, executed by Borrower, and supported by such evidence as
Lender shall reasonably require.  Borrower shall apply only for the disbursement
with respect to Work actually done by the General Contractor and for materials
and equipment actually incorporated into the Property.  Each application for an
advance shall be deemed a certification by Borrower that as of the date of such
application, all representations and warranties contained in this Agreement are
true and correct, and that Borrower is in compliance with all of the provisions
of this Agreement.</A></LI></P>
<OL>

<U><P ALIGN="JUSTIFY"><LI>Construction Account</U>.  As set forth in the
Disbursement Schedule, and subject to Section 4.2, for accounting purposes only,
Lender may, at Lender's sole discretion, deposit advances requested under
Section 4.1 of this Agreement to deposit account no. 4107012 maintained with
Lender.</LI></P></OL>

<P ALIGN="JUSTIFY"><LI><A NAME="_Ref517675159"><A
NAME="_Ref513881017"><U>Payments</U>.  At the sole option of Lender, advances
may be paid in the joint names of Borrower and the General Contractor,
subcontractor(s) or supplier(s) in payment of sums due under the construction
contract.  At Lender's sole option, Lender may directly pay the General
Contractor and any subcontractors or other parties the sums due under the
construction contract.  Borrower appoints Lender as its attorney in fact to make
such payments.  This power shall be deemed to be coupled with an interest, shall
be irrevocable, and shall survive an Event of Default under this
Agreement.</A></LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref515963054"><A
NAME="_Ref515964983"></A><U>Projected Cost Overruns</U>.  If at any time Lender
determines (in Lender's sole judgment) that the amount of the undisbursed Loan
proceeds is not sufficient to pay all of the costs to complete the construction
of the Improvements and to satisfy the interest obligations, then Lender may
require Borrower to deposit with Lender any additional funds that Lender
determines are necessary to pay such costs and satisfy the interest obligations.
Borrower shall deposit such funds within ten (10) days of Lender's request.
Funds deposited with Lender pursuant to this Section</A> 4.3 shall be disbursed
prior to any Loan Proceeds</A> in the same manner as disbursement of the Loan
proceeds.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Inspections</U>.  Lender may make on-site inspections
and review of construction to verify percentage of completion and certify
disbursement requests.  Loan Proceeds will not be advanced more frequently than
once a month as construction progresses.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513882650"><U>Advances for Materials</U>.
Lender will not be required to make any advances for building materials or
furnishings (collectively &quot;<I>Materials</I>&quot;) that are located off the
Property or are stored on the Property but not affixed to or incorporated in the
Improvements unless Borrower will have submitted to Lender evidence satisfactory
to Lender that: (a) all sums then due under the purchase contract for the
Materials have been paid or that Borrower will cause the payment to be made
promptly on the making of the Advance and will apply the Advance for that
purpose; (b) the Materials are in storage or have been shipped in compliance
with Section 4.5; (c) Borrower has purchased and there is in full force
insurance coverage on the Materials complying with Section 4.5; and (d) Borrower
has acquired (or on payment of the amounts to be disbursed in the Advance will
acquire) title to the Materials, and Lender's security interest in the Materials
created under this Agreement and under the Loan Documents has been (or
simultaneously will be) perfected as required by applicable law.</A></LI></P>
<OL>

<U><P ALIGN="JUSTIFY"><LI>Lien on Materials</U>.  Borrower grants Lender, to the
extent not granted in any other provisions of the Loan Documents, a security
interest in all Materials for which any Advance is made at any time by Lender
pursuant to Section 4.5, together with all additions and accessions and all
replacements and proceeds.  The security interest will secure the repayment of
the Indebtedness and the payment and performance of all of the obligations of
Borrower under the Loan Documents, and Lender will have all of the rights and
remedies provided for in the Security Agreement, as well as all other rights and
remedies provided by any applicable law.  Borrower agrees, at Borrower's cost
and expense, to: (a) execute from time to time any financing statements and
other writings that Lender may reasonably require to perfect and maintain the
priority of the security interest, and to file the statements in the manner
provided by applicable law; (b) keep the materials stored at all times at the
site of the Improvements, in a bonded warehouse, or other facility satisfactory
to Lender, or at the premises of the manufacturer or fabricator (in which case
the materials will be appropriately marked and identified to the purchase
contract and physically segregated in an area with access to a public street),
until the materials are incorporated into the Improvements, provided that if the
materials are stored with the manufacturer or fabricator, Lender must receive
evidence satisfactory to Lender of the creditworthiness of the manufacturer or
fabricator, or Borrower will procure and deliver to Lender any dual obligee
performance and labor and material payment bond, in form, substance, and amount
satisfactory to Lender, that Lender may require; (c) keep the materials insured
at all times against any risks that Lender may require pursuant to the terms of
the Deed of Trust; (d) use the materials only for construction or furnishing of
the Improvements, and not make any transfer of them or permit any lien to attach
to them that could impair the ability of Borrower to use the materials for that
purpose; (e) take all actions necessary to maintain, preserve, and protect the
materials and keep them in good condition and repair, and comply with all laws,
regulations, and ordinances relating to the ownership, storage, or use of the
materials; and (f) ensure that Lender may enter on any property on which the
materials may be stored to inspect them at any reasonable time.</LI></P>
<P ALIGN="JUSTIFY"><LI>If Borrower fails to perform any of its obligations under
this Section 4.5, Lender may take any actions and expend any sums that may be
necessary in Lender's judgment to protect and preserve Lender's security
interest, and all expenditures so incurred (including but not limited to
reasonable attorney fees and disbursements) will be repayable by Borrower
promptly on demand, will bear interest until paid at the Default Rate, and will
be secured by the Security Documents and by the security interest granted
above.</LI></P></OL>

<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513883800"><U>Conditions Precedent to Each
Loan Disbursement</U>.  The obligation of Lender to make any disbursements
pursuant to the terms of this Agreement will be subject to the following
conditions precedent:</A></LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI>No Event of Default or Potential Default will have
occurred and be continuing.</LI></P>
<P ALIGN="JUSTIFY"><LI>No determination will have been made by Lender that the
amount of undisbursed Loan Proceeds is less than the amount required to pay all
expenses in connection with the Completion of the Improvements, including, but
not limited to, any extra Work, unless Borrower will have deposited with Lender
an amount at least equal to the amount of the deficiency as determined by Lender
in accordance with Section 4.3.</LI></P>
<P ALIGN="JUSTIFY"><LI>Borrower will have furnished to Lender evidence
satisfactory to Lender of payment of bills and releases of lien rights covering
Work done or Materials furnished in connection with the Work showing the
expenditure of an amount equal to the total advance at the time disbursed,
including the then requested payment.</LI></P>
<P ALIGN="JUSTIFY"><LI>Borrower will have furnished to Lender at Borrower's
expense:</LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI>evidence satisfactory to Lender that the Title Company is
prepared to issue to Lender a title insurance endorsement to the Title Policy,
the payment for which will constitute a cost advance to Borrower, showing no
intervening liens or encumbrances on the Property and insuring the full amount
of the disbursement, and</LI></P>
<P ALIGN="JUSTIFY"><LI>a satisfactory report under the California Uniform
Commercial Code showing no liens or interests other than those of Lender, if
requested by Lender.</LI></P></OL>

