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                                                                   EXHIBIT 10.17

                            COLLABORATION AGREEMENT

        THIS COLLABORATION AGREEMENT (this "AGREEMENT") is made effective as of
the 11th day of August 2001 (the "EFFECTIVE DATE") by and between Hyseq, Inc., a
corporation organized under the laws of Delaware, having offices at 670 Almanor
Avenue, Sunnyvale, California 94085 USA ("HYSEQ"), and Kirin Brewery Company,
Ltd., a corporation organized under the laws of Japan, having offices at 10-1,
Shinkawa 2-chome, Chuo-ku, Tokyo 104-8288, Japan, ("Kirin"). Hyseq and Kirin are
sometimes referred to herein individually as a "PARTY" and collectively as the
"PARTIES."

                                    RECITALS

        1. Hyseq owns or has rights under certain patents, patent applications,
technology, know-how and other intellectual property relating to gene and
protein discovery and expression, and may develop or acquire additional such
rights.

        2. Kirin owns or has rights under certain patents, patent applications,
technology, know-how and other intellectual property relating to gene and
protein discovery and expression, and may develop or acquire additional such
rights.

        3. The Parties wish to collaborate in the research and development of
new protein, antibody and macromolecular therapeutics directed to human
diseases, including, but not limited to, hematopoietic and inflammatory
diseases, in accordance with the terms and conditions set forth herein.

        4. The Parties may also collaborate in the marketing and sale of certain
products resulting from such research and development efforts in accordance with
the terms and conditions set forth herein.

        In consideration of the premises and of the mutual covenants and
obligations set forth herein, the Parties hereby agree as set out below.

                                    ARTICLE 1

                                   DEFINITIONS

        The following capitalized terms shall have the following meanings:

        1.1 "ADDITIONAL TECHNOLOGY" shall have the meaning set forth in Section
3.5.1.

        1.2 "AFFILIATE" means any individual, corporation, association or other
business entity which directly or indirectly controls, is controlled by or is
under common control with the Party in question. As used in this definition of
"Affiliate" only, the term "control" means the direct or indirect ownership of
more than fifty percent (50%) of the stock having the right to vote for
directors thereof or the ability to otherwise control the management of the
corporation or other business entity whether through the ownership of voting
securities, by contract, resolution, regulation or otherwise; provided that, if
local law requires a minimum percentage of local

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ownership, control will be established by direct or indirect beneficial
ownership of one hundred percent (100%) of the maximum ownership percentage that
may, under such local law, be owned by foreign interests.

        1.3 "APPLICABLE LAWS" means all laws, statutes, ordinances, codes, rules
and regulations which have been enacted by a governmental authority and are in
force as of the Effective Date or come into force during the term of this
Agreement, in each case to the extent that the same are applicable to the
performance by the Parties of their respective obligations under this Agreement.

        1.4 "APPROVAL APPLICATION" means any application necessary or
appropriate to obtain a Regulatory Approval, together with all required
documents, data and information concerning the New Product which is the subject
of such application.

        1.5 "AUDITED PARTY" shall have the meaning set forth in Section 3.4.3.

        1.6 "AUDITING PARTY" shall have the meaning set forth in Section 3.4.3.

        1.7 "BANKRUPTCY CODE" shall have the meaning set forth in Section 11.10.

        1.8 "BENCH SCIENTIST" means, as to a Party, an employee of such Party
having both an advanced scientific degree and the qualifications, skill and
experience adequate for the tasks assigned to such employee by such Party in
performance of the R&D Plan.

        1.9 "CHANGE OF CONTROL," as to a Party, means a change in Control of
such Party by merger or reorganization, sale or other transfer of business and
assets, sale or other transfer of capital stock, or similar transaction, whether
in a single transaction or series of related transactions, as a result of which
any Person (or any group of related Persons) that did not directly or indirectly
Control such Party prior to the transaction (or series of transactions)
thereafter directly or indirectly Controls such Party.

        1.10 "CONTROL" (including "Controlled," "Controls" and other forms)
shall mean (except with respect to the definition of Affiliate), as to a Person:
(a) ownership or control, directly or indirectly, of more than fifty percent
(50%) of the voting securities of the Person or, in the case of a noncorporate
Person, equivalent interests or (b) the right or power to designate more than
fifty percent (50%) of the governing authority (e.g., board of directors) of the
Person (whether through management contract, voting rights agreement or similar
means).

        1.11 "DEVELOPMENT CANDIDATE" means a specific molecule, such as a
protein, antibody, or other macromolecule, selected and approved by the JRDC for
R&D Work under the R&D Plan in accordance with the terms and conditions of this
Agreement.

        1.12 "DEVELOPMENT FUNDING" shall have the meaning set forth in Section
3.2.

        1.13 "DEVELOPMENT WORK" shall have the meaning set forth in Section
2.1.1.

        1.14 "DISCLOSING PARTY" shall have the meaning set forth in Section 7.1.

        1.15 "DISPUTE" shall have the meaning set forth in Section 10.2.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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AMENDED.

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        1.16 "EFFECTIVE DATE" shall have the meaning set forth in the first
paragraph of this Agreement.

        1.17 "ENFORCING PARTY" shall have the meaning set forth in Section
5.5.4.

        1.18 "FIRST PARTY" shall have the meaning set forth in Section 5.1.6.

        1.19 "FTE" means the full time equivalent effort, for one calendar year,
of one individual participating directly and substantially in R&D Work on behalf
of a Party, or, in the case of less than a full-time dedicated scientific
person, a full-time, equivalent scientific person year, based upon a total of
fifty-two (52) weeks (i.e., two thousand eighty (2,080) hours) per year of such
R&D Work on behalf of a Party. The Parties shall agree upon standard cost
accounting procedures to determine FTE contributions properly allocable to the
R&D Work.

        1.20 "FTE RATE" means [***] per FTE, which rate shall apply to a Bench
Scientist and remain fixed and in effect for the duration of the term of this
Agreement, unless otherwise agreed upon by the Parties.

        1.21 "HYSEQ CLAIMS" shall have the meaning set forth in Section 9.2.

        1.22 "HYSEQ IMPROVEMENTS" means any improvements to or modifications of
the Hyseq Technology, excluding Joint Inventions, by any Party or its
Affiliates, either jointly or solely.

        1.23 "HYSEQ INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 9.2.

        1.24 "HYSEQ TECHNOLOGY" means: all Patent Rights, all copyrights, trade
secrets and all other intellectual property rights and interests of every nature
(specifically including, but not limited to, unpatented inventions, ideas, data,
know-how, methods, processes, biological material, reagents, software and trade
secrets of any kind, and any other rights or interests in any Inventions) that
are: (i) owned by Hyseq or any its Affiliates (to the greatest extent that Hyseq
or its Affiliates has the right and authority to grant licenses as of the
Effective Date) or, if not so owned, as to which Hyseq or any of its Affiliates
otherwise has the right to grant licenses or sublicenses as of the Effective
Date (subject to any limitations imposed by a Third Party license); (ii) [***]
to perform the R&D Work or to make, have made, use, sell, offer for sale and/or
import Development Candidates or New Products; and (iii) as directed by the
JRDC.

        1.25 "HYSEQ TERRITORY" means the countries and multinational
jurisdictions listed in Exhibit A.

        1.26 "INDEMNIFIED PARTY" shall have the meaning set forth in Section
9.3.

        1.27 "INDEMNIFYING PARTY" shall have the meaning set forth in Section
9.3.

        1.28 "INFRINGEMENT" shall have the meaning set forth in Section 5.5.1.

        1.29 "INVENTIONS" means any and all creations, materials and
information, in any tangible or intangible form whatsoever and whether or not
patentable, relevant to or resulting from the research, discovery, development,
manufacture or commercialization of protein or antibody

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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therapeutics or diagnostics, including, without limitation, ideas, discoveries,
inventions, practices, methods, techniques, specifications, formulations,
formulas, knowledge, trade secrets, know-how, skill, experience, test data
(including pharmacological, biological, chemical, biochemical, toxicological and
clinical test data), analytical and quality control data, stability data,
results of studies, databases, technical drawings, software, works of authorship
and other related subject matter.

        1.30 "JOINT INVENTION" means any Invention (a) made in the course of
performance of the R&D Work or commercialization of a New Product, (b) by one or
more employees, agents or contractors of Hyseq or its Affiliates and/or Kirin or
its Affiliates, and (c) which comprises, or which is required to make, use,
sell, offer for sale or import, a Development Candidate or a New Product.

        1.31 "JOINT PATENTS" means, subject to Section 5.1.6, all Patent Rights
that claim, cover or are directed to Joint Inventions and Other Joint
Inventions.

        1.32 "JRDC" shall have the meaning set forth in Section 2.1.2.

        1.33 "KIRIN CLAIMS" shall have the meaning set forth in Section 9.1.

        1.34 "KIRIN IMPROVEMENTS" means any improvements to or modifications of
the Kirin Technology, excluding Joint Inventions, by any Party or its
Affiliates, either jointly or solely.

        1.35 "KIRIN INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 9.1.

        1.36 "KIRIN TECHNOLOGY" means: all Patent Rights, copyrights, trade
secrets and all other intellectual property rights and interests of every nature
(specifically including, but not limited to, unpatented inventions, ideas, data,
know-how, methods, processes, biological material, reagents, software and trade
secrets of any kind, and any other rights or interests in any Inventions) that
are: (i) owned by Kirin or any its Affiliates (to the greatest extent that Kirin
or its Affiliates has the right and authority to grant licenses as of the
Effective Date) or, if not so owned, as to which Kirin or any of its Affiliates
otherwise has the right to grant licenses or sublicenses as of the Effective
Date (subject to any limitations imposed by a Third Party license); (ii) [***]
to perform the R&D Work or to make, have made, use, sell, offer for sale and/or
import New Products and (iii) as directed by the JRDC.