<P ALIGN="JUSTIFY"><LI>The Project Architect and the Inspector each will have
certified in writing to Lender in a form satisfactory to Lender at the time of
each disbursement request that the Improvements are being constructed in
accordance with the Plans and Specifications.</LI></P>
<P ALIGN="JUSTIFY"><LI>In the judgment of Lender, all work done will have been
completed with sound, new materials and fixtures, in a good and proper manner,
and all materials, fixtures, and furnishings installed on or acquired for the
Property will be owned by Borrower free of any liens, encumbrance, or other
interests of any kind other than Lender's lien or security interest.</LI></P>
<P ALIGN="JUSTIFY"><LI>All approvals, permits, certifications, consents, and
licenses of governmental authorities or other parties having jurisdiction over
the Property or the Work or contractual rights to approve or observe
construction of the Improvements, that are necessary at the stage of
construction when the disbursement is to be made to enable Completion of
Improvements on or before the Completion Date, will have been received and will
be in full force.</LI></P>
<P ALIGN="JUSTIFY"><LI>The representations and warranties in the Loan Documents
will be correct as of the date of the requested disbursement as though made on
that date.</LI></P>
<P ALIGN="JUSTIFY"><LI>All commitment, loan, and other fees then due and payable
to Lender, including the fees provided for in Section 8.21, will have been paid
in full to Lender, and all documents, records, statements, certificates,
reports, and other materials and information described in <U>Exhibit C</U> will
have been received and approved in writing by Lender.</LI></P>
<P ALIGN="JUSTIFY"><LI>As to each portion of the Improvements affected, directly
or indirectly, by any work for which a disbursement is requested, a valid
building permit will be in full force.</LI></P>
<P ALIGN="JUSTIFY"><LI>Borrower will have delivered to Lender all funds,
documents, instruments, policies, evidence of satisfaction of conditions, and
other materials requested by Lender under the terms of this Agreement or any of
the other Loan Documents.</LI></P>
<P ALIGN="JUSTIFY"><LI>On the completion of foundations for the Improvements,
the Title Company will have issued its foundation endorsement insuring Lender
that each foundation is constructed wholly within the boundaries of the Property
and any applicable setback lines and does not encroach on any easement, rights-
of-way, or setback lines or violate any covenants, conditions, or restrictions
of record.</LI></P></OL>

<U><P ALIGN="JUSTIFY"><LI>Discretionary Advance</U>.  Regardless of the failure
of any condition precedent to Lender's obligation to make advances, Lender may
make any advances if Lender, in its sole discretion, determines it to be
advisable.  The making of any disbursement, either before or after the
satisfaction of all conditions precedent with respect to Lender's obligation to
make the disbursement, will not be deemed to constitute an approval or
acceptance by Lender of the Work completed or a waiver of the condition with
respect to a subsequent disbursement.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Construction Loan Transfer of Funds</U>.  Upon request
by Borrower and submission of a Construction Loan Transfer of Funds in the form
attached to the Disbursement Schedule, Lender may, in Lender's sole discretion,
reallocate undisbursed funds within the budget subject to the terms contained in
Section 4.3.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513892119"><U>Final Disbursement</U>.  The
Upon Completion of the Improvements, the final advance will be disbursed when
the following conditions have been satisfied: (a) The Project Architect and the
Inspector will have certified to Lender in a manner satisfactory to Lender that
the Improvements have been completed in accordance with the Plans and
Specifications with sound, new materials and in a good and workmanlike manner
and that the Improvements comply with all governmental requirements and are
structurally sound; (b) The provisions of Section 3.9 will have been fully
complied with; (c) Title policy endorsements in form and amount satisfactory to
Lender (including an endorsement insuring lien-free completion of the
Improvements) will have been furnished to Lender; (d) The conditions of Section
4.6 will have been satisfied; (e) Final lien waivers will have been obtained
from the General Contractor, each of the various subcontractors and material
suppliers, and substantially all of the subcontractors and submaterial suppliers
under the subcontractors and material suppliers at any level, or Borrower will
have furnished evidence satisfactory to Lender that the General Contractor and
subcontractors and material suppliers and sub-subcontractors and submaterial
suppliers have been paid in full as evidenced by unconditional lien waivers or
will be paid in full as evidenced by conditional lien waivers upon final
payment; (f) Borrower will have furnished evidence, in form and substance
satisfactory to Lender, that: (i) Borrower has obtained final certificates of
occupancy for all of the Improvements; (ii) all other permits and approvals
necessary for the construction, equipping, management, operation, use, or
ownership of the Improvements will have been obtained, subject only to those
conditions approved by Lender, and (iii) the completed Improvements comply with
all applicable zoning regulations, subdivision map acts, building code
provisions, and similar governmental laws and regulations, and have adequate
ingress and egress from public streets, that evidence to be in the form of a
certificate executed by Borrower in favor of Lender; (g) Borrower will have
furnished evidence in form and substance satisfactory to Lender that all
utilities necessary for the full use and operation of the Improvements are
available and have been connected to the Improvements; and (h) Borrower will
have filed a notice of completion of the Improvements and the statutory period
for filing of mechanics' and materialmen's liens shall have passed.</A>
Notwithstanding any other provision of this Agreement to the contrary, Lender
may retain up to ten percent (10%) of the hard costs to be paid as the final
payment to the General Contractor upon satisfaction of the conditions set forth
above.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Use of Proceeds</U>.  All Loan Proceeds will be
disbursed as provided in this Agreement and used only for payment of the costs
of construction of the Improvements in accordance with the Plans for other
purposes specified in the Loan Documents.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Operating Account</U>.  Borrower covenants and agrees
that at all times when any part of the Loan will be outstanding, Borrower will
deposit all gross revenues of whatever kind received in connection with the
operation of the Improvements in an account to be opened and maintained with
Lender.  Borrower grants to Lender, to the extent not granted in any other Loan
Documents, a security interest in that deposit account and Borrower agrees to
execute any documents and perform any acts that Lender may deem necessary to
evidence or perfect the security interest.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Payment of Operating Expenses</U>.  Borrower covenants
and agrees that it will: (a) pay promptly when due all debts, management fees,
and other obligations incurred in the operation of the Property, including,
without limitation, the payment of all sums due and payable to persons providing
labor, service, or supplies to the Property; (b) at all times purchase any
operating supplies and inventories that are reasonably necessary for the
operation of a biotechnology research and development office facility; (c) pay
interest on the Loan to Lender as the interest accrues; and (d) at all times,
purchase any other services and any other items that are reasonably necessary
for or customary in the management or operation of biotechnology research and
development office facility (these expenses referred to collectively as
&quot;<I>Operating Expenses</I>&quot;).</LI></P></OL>

<P ALIGN="CENTER"><LI><BR>
<BR>
<B>BORROWER'S REPRESENTATIONS AND WARRANTIES</LI></P>
</B><P ALIGN="JUSTIFY">As a material inducement to Lender to enter into this
Agreement and to make the Loan to Borrower, Borrower and each signatory who
signs on its behalf unconditionally represents and warrants to Lender as
follows:</P>
<OL>

<U><P ALIGN="JUSTIFY"><LI>Incorporation, Good Standing, and Due
Qualification</U>.  Borrower is a limited liability company duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization; has the company power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged in;
and is duly qualified as a foreign limited liability company and in good
standing under the laws of each other jurisdiction in which such qualification
is required.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Corporate Power and Authority</U>.  The execution,
delivery, and performance by Borrower of the Loan Documents to which it is a
party has been duly authorized by all necessary company action and does not and
will not (a) require any consent or approval of the members of such company; (b)
contravene Borrower's articles of organization or operating agreement; (c)
violate any provision of any law, rule, regulation (including, without
limitation, Regulations U and X of the Board of Governors of the federal Reserve
System), order, writ, judgment, injunction, decree, determination, or award
presently in effect having applicability to such company; (d) result in a breach
of or constitute a default under indenture or loan or credit agreement or any
other agreement, lease, or instrument to which Borrower is a party or by which
it or its properties may be bound or affected; (e) result in, or require, the
creation or imposition of any Lien, upon or with respect to any of the
properties now owned or hereafter acquired by Borrower; and (f) cause Borrower
to be in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award or any such indenture, agreement,
lease, or instrument.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Legally Enforceable Agreement</U>.  This Agreement is,
and each of the other Loan Documents when delivered under this Agreement will be
legal, valid, and binding obligations of the Borrower in accordance with their
respective terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws affecting creditors'
rights generally.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Ownership and Liens</U>.  Borrower has title to, or
valid leasehold interests in, all of its properties and assets, real and
personal, including the properties and assets and leasehold interest reflected
in the Financial Statements delivered to Lender (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties and assets owned by Borrower and none of its leasehold interests is
subject to any lien, except for such lien granted to Lender.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Other Agreements</U>.  Neither Borrower nor Guarantor
is a party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument or subject to any charter or corporate restriction which
could have a material adverse effect on the business, properties, assets,
operations, or conditions, financial or otherwise, of Borrower, or the ability
of Borrower to carry out its obligations under the Loan Documents to which it is
a party.  Neither the Borrower nor Guarantor is in default in any respect in the
performance, observance, or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument material to its business to
which it is a party.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513884596"><U>Litigation</U>.  Except as set
forth in Schedule 5.6, if any, there are no actions or proceedings pending by or
against Borrower before any court or administrative agency in which an adverse
decision could have a material adverse effect on Borrower.  Borrower does not
have knowledge of any such pending or threatened actions or
proceedings.</A></LI></P>
<U><P ALIGN="JUSTIFY"><LI>No Material Adverse Change in Financial
Statements</U>.  All consolidated Financial Statements related to Borrower and
Guarantor that have been delivered to Lender fairly present in all material
respects Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended.  There
has not been a material adverse change in the financial condition of Borrower
since the date of the most recent of such financial statements submitted to
Lender.  There are no Contingent Obligations or liabilities of Borrower or
Guarantor, fixed or contingent, which are material but are not reflected in the
foregoing financial statements or in the notes thereto, other than liabilities
arising in the ordinary course of business since the date of such financial
statements.  Upon request of Lender, Borrower shall provide Lender updated
financial statements of Borrower and Guarantor.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Operation of Business</U>. Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, to conduct their respective businesses substantially as now
conducted and as presently proposed to be conducted and Borrower is not in
violation of any valid rights of others with respect to any of the
foregoing.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Regulatory Compliance</U>.  Borrower has met the
minimum funding requirements of ERISA with respect to any employee benefit plan
subject to ERISA.  No event has occurred resulting from Borrower's, failure to
comply with ERISA that is reasonably likely to result in Borrower incurring any
liability that could have a Material Adverse Effect.  Borrower is not an
&quot;investment company&quot; or a company &quot;controlled&quot; by an
&quot;investment company&quot; within the meaning of the Investment Company Act
of 1940.  Borrower is not engaged principally, or as one of the important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations G, T and U of the Board
of Governors of the Federal Reserve System).  Borrower has complied with all the
provisions of the Federal Fair Labor Standards Act, and has not violated any
statutes, laws, ordinances or rules applicable to it, violation of which could
have a Material Adverse Effect.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Environmental Condition</U>.  Except as disclosed in
the environmental reports delivered to Lender or in writing and acknowledged in
writing by Lender, none of Borrower's properties or assets have ever been used
by such parties or, to the best of such parties knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of such parties knowledge, none of their
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by such parties; and such parties have not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by such parties resulting in the releasing, or otherwise disposing of
hazardous waste or hazardous substances into the environment. </LI></P>
<U><P ALIGN="JUSTIFY"><LI>Taxes</U>.  Borrower has filed or caused to be filed
all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Government Consents</U>.  Borrower has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all Governmental Authorities that are necessary
for the continued operation of Borrower's respective business as currently
conducted. </LI></P>
<U><P ALIGN="JUSTIFY"><LI>Full Disclosure</U>.  No information, exhibit, or
report furnished by Borrower or Guarantor to Lender in connection with the
negotiation of this Agreement contained any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the statement
contained therein not materially misleading.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>No Default</U>.  There is no default on the part of
Borrower under this Agreement, the Note, the Deed of Trust or any of the other
Loan Documents, and no event has occurred and is continuing which with notice or
the passage of time or both would constitute an Event of Default
thereunder.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Title to Property</U>.  Borrower is, or on recordation
of the Deed of Trust in the official records of San Mateo County, California
will be, the sole legal and beneficial owner of the Property, which is free of
all claims, liens, and encumbrances other than those shown in the Title
Policy.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Plans and Specifications</U>.  The Plans and
Specifications are satisfactory to Borrower and the General Contractor and have
been approved by the Take Out Lender.  There are no structural defects in the
Improvements as shown in the Plans and Specifications, and to the best of
Borrower's knowledge, no violation of any Governmental Requirement
exists.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Permits</U>.  Borrower has, or prior to the
commencement of construction of the Improvements will have: (a) received all
requisite building permits and approvals from all applicable Governmental
Authorities; (b) filed or recorded all subdivision maps, plats, and other
required instruments; and (c) to the best of Borrower's knowledge, complied with
all other related Governmental Requirements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Utilities</U>.  All utility services, including
without limitation gas, electric, water, storm and sanitary sewer, and telephone
facilities, necessary for the construction of the Improvements and the operation
for their intended purposes: (a) are available at or within the boundaries of
the Property; or (b) all necessary steps have been taken by Borrower and all
applicable Governmental Authorities and utility companies to assure the complete
construction, installation, and availability of them on completion of the
Improvements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Roads</U>.  All roads necessary for the full use of
the Improvements for their intended purposes: (a) have been completed; or (b)
the necessary rights-of-way have been acquired by or dedicated to public use and
accepted by appropriate Governmental Authorities, and all necessary steps have
been taken by Borrower and such Governmental Authorities to assure the complete
construction, installation, and availability of them on completion of the
Improvements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Compliance</U>.  To the best of Borrower's knowledge,
the construction, use, and occupancy of the Property and Improvements comply in
full with, or if built according to the Plans and Specifications, will comply in
full with, all Governmental Requirements.  Neither the zoning nor any other
right to construct or use the Improvements is to any extent dependent on or
related to any real property other than the Property.  All approvals, licenses,
permits, certifications, filings, and other actions normally accepted as proof
of compliance with all Governmental Requirements by prudent lending institutions
that make investments secured by real property in the general area of the
Property, to the extent available as of the date of this Agreement, have been
given or taken, and to the extent that the approvals, licenses, permits,
certifications, filings, and other actions are not available as of the date of
this Agreement, either: (a) the Governmental Authority charged with giving or
taking them is under a legal duty to do so; or (b) Borrower is entitled to have
them given or taken as the ministerial act of that Governmental
Authority.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Adequacy of Loan</U>.  The aggregate amount of all
Loan Proceeds, and any funds held by Borrower, are sufficient to pay all costs
of construction of the Improvements in accordance with the Plans and
Specifications.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Other Financing</U>.  Borrower has not received other
financing for either the acquisition of the Property or the construction of the
Improvements, except as has been specifically disclosed to and approved by
Lender in writing.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Nature of Representations and Warranties</U>.
Borrower certifies to Lender that all representations and warranties made in
this Agreement and all other Loan Documents are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit any
material fact necessary to make the representations and warranties not
misleading.  All representations and warranties will remain true and correct in
all material respects and will survive so long as any of Borrower's obligations
have not been satisfied or the Loan or any part of it remains outstanding, and
for any applicable statute of limitations period.  Each request by Borrower for
a disbursement will constitute an affirmation that all representations and
warranties remain true and correct as of the date of that request.  Each
representation and warranty made in this Agreement, in any other Loan Documents,
and in any other document delivered to Lender by Borrower, will be deemed to
have been relied on by Lender, regardless of any investigation, inspection, or
inquiry made by Lender or any related disbursement made by Lender.  The
representations and warranties that are made to the best knowledge of Borrower
have been made after diligent inquiry calculated to ascertain the truth and
accuracy of the subject matter of each representation and
warranty.</LI></P></OL>