        1.37 "KIRIN TERRITORY" means the countries and multinational
jurisdictions listed in Exhibit B.

        1.38 "NET SALES" means the gross amount billed or invoiced by a Party or
its Affiliates or any of their Sublicensees for the sale or other disposition of
a New Product, less the following deductions: [***]. "Net Sales" does not
include amounts for any New Product furnished to a Third Party for which [***].
Furthermore, "Net Sales" excludes amounts from sales or other dispositions of
New Products between a Party and any of its Affiliates or between a Party (or
any of its Affiliates) and its Sublicensees, solely to the extent that such
entity purchasing the New Product resells such New Products to a Third Party.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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        1.39 "NEW PRODUCT" means any protein, antibody, or macromolecular
therapeutic or diagnostic product directly resulting from the Development Work
hereunder, including, without limitation, any Development Work performed with
respect to a Development Candidate.

        1.40 "OTHER JOINT INVENTION" means any Invention made in the course of
performance of the R&D Work or commercialization of New Products by the
employees, agents or contractors of Hyseq or its Affiliates and/or Kirin or its
Affiliates but excluding Joint Inventions, Hyseq Improvements, and Kirin
Improvements.

        1.41 "OTHER TERRITORY" means all countries of the world excluding those
countries in the Hyseq Territory or the Kirin Territory.

        1.42 "PATENT COSTS" means all preparation, filing, prosecution and
maintenance out-of-pocket fees and expenses (including attorneys' fees),
actually and reasonably incurred in connection with the establishment and
maintenance of Patent Rights.

        1.43 "PATENT RIGHTS" means (a) all issued patents and inventor's
certificates, and all patent applications throughout the world, including any
renewal, division, continuation, continued prosecution application or
continuation-in-part of any of such patents, certificates and applications, and
any and all patents issuing in respect thereof; (b) any and all reissues,
extensions, substitutions, confirmations, registrations, revalidations,
revisions, renewals, reexaminations, foreign counterparts of and additions to
any of the foregoing; and (c) all intellectual property rights and other
proprietary rights in, to and under the foregoing.

        1.44 "PERSON" means any individual or legal entity.

        1.45 "PRIOR ART INVENTION" shall have the meaning assigned to it in
Section 5.1.6.

        1.46 "PROJECT YEAR" means a twelve (12) month period in which one or
both Parties shall perform specific R&D Work approved by the JRDC under the R&D
Plan. Each Project Year shall commence as of its applicable Project Year
Commencement Date. For purposes of clarification, more than one Project Year may
be in progress at any time, and no two Project Years shall necessarily have the
same Project Year Commencement Date.

        1.47 "PROJECT YEAR COMMENCEMENT DATE," as to a Project Year, means the
date specified by the JRDC in the R&D Plan for such Project Year.

        1.48 "R&D PLAN" shall have the meaning set forth in Section 2.1.1.

        1.49 "R&D WORK" shall have the meaning set forth in Section 2.1.1.

        1.50 "RECEIVING PARTY" shall have the meaning set forth in Section 7.1.

        1.51 "REGULATORY APPROVAL" means, with respect to a nation or, where
applicable, a multinational jurisdiction, any approvals, licenses, registrations
or authorizations necessary for the manufacture, marketing and sale of a New
Product in such nation or jurisdiction.

        1.52 "RESEARCH FUNDING" shall have the meaning set forth in Section
3.1.1.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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        1.53 "RESEARCH WORK" shall have the meaning set forth in Section 2.1.1.

        1.54 "RESPONSIBLE EXECUTIVE" shall have the meaning set forth in Section
10.2.

        1.55 "RIGHT" shall have the meaning set forth in Section 11.7.

        1.56 "SECOND PARTY" shall have the meaning set forth in Section 5.1.6.

        1.57 "SUBLICENSEE" means an authorized or permitted licensee or
sublicensee of a Party or any of its Affiliates.

        1.58 "THIRD PARTY" means any Person other than Hyseq or Kirin or their
respective Affiliates.

                                    ARTICLE 2

                            RESEARCH AND DEVELOPMENT

        2.1 JOINT RESEARCH AND DEVELOPMENT COMMITTEE.

               2.1.1 In accordance with the terms and conditions set forth
below, the Parties shall conduct the research and development of Development
Candidates ("R&D WORK") pursuant to a mutually agreed plan approved (and as
amended from time to time) in accordance with this Article 2, including, at a
minimum and without limitation, the subject matter set forth in Exhibit C (the
"R&D PLAN"). The R&D Work shall consist of the two phases: (a) the discovery or
optimization of potential Development Candidates (the "RESEARCH WORK"), and (b)
the development of select Development Candidates into New Products (the
"DEVELOPMENT WORK").

               2.1.2 Within ten (10) days after the Effective Date, each Party
shall appoint three (3) individuals to serve as its representatives on a joint
research and development committee (the "JRDC"). The JRDC shall formulate and
approve the initial R&D Plan and, from time to time, any modifications or
amendments thereto. The initial R&D Plan shall include, at a minimum and without
limitation, the subject matter set forth in Exhibit C. The R&D Plan shall
specify the R&D Work to be performed by the Parties and the Project Year
Commencement Date therefor. Each Party shall have the right to change any or all
of its representatives on the JRDC upon written notice to the other Party,
provided that each Party shall appoint and maintain for the duration of the term
of this Agreement at least one senior management representative on the JRDC.

               2.1.3 The JRDC shall have authority over the design, management
and conduct of the R&D Work and, if applicable, the commercialization of New
Products. The JRDC may appoint individuals to serve as representatives on
subcommittees to assist the JRDC with respect to any particular subject matter
of the R&D Plan and, if applicable, the commercialization of New Products,
including, for example, product manufacturing, quality control and assurance,
preclinical studies design, implementation and evaluation, clinical protocols
design, implementation and evaluation, and regulatory affairs. Without limiting
the generality of the foregoing, the JRDC shall have the sole authority to:

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               (a)    Develop and implement the R&D Plan, including, without
                      limitation, go/no-go criteria, timelines and
                      responsibilities with respect to the discovery,
                      optimization and development of Development Candidates,
                      which responsibilities may include [***];

               (b)    Develop and implement the budget for the Research Funding
                      and Development Funding;

               (c)    Monitor and make recommendations regarding compliance of
                      the Parties with the R&D Plan and the conduct of the R&D
                      Work;

               (d)    Develop and implement amendments and modifications to the
                      R&D Plan;

               (e)    Set priorities with respect to allocation of resources
                      under the R&D Plan;

               (f)    Review any and all proposed publications relating to the
                      R&D Plan or activities with respect to a Development
                      Candidate and the results therefrom, and any and all
                      proposed filings of patent applications in connection
                      therewith;

               (g)    List on Exhibit D all Patent Rights identified by each
                      Party that claim a Development Candidate or New Product,
                      provided that any and all Patent Rights that claim a Joint
                      Invention shall be deemed to be listed on Exhibit D;

               (h)    Direct prosecution of Joint Patents as provided in Section
                      5.4;

               (i)    Determine and direct the licensing and/or disposition of
                      any Joint Patents that claim Other Joint Inventions;

               (j)    Select Development Candidates for Development Work and
                      determine how such Development Work should occur;

               (k)    Monitor and review pre-clinical and clinical trials of
                      Development Candidates and Approval Applications for New
                      Products;

               (l)    Determine on an annual basis whether to continue or
                      discontinue performance of the R&D Plan or any R&D Work
                      thereunder;

               (l)    Coordinate each Party's activities with respect to the
                      commercialization of New Products, if applicable, and
                      establish each Party's rights and obligations with respect
                      to the launch, promotion, marketing and sale of New
                      Products in the Other Territory; and

               (m)    Decide which Party or Parties shall manufacture each New
                      Product, subject to a separate manufacturing agreement to
                      be negotiated in good faith by each Party.

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               2.1.4 During the term of this Agreement, and thereafter as set
forth in Section 8.4.2, if applicable, the JRDC shall meet, in person or by
telephone conference call, on an "as needed" basis (as determined by the JRDC)
to review progress of the R&D Plan. The JRDC shall hold regular meetings, in
person or by telephone conference call, as necessary, to discuss the progress of
the R&D Work and any all Inventions resulting therefrom; provided that the JRDC
shall meet at least one (1) time each quarter and shall hold at least two (2)
in-person meetings per year, with at least one (1) in-person meeting being held
at the offices of each Party each year. All decisions made or actions taken by
the JRDC shall be made in writing, signed by a JRDC representative of each
Party, and require the [***] of the Parties, with each Party entitled to [***]
vote. Any decision of or action by the JRDC without the [***] of the Parties
shall be null and void. A quorum of the JRDC shall consist of two members,
provided that at least one member appointed by each Party is present. The JRDC
shall keep meeting minutes and prepare a quarterly report for internal senior
management review by the Parties. The host Party at each in-person meeting shall
prepare the minutes for that meeting and the Parties will alternate preparing
minutes for each meeting held via telephone or video conference. All
disagreements arising out of the R&D Plan, R&D Work or prosecution of Patent
Rights during the term of this Agreement shall be referred to the JRDC. If the
JRDC is unable to resolve such disagreement within thirty (30) days, the matter
shall be resolved in accordance with the procedures set forth in Article 10.