<P ALIGN="CENTER"><LI><BR>
<BR>
<B>DEFAULT</LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513885452"></B><U>Events of Default</U>.  At
the option of Lender, each of the following events will constitute a default
(each an &quot;<I>Event of Default</I>&quot;):</A></LI></P>
<OL>

<U><P ALIGN="JUSTIFY"><LI>Default under the Deed of Trust</U>.  The occurrence
of a default or event of default under any Loan Document or the Environmental
Indemnity.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Governmental Requirements</U>.  Borrower's failure to
comply with any Governmental Requirements within thirty (30) days after Borrower
receives notice on non-compliance.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Expiration of Permits</U>.  Borrower's neglect,
failure, or refusal to keep in full force any permit, license, consent, or
approval with necessary for the construction, occupancy, or use of the
Improvements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Construction</U>.  Any material deviation from the
Plans and Specifications in the construction of the Improvements, or the
appearance or use of defective workmanship or materials in the construction of
the Improvements, if Borrower fails to remedy them or to diligently proceed to
remedy them to Lender's satisfaction within ten (10) days after Lender's written
demand to do so.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Construction Schedule</U>.  Borrower's failure to
complete the construction of the Improvements by the Completion Date.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Liens or Stop Notices</U>.  The filing of any lien
against the Property or Improvements or the service on Lender of any bonded stop
notice related to the Loan, if the claim of lien or bonded stop notice continues
for thirty (30) days without discharge, satisfaction, or the making of provision
for payment (including bonding) to the satisfaction of Lender as provided for in
Section 3.6.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Attachment</U>.  The attachment, levy, execution, or
other judicial seizure of any portion of the Property or Improvements, or any
substantial portion of the other assets of Borrower, that is not released,
expunged, bonded, discharged, or dismissed within thirty (30) days after the
attachment, levy, execution, or seizure.</LI></P></OL>
</OL>

<P ALIGN="CENTER"><LI><BR>
<BR>
<B>REMEDIES</LI></P>
<OL>

</B><U><P ALIGN="JUSTIFY"><LI>Option to Act</U>.  On the occurrence of any Event
of Default, in addition to its other rights in this Agreement or in any of the
other Loan Documents, at law, or in equity, Lender may, without prior demand,
exercise any one or more of the following rights and remedies:</LI></P>
<OL>

<U><P ALIGN="JUSTIFY"><LI>Termination of Disbursements</U>.  Terminate its
obligation to make disbursements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Acceleration</U>.  Declare the Note and all other sums
owing to Lender with respect to the other Loan Documents immediately
due.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Continuation of Disbursements</U>.  Make any
disbursements after the happening of any one or more of the Events of Default,
without waiving its right to demand payment of the Note and all other sums owing
to Lender with respect to the other Loan Documents or any other rights or
remedies and without liability to make any other or further disbursements,
regardless of Lender's previous exercise of any rights and remedies.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Legal and Equitable Remedies</U>.  Proceed as
authorized at law or in equity with respect to the Event of Default, and in
connection with that, remain entitled to exercise all other rights and remedies
described in this Agreement or the Deed of Trust.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Disbursement by Lender</U>.  Make any payment from
undisbursed Loan Proceeds or other funds of Lender.</LI></P></OL>