        2.2 RESPONSIBILITIES OF THE PARTIES.

               2.2.1 Each Party shall be solely responsible for all R&D Work
assigned to such Party under the R&D Plan. If the R&D Plan fails to allocate
responsibility for any R&D Work to a particular party, the JRDC shall promptly
designate the responsible Party for such R&D Work. Each Party shall use [***]
efforts to perform the R&D Work for which it is responsible. Without limiting
the generality of the foregoing, each Party shall use [***] efforts to: (a)
commit sufficient internal resources to perform the R&D Work, (b) make available
to the other Party sufficient quantities of materials, as required under the R&D
Plan, for such Party to perform the R&D Work, (c) commit sufficient resources to
deliver and disclose technology (including trade secrets and know-how) required
to be so delivered and disclosed to the other Party in accordance with the R&D
Plan, (d) report all Inventions to the JRDC pursuant to Section 2.2.3, (e) carry
out its responsibilities with respect to prosecution of Joint Patents as
directed by the JRDC, and (f) cooperate, consult and share information with
respect to the establishment and progress of pre-clinical and clinical trials
and filings for Regulatory Approval.

               2.2.2 Each Party shall be solely responsible for the promotion,
marketing and sales of New Products (including all Regulatory Approval relating
thereto), and all costs associated with the foregoing, in the Hyseq Territory or
Kirin Territory, as applicable, and, as directed by the JRDC, the Other
Territory. Each Party shall use [***] efforts to promote, market and sell New
Products in the Hyseq Territory and Kirin Territory, as applicable, and, as
directed by the JRDC, the Other Territory.

               2.2.3 Each Party shall prepare and maintain detailed records of,
and regularly disclose to the JRDC and the other Party, any and all Inventions
and other related information created by or for such Party in connection with
the R&D Work. Such disclosure shall be made as provided for in the R&D Plan, but
in no event less than once per calendar quarter. Without limiting the generality
of the foregoing, each Party shall regularly provide the JRDC with information

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sufficient to enable the JRDC to perform its obligations pursuant to Section
2.1, including, without limitation, reasonably detailed descriptions of the R&D
Work performed, the scheduling of ongoing or future R&D Work, resources
anticipated to accomplish the R&D Work, and any additional reasonable reporting
information required by the JRDC.

        2.3 RIGHT TO NEGOTIATE NEW AGREEMENT. At any time after any Development
Candidate approved by the JRDC for Development Work hereunder [***], either
Party may request the other Party to discuss alternative approaches and
contractual arrangements, to be memorialized in a separate agreement with
respect to the development, manufacturing and commercialization of New Products.
The other Party shall make appropriate representatives reasonably available to
confer with such Party regarding the terms and conditions of such separate
agreement for a period of [***], provided that nothing in this Agreement shall
be construed to require or obligate such other Party to enter into any such
separate agreement.

                                    ARTICLE 3

                               FUNDING; ROYALTIES

        3.1 RESEARCH FUNDING.

               3.1.1 The JRDC shall formulate and approve a budget to cover the
FTE contributions of Hyseq, and [***] costs and expenses actually incurred by
Hyseq, subject to [***], that are [***], in performance of the Research Work
during each Project Year (such approved budget referred to herein as the
"RESEARCH FUNDING"). Such [***] costs and expenses include, for example and
without limitation, approved outside services, contract manufacturing, contract
studies or consulting services, but exclude [***] costs and expenses incurred in
performance of the Research Work. Kirin shall be solely responsible for payment
of the Research Funding in accordance with Section 3.1.2. Within [***] after the
close of each quarter of any Project Year, Hyseq shall submit to Kirin a
detailed and accurate invoice, based on Hyseq's actual FTE contributions and the
FTE Rate, and any approved [***] expenses incurred, for Research Work conducted
by Hyseq during such quarter. Each such invoice shall identify each individual
performing Research Work by or on behalf of Hyseq together with a reasonably
detailed description of the Research Work performed by such individual, and the
time spent (on a monthly basis) by such individual performing such Research
Work. Kirin shall not be responsible for expenses incurred in any Project Year
by Hyseq with respect to Research Work that was not approved by the JRDC or to
the extent that such expenses exceed the budgeted amounts therefor.

               3.1.2 For each Project Year, Kirin shall pay the budgeted
Research Funding payments for Research Work conducted by Hyseq during each
quarter of the Project Year (based upon budgeted Research Funding for such
quarter of the Project Year as approved by the JRDC) within [***] after receipt
of Hyseq's invoice therefor, as submitted pursuant to Section 3.1.1; provided,
however, that, upon receipt of such invoice by Kirin, the Parties shall review
the amount of expenses submitted by Hyseq in such quarter and, in the event that
Hyseq's actual expenses are less than the budgeted Research Funding payment for
such quarter, Kirin shall only be required to pay the amount of actual expenses
incurred by Hyseq. Kirin shall not be obligated to make any payment to Hyseq
hereunder before the initial Project Year Commencement Date.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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AMENDED.

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               3.1.3 As provided under Sections 3.1.1 and 3.1.2, the Research
Work for which Kirin shall pay, and the associated Research Funding therefor,
for each Project Year shall be approved by the JRDC not later than ninety (90)
days prior to the start of each such Project Year. In the event that the
Research Funding for any Project Year has not been agreed upon in advance of the
start of such Project Year, the Responsible Executives of the Parties shall
meet, in person or by conference telephone call, to resolve the matter. Pending
such resolution, however, Kirin, at its sole discretion, may elect to fund the
FTE contributions of Hyseq for any upcoming Project Year, on a quarterly basis,
in amounts sufficient to continue any Research Work (or portions thereof) from
the corresponding just-ended Project Year, and Hyseq shall continue to perform
such ongoing Research Work (or portions thereof).

               3.1.4 Except as expressly provided in this Section 3.1, Hyseq
shall bear all costs and expenses incurred by Hyseq in performance of Research
Work under the R&D Plan.

               3.1.5 Upon Kirin's request, the JRDC shall provide to Kirin, on
or before October 1 of any calendar year, an estimated budget for all Research
Work to be performed by Hyseq during the subsequent calendar year.

        3.2 DEVELOPMENT FUNDING. The JRDC shall agree upon a budget to cover
both Parties' FTE contributions in performance of the Development Work during
each Project Year (such approved budget referred to herein as the "DEVELOPMENT
FUNDING"). The Parties shall share responsibility equally (i.e., on a 50/50
basis) for payment of the Development Funding, based on each Party's actual FTE
contributions to the Development Work and the FTE Rate. Within [***] after the
close of each quarter of a Project Year, each Party shall submit detailed and
accurate reports of its actual FTE contributions at the FTE Rate to the other
Party, and the Party reporting lower costs for such quarter shall reimburse the
other Party for one-half the difference between each Party's individual costs
within [***] after both parties submit their reports, provided that neither
Party shall be responsible for expenses incurred in a Project Year by the other
Party with respect to Development Work that was not approved by the JRDC or to
the extent that such expenses exceed such Party's allocated portion of the
budgeted amounts therefor. Unless otherwise provided by the JRDC in writing, any
other costs for the R&D Plan (e.g., third-party licenses and costs relating to
third-party contractors) shall be borne solely by the Party which incurred such
costs.

        3.3 NET SALES ROYALTY.

               3.3.1 Hyseq shall pay Kirin a royalty equal to [***] of Net Sales
billed or invoiced by Hyseq or its Affiliates or Sublicensees in the Hyseq
Territory.

               3.3.2 Kirin shall pay Hyseq a royalty equal to [***] of Net Sales
billed or invoiced by Kirin or its Affiliates or Sublicensees in the Kirin
Territory.

        3.4 ROYALTY PAYMENT TERMS.

               3.4.1 All royalty payments due and payable pursuant to Section
3.3 shall be made within [***] after the close of the calendar quarter in which
the applicable Net Sales were billed or invoiced. Each payment shall be
accompanied by a written statement setting forth in reasonable detail the Net
Sales in each country for each New Product, the rates of exchange (if
applicable), and the royalty calculation.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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               3.4.2 All royalty payments due and payable pursuant to Section
3.3 shall be made in United States Dollars. Each payment shall be made by wire
transfer to such financial institutions and account numbers as the other Party
may designate in writing. In the event that a Party (or its Affiliates or
Sublicensees) sells New Products in foreign currencies other than United States
Dollars, the royalties owed shall be calculated by such Party (or its Affiliates
or Sublicensees) in the foreign currency (and otherwise in accordance with such
Party's or its Affiliates' or Sublicensees' standard accounting procedures) by
converting the total amount of each foreign-currency royalty owed for the
applicable reporting period to United States Dollars at the exchange rate in the
United States (calculated by reference to the "United States Dollar noon buying
rates," or its equivalent, as published in the Wall Street Journal) in effect on
the last business day of the applicable reporting period.

               3.4.3 Each Party shall keep and maintain accurate books and
records to verify the number of units of New Products sold or otherwise disposed
of during a reporting period by such Party, its Affiliates and its Sublicensees,
and such other information as may be reasonably required to confirm the amounts
payable hereunder with respect to such reporting period. Each Party shall
preserve such books and records for a period of [***] after the end of the
period covered by such books and records, which obligation shall survive for
[***] after expiration or termination of this Agreement. Each Party (the
"AUDITING PARTY") shall have the right, on [***] advance written notice and not
more than [***] in any twelve (12) month period, to have an independent
accounting firm reasonably acceptable to the other Party (the "AUDITED PARTY")
examine such books, records and accounts of the Audited Party during the Audited
Party's normal business hours solely to verify the accuracy of the royalty
reports and the amount of payments made by the Audited Party hereunder during
the preceding [***] quarterly reporting periods. The accounting firm shall not
be paid on a contingency or other basis related to the outcome of the audit, and
shall execute a confidentiality agreement with the Audited Party in a form
mutually acceptable to the Parties that prohibits the accounting firm from
disclosing or using information obtained in connection with the audit other than
the disclosure to the Auditing Party of the amount of any underpayment or
overpayment. Any such audit shall be conducted during the Audited Party's
regular business hours, in such a manner so as not to interfere with the Audited
Party's normal business activities, and shall be at the Auditing Party's
expense, provided that if such audit reveals an underpayment of more than [***]
during any reporting period, the Audited Party shall pay the costs of the audit.

               3.4.4 Any deduction, withholding or similar taxes that a Party is
required by statute to withhold with respect to any royalty payment payable
hereunder shall be deducted from such payment; provided that the deducting Party
shall provide the other Party with a copy of the certificate or other
documentation demonstrating the payment to applicable tax authorities of the
deducted, withheld or taxed amount. Late payments shall be subject to interest
at a rate equal to [***] per annum or the maximum rate allowed by law, whichever
is less.

        3.5 ADDITIONAL TECHNOLOGY.

               3.5.1 During the term of this Agreement, if either Party becomes
aware of technology or related intellectual property rights relating to a New
Product that is held or otherwise controlled by a Third Party, and such Party
believes such technology and/or intellectual property rights are required to
make, use, sell, offer for sale or import such New Product ("ADDITIONAL
TECHNOLOGY") in any country within the Hyseq Territory, Kirin Territory or Other
Territory, as

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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applicable, such Party may present a description of such technology, along with
an analysis of the purported need for such technology, to the JRDC. Such Party
shall [***]. Upon the written approval of the JRDC, which approval shall not be
unreasonably withheld, such Party shall have the right to [***], provided that
in no event will [***].

               3.5.2 Notwithstanding anything to the contrary in this Section
3.5, this section shall not limit or otherwise restrict either Party in
procuring technology or intellectual property rights.

                                    ARTICLE 4

                               GRANTS OF LICENSES

        4.1 GRANT OF LICENSES BY HYSEQ TO KIRIN.

               4.1.1 Subject to the terms and conditions of this Agreement,
Hyseq hereby grants to Kirin and its Affiliates a non-exclusive right and
license, without a right to grant sublicenses, under the Hyseq Technology and
Hyseq Improvements, as follows: (a) worldwide, solely to conduct Kirin's
obligations to perform the R&D Work in accordance with the R&D Plan; (b) in the
Kirin Territory to make, use, sell, offer for sale and import New Products in
the Kirin Territory; and (c) in the Other Territory to make, use, sell, offer
for sale and import New Products in the Other Territory solely as directed by
the JRDC pursuant to Article 2.

               4.1.2 Subject to the terms and conditions of this Agreement and
upon designation of a Development Candidate by the JRDC, Hyseq grants to Kirin
and its Affiliates, on a Development Candidate-by-Development Candidate basis, a
worldwide co-exclusive right and license (i.e., exclusive except for Hyseq's
retention of all such rights for itself and its Affiliates and its
Sublicensees), under all Patent Rights of Hyseq that claim each Development
Candidate and are listed on Exhibit D, including without limitation, the Prior
Art Inventions, to make, use and import (and to have such rights exercised on
its or their behalf) Development Candidates for the limited purpose of
conducting the R&D Work in accordance with the R&D Plan, as directed by the JRDC
pursuant to Article 2. Kirin and its Affiliates shall have the right to grant
sublicenses under the foregoing license only upon the prior written consent of
Hyseq, which shall not be unreasonably withheld or delayed.

               4.1.3 Subject to the terms and conditions of this Agreement ,
Hyseq grants to Kirin and its Affiliates, on a New Product-by-New Product basis,
an exclusive right and license, under all Patent Rights of Hyseq that claim each
New Product and are listed on Exhibit D, to make, use, sell, offer for sale and
import New Products in the Kirin Territory and, solely as directed by the JRDC
pursuant to Article 2, in the Other Territory. Kirin and its Affiliates shall
have the right to grant sublicenses under the foregoing license only upon the
prior written consent of Hyseq, which shall not be unreasonably withheld or
delayed.

        4.2 GRANT OF LICENSES BY KIRIN TO HYSEQ.

               4.2.1 Subject to the terms and conditions of this Agreement,
Kirin hereby grants to Hyseq and its Affiliates a non-exclusive right and
license, without a right to grant sublicenses, under the Kirin Technology and
Kirin Improvements, as follows: (a) worldwide, solely to conduct

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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Hyseq's obligations to perform the R&D Work in accordance with the R&D Plan; (b)
in the Hyseq Territory to make, use, sell, offer for sale and import New
Products in the Hyseq Territory; and (c) in the Other Territory to make, use,
sell, offer for sale and import New Products in the Other Territory solely as
directed by the JRDC pursuant to Article 2.

               4.2.2 Subject to the terms and conditions of this Agreement and
upon designation of a Development Candidate by the JRDC, Kirin grants to Hyseq
and its Affiliates, on a Development Candidate-by-Development Candidate basis, a
worldwide co-exclusive right and license (i.e., exclusive except for Kirin's
retention of all such rights for itself and its Affiliates and its
Sublicensees), under all Patent Rights of Kirin that claim each Development
Candidate and are listed on Exhibit D, including without limitation, the Prior
Art Inventions, to make, use and import (and to have such rights exercised on
its or their behalf) Development Candidates for the limited purpose of
conducting the R&D Work in accordance with the R&D Plan, as directed by the JRDC
pursuant to Article 2. Hyseq and its Affiliates shall have the right to grant
sublicenses under the foregoing license only upon the prior written consent of
Kirin, which shall not be unreasonably withheld or delayed.

               4.2.3 Subject to the terms and conditions of this Agreement Kirin
grants to Hyseq and its Affiliates, on a New Product-by-New Product basis, an
exclusive right and license, under all Patent Rights of Kirin that claim each
New Product and are listed on Exhibit D, to make, use, sell, offer for sale and
import New Products in the Hyseq Territory and, solely as directed by the JRDC
pursuant to Article 2, in the Other Territory. Hyseq and its Affiliates shall
have the right to grant sublicenses under the foregoing license only upon the
prior written consent of Kirin, which shall not be unreasonably withheld or
delayed.

        4.3 NO OTHER RIGHTS. This Agreement confers no right, license or
interest by implication, estoppel or otherwise under any patents, patent
applications, know-how or other intellectual property rights of either Party
except as expressly set forth in this Article 4 and in Articles 5 and 8. Each
Party hereby expressly reserves all rights and interests with respect to
patents, patent applications, know-how or other intellectual property rights not
expressly granted to the other Party hereunder.

                                    ARTICLE 5

                          INTELLECTUAL PROPERTY MATTERS

        5.1 OWNERSHIP OF INTELLECTUAL PROPERTY.

               5.1.1 JOINT INVENTIONS; JOINT PATENTS; OTHER JOINT INVENTIONS.
Subject to the provisions of Section 5.1.6, the Parties shall jointly own all
Joint Inventions, Joint Patents and Other Joint Inventions. Unless otherwise
explicitly provided herein, neither Party shall have any right or obligation of
consent, accounting or payment of royalties or other consideration with respect
to such Party's commercialization or exploitation of any Joint Invention, Joint
Patent or Other Joint Inventions.

               5.1.2 ASSIGNMENT BY HYSEQ. In order to effect the joint ownership
provisions of Section 5.1.1, and subject to Section 5.1.6, Hyseq hereby assigns
and agrees to assign to Kirin a

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AMENDED.

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one-half undivided interest (and thereby retains an equal one-half undivided
interest) in, to and under: (a) any Joint Invention or Other Joint Invention
made solely by the employees, agents or contractors of Hyseq and its Affiliates;
and (b) all Patent Rights claiming such Joint Invention or Other Joint
Inventions.

               5.1.3 ASSIGNMENT BY KIRIN. In order to effect the joint ownership
provisions of Section 5.1.1, and subject to Section 5.1.6, Kirin hereby assigns
and agrees to assign to Hyseq a one-half undivided interest (and thereby retains
an equal one-half undivided interest) in, to and under: (a) any Joint Invention
or Other Joint Invention made solely by the employees, agents or contractors of
Kirin and its Affiliates; and (b) all Patent Rights claiming such Joint
Invention or Other Joint Invention.

               5.1.4 HYSEQ TECHNOLOGY; HYSEQ IMPROVEMENT. As between the
Parties, subject only to the licenses set forth in Article 4 and Article 8, and
the provisions of Section 5.1.6, Hyseq shall (a) retain all right, title and
interest in and to the Hyseq Technology, and (b) solely own (i) any Hyseq
Improvements (whether or not such Hyseq Improvements are invented, developed or
made solely by or with the contribution of the employees, agents or contractors
of Kirin) and (ii) all Patent Rights claiming, covering or directed to any such
Hyseq Improvements. To the extent necessary to implement the foregoing, Kirin
hereby assigns and agrees to assign to Hyseq all of Kirin's right, title and
interest in, to and under the Hyseq Improvements.

               5.1.5 KIRIN TECHNOLOGY; KIRIN IMPROVEMENT. As between the
Parties, subject only to the licenses set forth in Article 4 and Article 8, and
the provisions of Section 5.1.6, Kirin shall (a) retain all right, title and
interest in and to the Kirin Technology, and (b) solely own (i) any Kirin
Improvements (whether or not such Kirin Improvements are invented, developed or
made solely by or with the contribution of the employees, agents or contractors
of Hyseq) and (ii) all Patent Rights claiming, covering or directed to any such
Kirin Improvements. To the extent necessary to implement the foregoing, Hyseq
hereby assigns and agrees to assign to Kirin all of Hyseq's right, title and
interest in, to and under the Kirin Improvements.