<U><P ALIGN="JUSTIFY"><LI>Repayment of Funds Advanced</U>.  If Lender spends its
funds in exercising or enforcing any of its rights or remedies under any of the
Loan Documents, the amount of funds spent will be payable to Lender on demand,
together with interest at the Default Rate from the date the funds were spent
until repaid.  These amounts will be deemed secured by the Deed of
Trust.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Rights Cumulative, No Waiver</U>.  All of Lender's
rights and remedies provided in this Agreement or in any of the other Loan
Documents are cumulative and may be exercised by Lender at any time.  Lender's
exercise of any right or remedy will not constitute a cure of any Event of
Default unless all sums then due to Lender under the Loan Documents are repaid
and Borrower has cured all other Events of Default.  No waiver will be implied
from Lender's failure to take, or delay in taking, any action concerning any
Event of Default or from any previous waiver of any similar or unrelated Event
of Default.  Any waiver under any of the Loan Documents must be in writing and
will be limited to its specific terms.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Disclaimer</U>.  Whether Lender elects to employ any
of the remedies available to it in connection with an Event of Default, Lender
will not be liable for:</LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI>the construction of or failure to construct, complete, or
protect the Improvements;</LI></P>
<P ALIGN="JUSTIFY"><LI>the payment of any expense incurred in connection with
the exercise of any remedy available to Lender or the construction or completion
of the Improvements, or</LI></P>
<P ALIGN="JUSTIFY"><LI>the performance or nonperformance of any other obligation
of Borrower.</LI></P></OL>

<U><P ALIGN="JUSTIFY"><LI>Grant of Power</U>.  Borrower irrevocably appoints
Lender as its attorney-in-fact, with full power and authority, including the
power of substitution, exercisable on the occurrence of an Event of Default, to
act for Borrower in its name, place, and stead as provided in this
Agreement:</LI></P>
<OL>

<U><P ALIGN="JUSTIFY"><LI>Possession and Completion</U>.  To take possession of
the Property and Improvements, remove all employees, contractors, and agents of
Borrower, to complete or attempt to complete the work of construction, and to
market, sell, or lease the Property and Improvements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Plans</U>.  To make any additions, changes, and
corrections in the Plans as may be necessary or desirable, in Lender's sole
discretion, or as it deems proper to complete the Improvements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Employment of Others</U>.  To employ any contractors,
subcontractors, suppliers, architects, inspectors, consultants, property
managers, and other agents that Lender, in its sole discretion, deems proper for
the completion of the Improvements, for the protection or clearance of title to
the Property or Fixtures, or for the protection of Lender's interests.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Security Guards</U>.  To employ security guards to
protect the Property and Improvements from injury or damage.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Compromise Claims</U>.  To pay, settle, or compromise
all bills and claims then existing or later arising against Borrower that
Lender, in its sole discretion, deems proper for the completion of the
Improvements, for the protection or clearance of title to the Property, or for
the protection of Lender's interests.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Legal Proceedings</U>.  To prosecute and defend all
actions and proceedings in connection with the Property or
Improvements.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Other Acts</U>.  To execute, acknowledge, and deliver
all other instruments and documents in the name of Borrower that are necessary
or desirable, to exercise Borrower's rights under all contracts concerning the
Property or Improvements, and to do all other acts with respect to the Property
or Improvements that Borrower might do on its own behalf, in each case as Lender
in its reasonable discretion deems proper.</LI></P></OL>
</OL>