               5.1.6 PRIOR ART INVENTIONS. Notwithstanding anything in this
Section 5.1 to the contrary, if only one Party or its Affiliates (the "FIRST
PARTY") owns subject matter that qualifies as prior art (as specifically
identified in 35 U.S.C. Section 102(e), (f) or (g)) with respect to any
Invention conceived, developed or reduced to practice by the employees, agents
or contractors of the other Party or its Affiliates (the "SECOND PARTY") or by
the Second Party and First Party in the course of performance of the R&D Work or
commercialization of a New Product, then the First Party shall own all right,
title and interest in, to and under such Invention, and all Patent Rights and
other intellectual property rights therein and thereunder, solely in the United
States (thereafter, a "PRIOR ART INVENTION"); provided, however, that the rights
to such Invention outside of the United States shall be as otherwise set forth
in this Agreement and shall be unaffected by this Section 5.1.6, provided
further that the Prior Art Invention shall not include Kirin Improvements and
Hyseq Improvements. In accordance with the foregoing, if, in the course of
making required disclosures of any Invention pursuant to this Agreement, or
preparing a United States patent application claiming, covering or directed to
any Invention, one Party becomes aware of any subject matter owned by either of
the Parties that qualifies as prior art (pursuant to 35 U.S.C. Section 102(e),
(f) or (g)) with respect to such Invention, such Party shall provide a detailed
written notice thereof to the other Party, and, following the other Party's
receipt of such notice, the Parties shall cooperate to execute all

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instruments required to document the assignment of the Prior Art Invention
required by this Section 5.1.6. The Second Party hereby agrees to transfer and
assign to the First Party all of its right, title and interest in, to and under
any such Prior Art Invention, and all Patent Rights therein, thereto, and
thereunder, solely in the United States, provided, however that such Prior Art
Invention, and all Patent Rights therein, thereto, and thereunder, outside the
United States shall be jointly owned as otherwise set forth in this Agreement
and shall be unaffected by this Section 5.1.6. The prosecution and maintenance
of any Patent Rights in, to and under any Prior Art Inventions owned by the
First Party pursuant to this Section 5.1.6 shall be governed in accordance with
the provisions of Section 5.3.

               5.1.7 Each Party shall execute or cause to be executed any
assignments or other instruments and documents and provide such other reasonable
assistance and cooperation as may be reasonably necessary or appropriate to
implement the provisions of this Section 5.1 and the assignments hereunder,
including, without limitation, by executing agreements with each Party's
employees, agents and contractors sufficient to convey to such Party the rights
transferred in this Section 5.1.

        5.2 OWNERSHIP OF APPROVAL APPLICATIONS AND REGULATORY APPROVALS.

               5.2.1 Subject to the rights granted to or owned by Kirin
hereunder, including without limitation, the rights owned by Kirin set forth in
Section 5.2.3, Hyseq shall own all right, title and interest in all Approval
Applications necessary to obtain Regulatory Approvals for New Products, together
with any Regulatory Approvals obtained in connection therewith, filed with or
issued by a governmental authority for a country or territory within the Hyseq
Territory and, as directed by the JRDC pursuant to Section 2.1.3, the Other
Territory. Such Approval Applications, together with any Regulatory Approvals
obtained in connection therewith, shall be filed in Hyseq's name and owned by
Hyseq.

               5.2.2 Subject to the rights granted to or owned by Hyseq
hereunder, including without limitation, the rights owned by Hyseq set forth in
Section 5.2.3, Kirin shall own all right, title and interest in all Approval
Applications necessary to obtain Regulatory Approvals required for manufacture,
marketing and sale of New Products, together with any Regulatory Approval
obtained in connection therewith, filed with or issued by a governmental
authority for a country or territory within the Kirin Territory and, as directed
by the JRDC pursuant to Section 2.1.3, the Other Territory. Such Approval
Applications, together with any Regulatory Approvals obtained in connection
therewith, shall be filed in Kirin's name and owned by Kirin.

               5.2.3 Each Party shall provide to the other Party [***] any new
or pending Approval Application. Each Party shall [***], and shall [***]
regarding Approval Application strategy. Each Party shall keep the other Party
informed of the status of an Approval Application to the extent known by each
Party.

        5.3 PROSECUTION AND MAINTENANCE OF SOLELY OWNED PATENTS; ABANDONMENT.

               5.3.1 Each Party shall have the sole right to file, prosecute and
maintain such Party's solely owned Patent Rights claiming, covering or directed
to a Development Candidate or New Product and shall bear all Patent Costs
associated therewith. Such Party (the "PROSECUTING

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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PARTY") shall provide to the other Party [***]. The Prosecuting Party shall
[***] with respect to any patent within such Patent Rights, and shall [***]
regarding the patent prosecution strategy for such Patent Rights. The
Prosecuting Party agrees to keep the other Party informed of the course of
patent prosecution or other proceedings relating to such Patent Rights to the
extent known by Prosecuting Party.

               5.3.2 Notwithstanding Section 5.3.1, in the event a Prosecuting
Party (as defined in Section 5.3.1) elects, on a country-by-country basis, not
to file or not to continue to prosecute and thereby abandon an application for a
patent, or not to maintain and thereby abandon a patent that it has the first
right to file, prosecute or maintain under Section 5.3.1 and that claims, or
which is required to make, use, sell, offer for sale or import, a Development
Candidate or New Product in such country or jurisdiction, such Party shall
notify the other Party not less than [***] before any relevant deadline, and
thereafter such other Party shall have the right to pursue, in such country or
jurisdiction, at such other Party's expense and in such other Party's sole
discretion, prosecution of such patent application or maintenance of such issued
patent, provided that with respect to any patent application or patent licensed
to a Party by a Third Party, the other Party shall only have a right to pursue
prosecution or maintenance to the extent permitted in the applicable agreement
with such Third Party. The other Party shall [***] any Patent Costs associated
with the prosecution or maintenance of such patent application or patent [***].

        5.4 PROSECUTION AND MAINTENANCE OF JOINT PATENTS; ABANDONMENT. The JRDC
shall determine and implement a patent strategy with respect to all Joint
Inventions and Other Joint Inventions that may be patentable. With respect to
all Joint Inventions and Other Joint Inventions for which the JRDC determines
patent protection should be sought, the JRDC shall direct, and the Parties shall
cooperate in, the preparation, filing and prosecution of Joint Patents, and the
Parties shall discuss and agree on the content and form of relevant patent
applications and any other relevant matters before such applications are made.
Each Party shall consider in good faith any comments from the other regarding
steps to strengthen such Joint Patents.

               5.4.1 Unless otherwise directed by the JRDC, Hyseq shall be
considered the Lead Party (as further described in Section 5.4.4) for Joint
Patents within the Hyseq Territory.

               5.4.2 Unless otherwise directed by the JRDC, Kirin shall be
considered the Lead Party (as further described in Section 5.4.4) for Joint
Patents within the Kirin Territory.

               5.4.3 The JRDC shall assign either Hyseq or Kirin as the Lead
Party (as further described in Section 5.4.4) for Joint Patents within the Other
Territory (or any jurisdiction therein).

               5.4.4 Unless otherwise directed by the JRDC, the Lead Party shall
have the right to file, prosecute and maintain Joint Patents within the Hyseq
Territory, Kirin Territory and/or Other Territory, as applicable, and shall bear
all Patent Costs associated therewith. In the event that the Lead Party elects
not to prosecute or maintain a patent application or patent with respect to a
particular Joint Invention or particular country or jurisdiction, the Lead Party
shall provide [***] notice thereof and the other Party may elect to prosecute
and maintain such patent application or patent at its sole discretion and
expense, and all rights in such patent application or patent shall be assigned
to such other Party. Either Party may choose at any time not to continue to pay
any such Patent Costs with respect to a particular Joint Patent, and shall
thereafter [***] if the other Party

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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AMENDED.

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pays all such Patent Costs. Such [***] shall take place in a timely manner to
enable the [***] Party to meet any external requirement concerning prosecution
matters and paying Patent Costs. In the event that a Party elects, at any time,
not to participate in the preparation, filing and prosecution of any patent
application covering a Joint Invention, such Party shall provide reasonable
assistance to the other Party, at the sole expense of such other Party, with
respect to any activities reasonably determined by such other Party as necessary
to obtain patent protection for such Joint Invention.

        5.5 ENFORCEMENT OF PATENT RIGHTS.

               5.5.1 If any Patent Right within the Joint Patents, or any Patent
Right within either Party's solely owned Patent Rights claiming, covering or
directed to a Development Candidate or New Product that is subject to Section
5.3, is [***] infringed by a Third Party through the manufacture, use, sale,
offer for sale or importation of any product (an "INFRINGEMENT"), the Party
first having knowledge of such infringement shall promptly notify the other
Party in writing. Such notice shall set forth the facts of the Infringement in
reasonable detail.

               5.5.2 Hyseq shall have the first right, but not an obligation, to
institute, prosecute and control, using counsel of Hyseq's choice, any action or
proceeding with respect to an Infringement of a patent within the Joint Patents,
or its solely owned Patent Rights claiming, covering or directed to a
Development Candidate or New Product, in the Hyseq Territory and such Other
Territory as directed by the JRDC. If Hyseq initiates any such action or
proceeding, Kirin agrees [***]. In the event that Hyseq fails to institute an
action or proceeding with respect to such Infringement within a period of [***]
after notice of such Infringement, and fails thereafter to prosecute such action
or proceeding, Kirin shall have the right, but not the obligation, to institute
and/or prosecute and control an action or proceeding in its name with respect to
such an Infringement by counsel of Kirin's choice. In the event that Kirin
institutes any such action or proceeding, Hyseq agrees [***].

               5.5.3 Kirin shall have the first right, but not an obligation, to
institute, prosecute and control, using counsel of Kirin's choice, any action or
proceeding with respect to an Infringement, of a patent within the Joint
Patents, or its solely owned Patent Rights claiming, covering or directed to a
Development Candidate or New Product, in the Kirin Territory and such Other
Territory as directed by the JRDC. If Kirin initiates any such action or
proceeding, Hyseq agrees [***]. In the event that Kirin fails to institute and
an action or proceeding with respect to such Infringement within a period of
[***] after notice of such Infringement, and fails thereafter to prosecute such
action or proceeding, Hyseq shall have the right, but not the obligation, to
institute and/or prosecute and control an action or proceeding in its name with
respect to such an Infringement by counsel of Hyseq's choice. In the event that
Hyseq institutes any such action or proceeding, Kirin agrees [***].

               5.5.4 Any recovery obtained by a Party enforcing one or more
patents, in accordance with this Section 5.5 (the "ENFORCING PARTY"), whether by
judgment, award, decree or settlement, shall be [***]. Any remainder of the
recovery shall be [***].

        5.6 INFRINGEMENT OF THIRD PARTY RIGHTS.

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               5.6.1 In the event that a Third Party alleges that intellectual
property rights owned, held or otherwise controlled by such Third Party are
being infringed or have been infringed by one or both Parties in connection with
the manufacture, use, sale, offer for sale or importation of a Development
Candidate or New Product in the Hyseq Territory, [***], any claim in any legal
action or proceeding arising from such allegation. The Parties shall consult
with each other concerning strategy, approaches and the consequences of
approaches that may be taken under this Section 5.6.1. Kirin shall [***].

               5.6.2 In the event that a Third Party alleges that intellectual
property rights owned, held or otherwise controlled by such Third Party are
being infringed or have been infringed by one or both Parties in connection with
the manufacture, use, sale, offer for sale or importation of a Development
Candidate or New Product in the Kirin Territory, [***]. The Parties shall
consult with each other concerning strategy, approaches and the consequences of
approaches that may be taken under this Section 5.6.2. Hyseq shall [***].

               5.6.3 In the event that a Third Party alleges that intellectual
property rights owned, held or otherwise controlled by such Third Party are
being infringed or have been infringed by one or both Parties in connection with
the manufacture, use, sale, offer for sale or importation of a Development
Candidate or New Product in the Other Territory, [***]. The Parties shall
consult with each other concerning strategy, approaches and the consequences of
approaches that may be taken under this Section 5.6.3. Unless otherwise agreed
upon by the Parties, the Parties shall [***] in connection with any such action
or proceeding. The Parties shall [***].

        5.7 SETTLEMENT WITH A THIRD PARTY. Except as expressly provided herein,
[***].

                                    ARTICLE 6

                         REPRESENTATIONS AND WARRANTIES

        6.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES CONCERNING CORPORATE
AUTHORIZATIONS. Each Party represents and warrants to the other Party that:

               (a)    Such Party is duly organized and validly existing and in
                      good standing under the laws of the jurisdiction of its
                      organization.

               (b)    Such Party has the full corporate power and is duly
                      authorized to enter into, execute and deliver this
                      Agreement, and to carry out and otherwise perform its
                      obligations hereunder.

               (c)    This Agreement has been duly authorized, executed and
                      delivered by such Party and constitutes a legal, valid and
                      binding obligation enforceable against it in accordance
                      with its terms subject, as to enforcement, to bankruptcy,
                      insolvency, reorganization and other laws of general
                      applicability relating to or affecting creditors' rights
                      and to the availability of particular remedies under
                      general equity principles.

               (d)    Such Party's execution, delivery and performance of this
                      Agreement and its compliance with the terms and conditions
                      hereof do not, and will not during

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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                      the term of this Agreement or any of its surviving
                      provisions conflict, with or result in a breach of any of
                      the terms and conditions of or constitute a default under
                      (i) any agreement where such conflict, breach or default
                      would impair in any material respect the ability of it to
                      perform its obligations or grant rights hereunder, (ii)
                      the provisions of its charter document or bylaws, or (iii)
                      any material law, rule, regulation or any order, writ,
                      injunction or decree of any court or governmental
                      authority entered against it or by which any of its
                      property is bound.

               (e)    As of the Effective Data, except for those actions, suits
                      and proceedings identified in each Party's publicly
                      available disclosures, including without limitation
                      disclosures required by the securities regulations
                      applicable to each Party, there are no actions, suits or
                      proceedings pending or threatened against it or its
                      Affiliates that may affect its ability to carry out its
                      obligations under this Agreement.

        6.2 RIGHT AND AUTHORITY TO GRANT LICENSES.

               6.2.1 As of the Effective Date, Hyseq represents and warrants to
Kirin that it has the right and authority to grant the rights and licenses
granted to Kirin and its Affiliates hereunder and is the sole and exclusive
owner of, or otherwise has the right to license, all intellectual property and
rights therein and thereto licensed to Kirin and its Affiliates hereunder.

               6.2.2 As of the Effective Date, Kirin represents and warrants to
Hyseq that it has the right and authority to grant the rights and licenses
granted to Hyseq and its Affiliates hereunder and is the sole and exclusive
owner of, or otherwise has the right to license, all intellectual property and
rights therein and thereto licensed to Hyseq and its Affiliates hereunder.

        6.3 [***] RESEARCH WORK. Unless otherwise agreed upon by the Parties in
writing, each Party hereby agrees that it shall not (and shall not permit any of
its Affiliates to), directly or indirectly, [***].

        6.4 NO [***] WARRANTY. Notwithstanding anything to the contrary herein,
nothing in this Agreement shall be deemed or construed as a representation or
warranty by either Party that any [***] of such Party is [***].

        6.5 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
PARTIES MAKE NO, AND EXPRESSLY DISCLAIM ALL, REPRESENTATIONS OR WARRANTIES OF
ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT.

        6.6 LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO A BREACH OF EACH
PARTY'S OBLIGATIONS PURSUANT TO ARTICLE 7 AND WITH RESPECT TO LIABILITY ARISING
UNDER ARTICLE 9, NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR INDIRECT DAMAGES AS A RESULT OF ITS BREACH OF THIS
AGREEMENT, NO MATTER THE CAUSE OR THEORY

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>

OF LIABILITY. THE FOREGOING LIMITATION SHALL APPLY EVEN IF THE OTHER PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING ANY FAILURE
OF ESSENTIAL PURPOSE OF ANY LIMITED WARRANTY PROVIDED HEREIN.

                                    ARTICLE 7

                                 CONFIDENTIALITY

        7.1 CONFIDENTIALITY; EXCEPTIONS. Except as otherwise provided in this
Agreement, the Parties agree that, for the term of this Agreement and [***]
thereafter, all non-public, proprietary, or "confidential"-marked invention
disclosures, Inventions, know-how, data, and technical, financial and other
information of any nature whatsoever, including, without limitation, all
discussions and information exchanged or disclosed, in writing or through
observation, by one Party (the "DISCLOSING PARTY") to the other Party (the
"RECEIVING PARTY") hereunder (collectively, "CONFIDENTIAL INFORMATION") shall be
received and maintained by the Receiving Party in strict confidence, shall not
be used by the Receiving Party for any purpose other than the purposes expressly
permitted by this Agreement or for the purpose of exercising the Receiving
Party's rights and obligations under this Agreement, and shall not be disclosed
to any Third Party (including, without limitation, in connection with any
publications, presentations or other disclosures). Notwithstanding the
foregoing, the Receiving Party may, subject to the provisions of this Agreement,
disclose the Disclosing Party's Confidential Information to those of its and its
Affiliates' or Sublicensees' directors, officers, employees, agents, consultants
and clinical investigators that have a need to know such Confidential
Information to achieve the purposes of this Agreement, provided that such
Receiving Party shall ensure that its and its Affiliates' or Sublicensees'
directors, officers, employees, agents, consultants or clinical investigators to
whom disclosure is to be made are bound by the obligations of confidentiality
and non-disclosure and non-use no less stringent than those set forth herein.
Each Party shall promptly notify the other Party in writing upon discovery of
any unauthorized use or disclosure of the Confidential Information, and shall
describe the facts and circumstances of such use or disclosure. Except to the
extent expressly provided for in this Agreement, Confidential Information
belongs to and shall remain the property of the Disclosing Party. The provisions
of this Article 7 shall not apply to any information which can be shown by
contemporaneous written documentation by the Receiving Party:

               7.1.1 To have been known to or in the possession of the Receiving
Party prior to the date of its actual receipt from the Disclosing Party;

               7.1.2 To be or to have become readily available to the public
other than through any act or omission of the Receiving Party in breach of this
Agreement or any other agreement between the Parties;

               7.1.3 To have been disclosed to the Receiving Party, other than
under an obligation of confidentiality, by a Third Party which had no obligation
not to disclose such information to others; or

               7.1.4 To have been subsequently independently developed by the
Receiving Party without use of the Confidential Information as demonstrated by
competent written records.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>

        7.2 AUTHORIZED DISCLOSURE. Notwithstanding anything to the contrary in
Section 7.1 of this Agreement, each Party shall have the right to disclose
Confidential Information hereunder solely to the extent such disclosure is
reasonably necessary in connection with submissions to any governmental
authority for the purposes of this Agreement or in filing or prosecuting patent
applications contemplated under this Agreement, [***] solely to the extent
required by law, complying with Applicable Laws, conducting R&D Work for the
purposes expressly permitted by this Agreement, or complying with applicable
securities laws and regulations; provided, however, that in the event of any
such anticipated disclosure of the Disclosing Party's Confidential Information
by the Receiving Party, the Receiving Party shall, except where impracticable,
give reasonable advance notice to the Disclosing Party of such disclosure
requirement (so that the Disclosing Party may seek a protective order and/or
other appropriate remedy or waive compliance with the confidentiality provisions
of this Article 7) and shall use its [***] efforts to secure confidential
treatment of such Confidential Information required to be disclosed.