<P ALIGN="CENTER"><LI><BR>
<BR>
<B>MISCELLANEOUS</LI></P>
<OL>

</B><U><P ALIGN="JUSTIFY"><LI>Successors and Assigns</U>. The terms of this
Agreement will be binding on and inure to the benefit of successors and assigns
of the parties.  However, Borrower will not assign this Agreement or any
interest it may have in the monies due or, except as otherwise provided, convey
or encumber the Property or Fixtures now or later on the Property without the
prior written consent of Lender.  However, if there is an assignment,
conveyance, or encumbrance, Lender may nevertheless at its option continue to
make disbursements under this Agreement to Borrower or to those who succeed to
Borrower's title, and all sums so disbursed will be deemed to be disbursements
under this Agreement and not modifications, and will be secured by the Security
Documents.  Lender may at any time assign the Loan Documents to any affiliate of
Lender or to a national bank or other lender having experience with construction
lending, and on transfer of the Loan Documents, the assignee will assume the
obligations of Lender, and Lender will have no further obligation of any nature.
In that case, the provisions of this Agreement will continue to apply to the
Loan, and the assignee will be substituted in the place and stead of Lender,
with all rights, obligations, and remedies of Lender, including, without
limitation, the right to further assign the Loan Documents.  In addition, Lender
may at any time assign a participation in the Loan to any other party, provided
that Lender continues to be primarily obligated under this Agreement.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Expenses</U>.  Borrower shall pay on demand all
reasonable fees and expenses, including reasonable attorneys' fees and expenses,
incurred by Lender in the enforcement or attempted enforcement of any of the
obligations of Borrower hereunder or in preserving any of Lender's rights and
remedies (including, without limitation, all such fees and expenses incurred in
connection with any &quot;workout&quot; or restructuring affecting the Loan
Documents or any bankruptcy or similar proceeding involving Borrower or any
Guarantor.  As used herein, the term &quot;reasonable attorneys' fees and
expenses&quot; shall include, without limitation, allocable costs and expenses
of Lender's in-house legal counsel and staff.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Time of Essence</U>.  Time is of the essence for the
performance of all obligations set forth in this Agreement.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Severability of Provisions</U>.  In the event any one
or more of the provisions contained in this Agreement is held to be invalid,
illegal or unenforceable in any respect, then such provision shall be
ineffective only to the extent of such prohibition or invalidity, and the
validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Amendments</U>.  Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or terminated, nor may any
consent to the departure from the terms hereof be given, orally (even if
supported by new consideration), but only by an instrument in writing signed by
all parties to this Agreement.  Any waiver or consent so given shall be
effective only in the specific instance and for the specific purpose for which
given.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Entire Agreement</U>.  This Agreement, together with
the Loan Documents and Environmental Indemnity embodies the entire agreement and
understanding among and between the parties hereto, and supersedes all prior or
contemporaneous agreements and understandings between said parties, verbal or
written, express or implied, relating to the subject matter hereof.  No promises
of any kind have been made by Lender or any third party to induce Borrower to
execute this Agreement.  No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Agreement.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Waiver</U>.  No failure to exercise and no delay in
exercising any right, power, or remedy hereunder shall impair any right, power,
or remedy which Lender may have, nor shall any such delay be construed to be a
waiver of any of such rights, powers, or remedies, or any acquiescence in any
breach or default hereunder; nor shall any waiver by Lender of any breach or
default by Borrower hereunder be deemed a waiver of any default or breach
subsequently occurring.  All rights and remedies granted to Lender hereunder
shall remain in full force and effect notwithstanding any single or partial
exercise of, or any discontinuance of action begun to enforce, any such right or
remedy.  The rights and remedies specified herein are cumulative and not
exclusive of each other or of any rights or remedies which Lender would
otherwise have.  Any waiver, permit, consent or approval by Lender of any breach
or default hereunder must be in writing and shall be effective only to the
extent set forth in such writing and only as to that specific instance.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Interpretation</U>.  This Agreement and all agreements
relating to the subject matter hereof are the product of negotiation and
preparation by and among each party and its respective attorneys, and shall be
construed accordingly.  The parties waive the provisions of California Civil
Code �1654.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Counterparts</U>.  This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if all signatures were upon the same instrument.  Delivery of an executed
counterpart of the signature page to this Agreement by telefacsimile shall be
effective as delivery of a manually executed counterpart of this Agreement, and
any party delivering such an executed counterpart of the signature page to this
Agreement by telefacsimile to any other party shall thereafter also promptly
deliver a manually executed counterpart of this Agreement to such other party;
provided; however, that the failure to deliver such manually executed
counterpart shall not affect the validity, enforceability, or binding effect of
this Agreement.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>No Third Parties Benefited</U>.  This Agreement is
made and entered into for the sole protection and benefit of the parties and
their permitted successors and assigns, and no other Person.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Notices</U>.  All notices required to be given will be
served in the manner provided in the Deed of Trust.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Authority to File Notices</U>.  Borrower irrevocably
appoints Lender as its agent (the agency being coupled with an interest) to file
for record any notices of completion, cessation of labor, or any other notice
that Lender deems necessary or desirable to protect its interests under this
Agreement or under the Loan Documents.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Actions</U>.  Lender will have the right to commence,
appear in, or defend any action or proceeding purporting to affect the rights,
duties, or liabilities of the parties hereunder, or the disbursement of any
funds under this Agreement.  In connection with that, Lender may incur and pay
costs and expenses, including, without limitation, reasonable attorney fees,
Borrower agrees to pay to Lender on demand all these expenses.  This Section
does not apply to actions or proceedings between the parties.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Signs</U>.  Borrower agrees that on the request of
Lender, Borrower will erect and place on or in the vicinity of the Property a
sign indicating that Lender has provided construction financing for the
Improvements.  The sign will remain the property of Lender and will be required
to be removed only after construction has been completed.  Lender may also
arrange for publicity of the Loan in its sole discretion.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Prepayment</U>.  Borrower may prepay the Loan only on
and subject to the terms and conditions in the Note.  Under no circumstances
will Borrower receive repayment of any fees previously paid to Lender.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513886651"><U>Borrower's
Responsibilities</U>.  To prevent and avoid construction defects, Borrower will
inspect, review, supervise, and assure the high quality, adequacy, and
suitability of: (a) the Plans and Specifications and all changes and amendments;
(b) architects, contractors, subcontractors, and material suppliers employed or
used in the Work, and the workmanship of and the materials used by all of them;
and (c) the progress and course of construction and its conformance with the
Plans and Specifications and any amendments, alterations, and changes that may
be approved by Lender.</A></LI></P>
<U><P ALIGN="JUSTIFY"><LI>Nonliability for Negligence, Loss, or Damage</U>.
Borrower acknowledges, understands, and agrees as follows: (a) The relationship
between Borrower and Lender is, and will at all times remain, solely that of
borrower and lender, and Lender neither undertakes nor assumes any
responsibility for or duty to Borrower to select, review, inspect, supervise,
pass judgment on, or inform Borrower of the quality, adequacy, or suitability of
any of those matters referred to in Section 8.16; (b) Lender owes no duty of
care to protect Borrower against negligent, faulty, inadequate, or defective
building or construction; (c) Lender will not be responsible or liable to
Borrower for any loss or damage of any kind to person or property whether
suffered by Borrower or any other Person or group of Persons or for negligent,
faulty, inadequate, or defective building or construction, and Borrower will
hold Lender harmless from any liability, loss, or damage for these
things.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Applicable Law</U>.  The Agreement shall be governed
by and construed in accordance with the laws of the State of
California.</LI></P>
<B><P ALIGN="JUSTIFY"><LI><A NAME="_Ref513886771"></B><U>Survival of Warranties
and Covenants</U>.  The warranties, representations, conditions, covenants, and
agreements in this Agreement and in the other Loan Documents will survive the
making of the Loan and the execution and delivery of the Note and will continue
in full force until the Indebtedness has been paid in full.  Nothing in this
Section 8.19 is intended to limit any other provision of the Loan Documents that
by their stated terms survive the repayment of the Indebtedness or the
termination of any Loan Document.</A></LI></P>
<U><P ALIGN="JUSTIFY"><LI>Recording and Filing</U>.  Borrower, at its expense,
will cause the Security Documents and all supplements to be recorded and filed
and rerecorded and refiled in any manner and in any places as Lender will
reasonably request, and will pay all recording, filing, rerecording, and
refiling taxes, fees, and other charges.</LI></P>
<P ALIGN="JUSTIFY"><LI><A NAME="_Ref513892242"><U>Loan
Expenses</U>.</A></LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI><A NAME="_Ref514056142">Borrower agrees to pay to Lender
on or before the date of this Agreement an amount equal to One Hundred Ten
Thousand and 00/100 Dollars ($110,000.00), which will be fully earned as of the
Commitment Date (&quot;<I>Loan Fee</I>&quot;).</A></LI></P>
<P ALIGN="JUSTIFY"><LI>In making the first disbursement, Lender may, at its
option, deduct from the proceeds of that disbursement a sum equal to the
aggregate of the following, to the extent Lender has knowledge of it and demand
has been made on Lender at the time of the deposit:  all expenses specifically
incurred in connection with the Loan or the preparation, execution, and delivery
of the Loan Documents, including, but not limited to, fees and disbursements of
Lender's outside counsel and of Lender's consultants, brokers charges,
commitment fees, other fees or commissions, recording costs and expenses,
transfer and other taxes (if any), surveys, appraisal fees, title and hazard
insurance premiums, recording, notary, and escrow charges, and all other
similar, usual, or customary loan closing charges and expenses; all costs and
expenses incurred in the review and approval of the matters set forth in
<U>Exhibit C</U> (if attached); and any other budgeted expenses that have been
approved by Lender in writing; and Lender will, for the benefit of Borrower, pay
those amounts over to the respective parties on whose behalf the demands will
have been received by Lender.  Borrower will pay directly any expenses in
connection with the Loan not so paid by Lender, including, without limitation,
any of the expenses specified above, and will hold Lender free from any cost,
liability, or obligation of any nature in connection with it, including
reasonable attorney fees incurred by Lender.</LI></P>
<P ALIGN="JUSTIFY"><LI>Borrower further agrees to pay on demand all out-of-
pocket costs and expenses incurred by Lender including, without limitation, the
fees and disbursements of Lender's outside counsel, in connection with:</LI></P>
<OL>