        7.3 RETURN OF CONFIDENTIAL INFORMATION. The Receiving Party shall keep
Confidential Information belonging to the Disclosing Party in appropriately
secure locations. Upon the termination of this Agreement, any and all
Confidential Information possessed in tangible form by a Receiving Party, its
Affiliates or Sublicensees or its or any of their officers, directors,
employees, agents, consultants or clinical investigators and belonging to the
Disclosing Party, shall, upon written request, be immediately returned to the
Disclosing Party (or destroyed if so requested) and not retained by the
Receiving Party, its Affiliates or Sublicensees or any of their officers,
directors, employees, agents, consultants or clinical investigators, provided
that, in the event any rights or licenses survive the termination of this
Agreement pursuant to Article 8, each Party shall be entitled to retain any
Confidential Information of the other Party that is reasonably required to
exercise such rights and licenses for so long as such rights and licenses
survive. Notwithstanding the foregoing, each Party may retain one (1) copy of
any Confidential Information in an appropriately secure location for
record-keeping purposes.

                                    ARTICLE 8

                        TERM, TERMINATION AND ABANDONMENT

        8.1 TERM OF AGREEMENT. The term of this Agreement shall commence on the
Effective Date and continue for three (3) years after the Effective Date (the
"Term"), unless sooner terminated in accordance with this Article 8.
Notwithstanding the foregoing, if the JRDC fails to approve the initial R&D Plan
within one hundred eighty (180) days after the Effective Date, either Party may
terminate this Agreement at any time, effective upon delivery of notice thereof.

        8.2 TERMINATION FOR CAUSE.

               8.2.1 If either Party commits a material breach of this Agreement
at any time, which breach is not cured within [***] after written notice from
the non-breaching Party specifying the breach, the non-breaching Party shall
have the right to terminate this Agreement by written notice. The Parties
acknowledge and agree that failure to exercise any right or option, or to take
any action expressly within the discretion of a Party, shall not be deemed to be
a material breach by the Party with such right, option or discretion.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       21
<PAGE>

               8.2.2 Each Party shall have the right to terminate this Agreement
if there is a Change of Control of the other Party.

        8.3 TERMINATION FOR INSOLVENCY. Either Party may terminate this
Agreement upon written notice to the other Party on or after the occurrence of
any of the following events: (a) the appointment of a trustee, receiver or
custodian for all or substantially all of the property of the other Party, or
for any lesser portion of such property, if the result materially and adversely
affects the ability of the other Party to fulfill its obligations hereunder,
which appointment is not dismissed within sixty (60) days, (b) the determination
by a court or tribunal of competent jurisdiction that the other Party is
insolvent such that such other Party's liabilities exceed the fair market value
of its assets, (c) the filing of a petition for relief in bankruptcy by the
other Party on its own behalf, or the filing of any such petition against the
other Party if the proceeding is not dismissed or withdrawn within sixty (60)
days thereafter, (d) an assignment by the other Party for the benefit of
creditors, or (e) the dissolution or liquidation of, or cessation of business in
the ordinary course by, the other Party.

        8.4 EFFECT OF TERMINATION; SURVIVAL.

               8.4.1 Upon termination or expiration of this Agreement, all of
the Parties' rights and obligations hereunder shall terminate, except as
provided in this Article 8.

               8.4.2 Except as provided in Section 8.4.3, upon termination or
expiration of this Agreement, if one or more New Products exists, then, for so
long as such one or both Parties or its Affiliates (or their Sublicensees)
continues to market and sell such New Products the following Sections shall
survive in addition to those set forth in Section 8.5: (a) Sections 2.2.2, 3.3,
3.4, 3.5, 4.1.1(b), 4.2.1(b), 4.1.3, 4.2.3, 6.1 and 6.2 shall remain in effect
until the earlier of (i) the last to expire of the Patent Rights claiming,
covering or directed to such New Products or (ii) the termination for cause,
pursuant to Section 8.2, of such surviving rights and obligations by either
Party; and (b) Sections 2.1.2, 2.1.3 and 2.1.4 shall survive solely to the
extent and for so long as necessary for the JRDC (or any approved subcommittee
thereof) to oversee the Parties' development and commercialization activities
with respect to one or more New Products.

               8.4.3 In the event a Party terminates this Agreement pursuant to
Section 8.2 or Section 8.3, (a) all licenses and rights granted to the other
Party pursuant to Article 4 shall terminate, and (b) the terminating Party shall
have an exclusive option to acquire (i) a worldwide, non-exclusive right and
license, without a right to grant sublicenses, under Hyseq Technology and Hyseq
Improvements or Kirin Technology and Kirin Improvements, as applicable, to
conduct research and development of Development Candidates and to make, have
made, use, sell, offer for sale and import any products resulting therefrom, and
(ii) a worldwide, royalty-bearing, exclusive right and license under all Patent
Rights of the other Party claiming, covering or directed to Development
Candidates, with a right to grant sublicenses, to make, use and evaluate such
Development Candidates and to make, have made, use, sell, offer for sale and
import any products resulting from such Development Candidates. The Party
entitled to exercise the foregoing option may do so only by providing written
notification thereof to the other Party at any time within a [***] period
commencing on the date of the other Party's written notice of termination of
this Agreement. Upon the exercise of the foregoing option, the Parties shall
negotiate [***] to establish

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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promptly a separate agreement formalizing the specific terms and conditions of
the foregoing license on [***] terms.

        8.5 SURVIVAL. Articles 1, 5, 7 (to the extent provided therein), 9, 10
and 11 and Sections 4.1.1(c) (to the extent limited by, if at all, Sections
8.4.3, 8.7.1, 8.7.2 and 8.7.3), 4.2.1(c) (to extent limited by, if at all,
Sections 8.4.3, 8.7.1, 8.7.2 and 8.7.3), 4.3, 5.1.6, 6.4, 6.5, 6.6, 8.4, 8.5 and
8.6 shall survive any termination or expiration of this Agreement.

        8.6 ACCRUED RIGHTS. Termination or expiration of this Agreement for any
reason shall be without prejudice to any rights which shall have accrued to the
benefit of either Party prior to such termination or expiration, including
damages arising from any breach under this Agreement. Such termination or
expiration shall not relieve either Party from obligations which are expressly
indicated to survive termination or expiration of this Agreement.

        8.7 ABANDONMENT OF R&D WORK OR NEW PRODUCTS.

               8.7.1 Either Party shall have the right, upon not less than [***]
prior written notice to the other Party, to elect to abandon all of the R&D Work
with respect to one or more Development Candidates. In the event a Party so
elects to abandon its obligations with respect to any Development Candidate, or
if a Party fails to perform its obligations under Sections 2.2.1 or 2.2.2 for a
period of [***], then (a) all licenses and rights granted to the abandoning
Party pursuant to Sections 4.1.1, 4.1.2 and 4.1.3 or Sections 4.2.1, 4.2.2 and
4.2.3, as applicable, with respect to such Development Candidate shall
terminate, and (b) the other Party shall have an exclusive option to acquire (i)
a worldwide, non-exclusive right and license, without a right to grant
sublicenses, under Hyseq Technology and Hyseq Improvements or Kirin Technology
and Kirin Improvements, as applicable, to conduct research and development of
such Development Candidate and to make, have made, use, sell, offer for sale and
import any products resulting therefrom, and (ii) a worldwide, royalty-bearing,
exclusive right and license under all Patent Rights of the abandoning Party
claiming, covering or directed to such Development Candidate, with a right to
grant sublicenses, to make, use and evaluate such Development Candidate and to
make, have made, use, sell, offer for sale and import any products resulting
from such Development Candidate. The Party entitled to exercise the foregoing
option may do so only by providing written notification thereof to the other
Party at any time within a [***] period commencing on the date of the other
Party's written notice of abandonment of such Development Candidate, after which
such option shall expire. Upon the exercise of the foregoing option, the Parties
shall negotiate [***] to establish promptly a separate agreement formalizing the
specific terms and conditions of the foregoing license on [***] terms.

               8.7.2 Either Party shall have the right, upon not less than [***]
prior written notice to the other Party, to elect to abandon substantially all
efforts to promote, market and sell one or more New Products in the Hyseq
Territory, Kirin Territory or Other Territory, as applicable (or within any
jurisdiction therein). In the event a Party so elects to abandon its obligations
with respect to any New Product, or if a Party fails to perform its obligations
under Section 2.2.2 for a period of [***], (a) all licenses and rights granted
to the abandoning Party pursuant to Sections 4.1.1, 4.1.2 and 4.1.3 or Section
4.2.1, 4.2.2 and 4.2.3, as applicable, with respect to such New Product shall
terminate, and (b) the other Party shall have an exclusive option to acquire (i)
a worldwide, non-exclusive right and license, without a right to grant
sublicenses, under Hyseq Technology and

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>

Hyseq Improvements or Kirin Technology and Kirin Improvements, as applicable, to
make, have made, use, sell, offer for sale and import such New Product and (ii)
a worldwide, royalty-bearing, exclusive right and license under all Patent
Rights of the abandoning Party claiming, covering or directed to such New
Product, with a right to grant sublicenses, to make, have made, use, sell, offer
for sale and import such New Product. The Party entitled to exercise the
foregoing option may do so only by providing written notification thereof to the
other Party at any time within a [***] period commencing on the date of the
other Party's written notice of abandonment of such New Product, after which
such option shall expire. Upon the exercise of the foregoing option, the Parties
shall negotiate [***] to establish promptly a separate agreement formalizing the
specific terms and conditions of the foregoing license on [***] terms.