<P ALIGN="JUSTIFY"><LI>the administration of the Loan, including, without
limitation, all approvals or consents given or contemplated to be given under
the Loan Documents, all amendments to the Loan Documents entered into by Lender
or requested by any Loan Party, and all title insurance policies and
endorsements required by Lender; and</LI></P>
<P ALIGN="JUSTIFY"><LI>the enforcement of any rights or remedies under the Loan
Documents, whether any action or proceeding is commenced, or the protection of
the security, or interests of Lender under the Loan Documents.</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY">Any costs and expenses, together with interest at the
interest rate set forth in the Note, will form a part of the indebtedness and
will be secured by the Security Documents.</P>
<U><P ALIGN="JUSTIFY"><LI>No Representations by Lender</U>.  By accepting or
approving anything required to be observed, performed, or fulfilled, or to be
given to Lender pursuant to this Agreement or pursuant to the Loan Documents,
including, but not limited to, any officer's certificate, balance sheet,
statement of income and expense, or other Financial Statement, survey,
appraisal, or insurance policy, Lender will not be deemed to have warranted or
represented the sufficiency, legality, effectiveness, or legal effect of it or
of any particular term, provision, or condition of it, and any acceptance or
approval will not be or constitute any warranty or representation by
Lender.</LI></P>
<B><U><P ALIGN="JUSTIFY"><LI>JURY TRIAL WAIVER</U>.  BORROWER WAIVES ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING: (A) BROUGHT BY
BORROWER, LENDER, OR ANY OTHER PERSON RELATING TO: (I) THE LOAN OR ANY
UNDERSTANDINGS OR PRIOR DEALINGS BETWEEN THE PARTIES; OR (II) THE LOAN
DOCUMENTS; OR (B) TO WHICH LENDER IS A PARTY.  BORROWER AGREES THAT THIS LOAN
AGREEMENT CONSTITUTES A WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY PURSUANT TO
THE PROVISIONS OF THE CODE OF CIVIL PROCEDURE �631 AND BORROWER DOES CONSTITUTE
AND APPOINT LENDER ITS TRUE AND LAWFUL ATTORNEY-IN-FACT (THE APPOINTMENT BEING
COUPLED WITH AN INTEREST) AND BORROWER DOES AUTHORIZE AND EMPOWER LENDER, IN THE
NAME, PLACE, AND STEAD OF BORROWER, TO FILE THIS LOAN AGREEMENT WITH THE CLERK
OR JUDGE OF ANY COURT OF COMPETENT JURISDICTION AS A STATUTORY WRITTEN CONSENT
TO WAIVER OF TRIAL BY JURY</B>.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Indemnity</U>.  Borrower agrees to defend, indemnify,
and hold Lender harmless from all losses, damages, liabilities, claims, actions,
judgments, costs, and reasonable attorney fees that Lender may reasonably incur
as a direct or indirect consequence of: (a) the making of the Loan; (b)
Borrower's failure to perform any obligations as and when required by this
Agreement or any of the other Loan Documents; (c) the failure at any time of any
of Borrower's representations or warranties to be true and correct; or (d) any
act or omission by Borrower, any contractor, subcontractor, engineer, architect,
or other Person with respect to the Property, the Improvements, or any portion
of them.  Borrower will pay immediately on Lender's demand any amounts owing
under this indemnity, together with interest at the lesser of the Default Rate
or the maximum rate permitted by law from the date Lender makes a payment or
incurs a loss.  Borrower's duty to indemnify Lender will survive the release and
cancellation of the Note and the reconveyance or partial reconveyance of the
Deed of Trust.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Further Assurances</U>.  At Lender's request and at
Borrower's expense, Borrower will execute, acknowledge, and deliver all other
instruments and perform all other acts necessary, desirable, or proper to carry
out the purposes of the Loan Documents or to perfect and preserve any liens
created by the Loan Documents.</LI></P>
<U><P ALIGN="JUSTIFY"><LI>Disclosure of Information</U>.  If Lender elects to
sell participations in the Loan, Lender may forward to each participant and
prospective participant all documents and information related to the Loan in
Lender's possession, including without limitation all Financial Statements,
whether furnished by Borrower or otherwise.</LI></P></OL>
</OL>

<P ALIGN="CENTER">[signature page follows]</P>
<P ALIGN="JUSTIFY"></P>
<B><P ALIGN="JUSTIFY">IN WITNESS WHEREOF</B>, the parties hereto have agreed to
the terms of this Construction Loan Agreement as of the date above.</P>
<P ALIGN="JUSTIFY"></P><DIR>
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<DIR>
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<B><P>AXYS 468 LITTLEFIELD LLC</P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>

</B><P>a California limited liability company</P>

<P>By:&#9;Axys Pharmaceuticals, Inc.</P>
<P>&#9;a Delaware corporation</P>
<P>Its:&#9;Manager</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
<P>By: &#9;/s/ Douglas Altschuler</P>

<P>Its: &#9; Vice President and General Counsel</P>
<P ALIGN="JUSTIFY"></P>
<B><P ALIGN="JUSTIFY">CUPERTINO NATIONAL BANK</P>
<P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">&nbsp;</P>
<U><P ALIGN="JUSTIFY">&#9;&#9;&#9;&#9;</P>
</U><P ALIGN="JUSTIFY">By:&#9;/s/ Al Diaz</P>
<P ALIGN="JUSTIFY">Its:&#9;Vice President</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="CENTER">&nbsp;</P>
<B><P ALIGN="CENTER">EXHIBIT A</P>
<P ALIGN="CENTER">LEGAL DESCRIPTION</P>
</B><P>The land situated in the State of California, County of San Mateo, City
of South San Francisco and described as follows:</P>
<DIR>
<DIR>
<DIR>
<DIR>

<P>Parcel 1, as shown on that certain Parcel map entitled &quot;PARCEL MAP
DIVISION OF HASKINS FERRANDO PROPERTY&quot;, filed in the office of the County
Recorder of San Mateo County, State of California, on March 5, 1969 in Book 7 of
Parcel Maps at page(s) 24.</P>

<P>A.P. No.:&#9;015-063-220&#9;&#9;&#9;JPN 015 006 063 22 A</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="CENTER">&nbsp;</P></DIR>
</DIR>
</DIR>
</DIR>

<B><P ALIGN="CENTER">EXHIBIT B</P>
<P ALIGN="CENTER">DISBURSEMENT SCHEDULE</P>
<P ALIGN="CENTER">[To be attached]</P>
</B><P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">EXHIBIT C</P>
<P ALIGN="CENTER">CONDITIONS LIST</P>
</B><P ALIGN="JUSTIFY">All of the following documents, certificates, records,
statements, reports, and other materials and information, each in form and
substance satisfactory to Lender, and duly executed by the parties thereto:</P>
<P ALIGN="JUSTIFY">(1)&#9;Evidence that all of the leasehold interest in the
Land is in Borrower.</P>
<P ALIGN="JUSTIFY">(2)&#9;This Agreement.</P>
<P ALIGN="JUSTIFY">(3)&#9;The Note.</P>
<P ALIGN="JUSTIFY">(4)&#9;The Deed of Trust.</P>
<P ALIGN="JUSTIFY">(5)&#9;The Assignment by Guarantor to Borrower of Guarantor's
interest in the Ground Lease.</P>
<P ALIGN="JUSTIFY">(6)&#9;The Sublease by and between Borrower and
Guarantor.</P>
<P ALIGN="JUSTIFY">(7)&#9;The Consent of Lessor to the Deed of Trust.</P>
<P ALIGN="JUSTIFY">(8)&#9;The Guaranty.</P>
<P ALIGN="JUSTIFY">(9)&#9;A 1992 ALTA Leasehold Loan Policy of title insurance
in an amount equal to Eleven Million and 00/100 Dollars ($11,000,000.00),
including any endorsements and other commitments as Lender may reasonably
require from the Title Company, showing the Deed of Trust to be a valid lien on
the Leasehold Estate, excepting only the items that will have been approved by
Lender.</P>
<P ALIGN="JUSTIFY">(10)&#9;Assignment of Architectural Contract.</P>
<P ALIGN="JUSTIFY">(11)&#9;Assignment of Construction Contract.</P>
<P ALIGN="JUSTIFY">(12)&#9;General Contractor's Consent to Assignment of
Construction Contract.</P>
<P ALIGN="JUSTIFY">(13)&#9;Architect's Consent to Assignment of Architectural
Contract.</P>
<P ALIGN="JUSTIFY">(14)&#9;UCC-1 Financing Statements covering all of the
property described in the Deed of Trust and the Assignment of Agreements.</P>
<P ALIGN="JUSTIFY">(15)&#9;Documentation evidencing approval of and authorizing
execution by Borrower of all documents (including guaranties) evidencing,
securing, or relating to the obligations of Borrower under the Loan
Agreement.</P>
<P ALIGN="JUSTIFY">(16)&#9;Documentation evidencing approval of and authorizing
execution by Guarantor of all documents (including guaranties) evidencing,
securing, or relating to the obligations of Borrower under the Loan
Agreement.</P>
<P ALIGN="JUSTIFY">(17)&#9;An appraisal of the Property by an MAI appraiser.</P>
<P ALIGN="JUSTIFY">(18)&#9;A final set of architectural, structural, mechanical,
electrical, grading, sewer, water, street, and utility plans and specifications
for the Improvements, including all supplements, amendments, and modifications,
signed and affixed with the architect's registration stamp or seal; affixed with
a certification that the documents are accurate copies of plans and
specifications for improvements as filed and approved by the city in which the
Development is located or any other appropriate governmental authority; and
approved by Borrower, the Guarantors, and any other party having approval rights
relating to the Improvements (&quot;Property Plans&quot;).</P>
<P ALIGN="JUSTIFY">(19)&#9;A detailed budget of costs to improve the Land.</P>
<P ALIGN="JUSTIFY">(21)&#9;Favorable environmental impact report, where
necessary and required by any local, state, or federal authority, or a negative
declaration, together with evidence of compliance of the Property with the
applicable general plan covering the Land.</P>
<P ALIGN="JUSTIFY">(22)&#9;Evidence that:</P>
<P ALIGN="JUSTIFY">(a)&#9;all public utilities necessary for the operation of
the Property (sewer, water, electricity, and gas) will be available for use at
the perimeter of the site and will be of adequate size to service the proposed
Improvements;</P>
<P ALIGN="JUSTIFY">(b)&#9;all necessary building, storm and sanitary sewer,
water, and utility permits and licenses have been issued, without variance, or
that any variance in any permits or licenses have been fully disclosed and
approved by Lender; and</P>
<P ALIGN="JUSTIFY">(c)&#9;the Property and the contemplated use of it comply
with all applicable zoning ordinances.</P>
<P ALIGN="JUSTIFY">(23)&#9;An engineer's report relating to the structural
soundness of the Improvements by an engineer satisfactory to Lender.</P>
<P ALIGN="JUSTIFY">(24)&#9;A general contract for the construction of the
Improvements with the General Contractor, which contract will provide for a
maximum fixed price for all work to be performed, together with current
Financial Statements of the general contractor and copies of all major
subcontracts (or any other subcontracts specified by Lender) then in effect for
the construction of any part of the Improvements.</P>
<P ALIGN="JUSTIFY">(25)&#9;A soils report covering the Land by a soils engineer
satisfactory to Lender.</P>
<P ALIGN="JUSTIFY">(26)&#9;Letters from the architect, engineer, or soil
engineer, as appropriate, certifying that:</P>
<P ALIGN="JUSTIFY">(a)&#9;copies of the soil boring test data, soil compaction
test report, and soil drainage report have been received, and the information
has been used in the design of the Improvements;</P>
<P ALIGN="JUSTIFY">(b)&#9;the Property Plans meet safety standards of the
Occupational Safety and Health Act of 1970, as they may apply; and</P>
<P ALIGN="JUSTIFY">(c)&#9;on completion of the Improvements in accordance with
the Property Plans, the Property will, to the best of the architect's and
engineer's knowledge, information, and belief, comply with all applicable local,
state, and federal governmental statutes, laws, ordinances, codes, and
regulations and have proper ingress and egress from and to appropriate public
streets adequate for the intended use of the Property.</P>
<P ALIGN="JUSTIFY">(27)&#9;A final cost breakdown and a construction progress
schedule and cash flow projection for the construction of the Improvements.</P>
<P ALIGN="JUSTIFY">(28)&#9;Copies of all inspection and test records and reports
made by or for the architect.</P>
<P ALIGN="JUSTIFY">(29)&#9;Insurance policies covering the Property and
construction of the Improvements insuring Borrower and Lender against loss or
damage by those risks that Lender will require.</P>
<P ALIGN="JUSTIFY">(30)&#9;Copies of all permits and approvals necessary or
received from all governmental authorities.</P>
<P ALIGN="JUSTIFY">(31)&#9;Copies of the contracts between Borrower and the
Property Architect and consulting engineer.</P>
<P ALIGN="JUSTIFY">(32)&#9;Evidence that the Land is zoned in a manner that will
permit the contemplated uses of the Property.</P>
<P ALIGN="JUSTIFY">(33)&#9;A detailed description of all requirements imposed by
any governmental authority as conditions to its approval of the Property,
together with a statement from Borrower describing its proposed
satisfaction.</P>
<P ALIGN="JUSTIFY">(34)&#9;An environmental property report concerning the
potential presence of Hazardous Materials on, under, or about the Property.</P>
<P ALIGN="JUSTIFY">(35)&#9;All other documents, agreements, instruments,
certificates, or opinions as may be reasonably requested by
Lender.</P></FONT></BODY>
</HTML>

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