               8.7.3 In the event that the JRDC fails to approve all Development
Work with respect to a Development Candidate (which had previously been the
subject of Research Work, and became a Development Candidate pursuant to Section
2.1.3(j) and for which Development Work has not been conducted), and such
failure is the consequence of one (1) Party's failure to vote in favor of such
Development Work, then: (a) all licenses and rights granted to each Party
pursuant to Section 4.1, 4.2 or 4.3, as applicable, with respect to such
Development Candidate shall terminate, and (b) the other Party shall have an
exclusive option to acquire (i) a worldwide, non-exclusive right and license,
without a right to grant sublicenses, under Hyseq Technology, or Hyseq's
interests in Patent Rights and other intellectual property rights covering Hyseq
Improvements and/or Prior Art Inventions, or Kirin Technology, or Kirin's
interests in Patent Rights and other intellectual property covering Kirin
Improvements or Prior Art Inventions, to conduct research and development of
such Development Candidate and to make, have made, use, sell, offer for sale and
import any products resulting therefrom, and (ii) a worldwide, royalty-bearing,
exclusive right and license under all Patent Rights or other intellectual
property rights of Hyseq or Kirin, as applicable, covering Joint Inventions,
with a right to grant sublicenses, to make, use and evaluate such Development
Candidate and to make, have made, use, sell, offer for sale and import any
products resulting from such Development Candidate. To exercise the foregoing
option, the Party with such option shall provide written notification thereof to
the other Party at any time within a [***] period commencing on the date of the
other Party's most recent failure to approve such Development Candidate for
Development Work, after which time period such option shall expire. Upon the
exercise of the foregoing option, the Parties shall negotiate [***] to establish
promptly a separate agreement formalizing the specific terms and conditions of
the foregoing license on [***] terms.

                                    ARTICLE 9

                                 INDEMNIFICATION

        9.1 INDEMNIFICATION BY HYSEQ. Hyseq shall defend and indemnify Kirin and
its Affiliates, and its and their respective directors, officers, employees and
agents (collectively, the "KIRIN INDEMNIFIED PARTIES"), against all claims,
damages, liabilities, losses, costs and expenses arising out of any suit, action
or proceeding brought against any Kirin Indemnified Party by a Third Party
(collectively, "KIRIN CLAIMS") if and to the extent arising from (a) a breach by
Hyseq of any of its representations and warranties set forth in Sections 6.1 or
6.2, or (b) any gross negligence or willful acts or omissions of Hyseq or any of
its employees or agents in connection with the performance of any
responsibilities to be performed by Hyseq under this Agreement, including
without limitation the R&D Work, or (c) the manufacture, use or sale of a
Development Candidate or New Product by

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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Hyseq or its Affiliates or Sublicensees, or (d) any tax, interest, penalty or
associated expense owed by Hyseq or its Affiliates or imposed on or related to
any amounts received by Hyseq or its Affiliates, except in each case to the
extent any such Kirin Claim is subject to indemnification by Kirin pursuant to
Section 9.2.

        9.2 INDEMNIFICATION BY KIRIN. Kirin shall defend and indemnify Hyseq and
its Affiliates, and its and their respective directors, officers, employees and
agents (collectively, the "HYSEQ INDEMNIFIED PARTIES"), against all claims,
damages, liabilities, losses, costs and expenses arising out of any suit, action
or proceeding brought against any Hyseq Indemnified Party by a Third Party
(collectively, "HYSEQ CLAIMS") if and to the extent arising from (a) a breach by
Kirin of any of its representations and warranties set forth in Sections 6.1 or
6.2, or (b) any gross negligence or willful acts or omissions of Kirin or its
employees or agents in connection with the performance of any responsibilities
to be performed by Kirin under this Agreement, including without limitation the
R&D Work, or (c) the manufacture, use or sale of a Development Candidate or New
Product by Kirin or its Affiliates or Sublicensees, or (d) any tax, interest,
penalty or associated expense owed by Kirin or its Affiliates or imposed on or
related to any amounts received by Kirin or its Affiliates, except in each case
to the extent any such Hyseq Claim is subject to indemnification by Hyseq
pursuant to Section 9.1.

        9.3 PROCEDURE. Any Kirin Indemnified Party or Hyseq Indemnified Party
(each, an "INDEMNIFIED PARTY") shall give prompt written notice to the other
Party (the "INDEMNIFYING PARTY") of any Kirin Claim or Hyseq Claim, as
applicable, with respect to which indemnification may be required under this
Article 9, provided that failure to give such notice shall not impair the
obligation of the Indemnifying Party to provide indemnification hereunder except
if and to the extent that failure materially impairs the ability of the
Indemnifying Party successfully to defend such claim. The Indemnifying Party
shall be entitled to assume the defense and control of any Kirin Claim or Hyseq
Claim, as applicable, at its own cost and expense, provided that the Indemnified
Party shall have the right to be represented by its own counsel at its own cost
in such matters. The Indemnified Party shall provide all reasonable assistance
to the Indemnifying Party, at the Indemnifying Party's expense, in connection
with the defense of any claim hereunder. In the event the Indemnifying Party
declines to assume control of any Kirin Claim or Hyseq Claim, as applicable, the
Indemnified Party may assume such control the defense and settlement of such
claim at the sole cost and expense of the Indemnifying Party. The Indemnifying
Party shall not settle or dispose of any Kirin Claim or Hyseq Claim, as
applicable, [***] the Indemnified Party without [***].

                                   ARTICLE 10

                        GOVERNING LAW; DISPUTE RESOLUTION

        10.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, without reference to or application
of its conflicts of laws rules or principles.

        10.2 DISPUTE RESOLUTION. The Parties are unable to resolve informally
any dispute arising out of or relating to this Agreement ("Dispute"), either
Hyseq or Kirin, by written notice to

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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the other, may have such Dispute referred to their respective executive officers
designated for attempted resolution by good faith negotiations (each, a
"Responsible Executive").

               FOR KIRIN:          President of Pharmaceutical Division

               FOR HYSEQ:          Chairman

        Any such Dispute shall be submitted to the Responsible Executives no
later than thirty (30) days following such request by either Hyseq or Kirin. All
negotiations pursuant to this Section 10.2 shall be treated as confidential
compromise and settlement negotiations. Nothing said or disclosed, nor any
document produced, in the course of such negotiations which is not otherwise
independently discoverable shall be disclosed to any Third Party nor offered or
received as evidence or used for impeachment or for any other purpose in any
current or future arbitration or litigation.

        10.3 ARBITRATION. In the event the Parties are not able to resolve a
Dispute within sixty (60) days after submission of the dispute to the
Responsible Executives pursuant to Section 10.2, such Dispute shall be settled
by arbitration; provided, however, that claims for injunctions and other
equitable relief shall be submitted to a court of competent jurisdiction; and
provided further that actions relating to the infringement, validity or
enforceability of any intellectual property right, including without limitation
a Patent Right, of either Party shall be submitted to a court of competent
jurisdiction in the country or territory in which such intellectual property
right exists or issued. In the case of Hyseq as the claimant in such
arbitration, such arbitration shall be held in Tokyo, Japan in accordance with
the Commercial Arbitration Rules of the Japan Commercial Arbitration
Association. In the case of Kirin as the claimant in such arbitration, such
arbitration shall be held in San Francisco, U.S.A., in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Judgment
upon the award rendered by such arbitration may be entered in any court having
jurisdiction over the party against which such award was rendered. Such
arbitration shall be conducted in the English language. The arbitrators shall
include one nominee of Hyseq and one nominee of Kirin and a third person
selected by said nominees. The Parties agree that any arbitration panel shall
include members knowledgeable as to evaluation of biopharmaceutical technology.
The prevailing Party shall be entitled to reasonable attorneys' fees and costs
to be fixed by the arbitrators.

        10.4 EXCLUSIVE DISPUTE RESOLUTION PROCEDURES. The Parties agree that the
procedures set forth in this Article 10 shall be the exclusive means of
resolving any and all Disputes between the Parties.

                                   ARTICLE 11

                                  MISCELLANEOUS

        11.1 ASSIGNMENT.

               11.1.1 Neither Party may assign or otherwise transfer its rights
or obligations under this Agreement without the prior written consent of the
other Party, such consent not to be unreasonably withheld, except that a Party
may assign or otherwise transfer its rights or obligations in whole or in part
without such consent, upon thirty (30) days prior written notice to the other
Party, (a) to an Affiliate of such Party, provided that no such assignment shall
relieve any Party as

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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the primary obligor hereunder, or (b) to a Third Party in connection with the
merger, consolidation, or sale of substantially all of the assets of the
assigning Party, or reorganization affecting substantially all of the assets or
voting control of the assigning Party, with respect to the subject matter of
this Agreement.

               11.1.2 This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties. Any assignment
not in accordance with this Agreement shall be void.

        11.2 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party to the extent the failure is occasioned by
government action, war, fire, explosion, flood, strike, lockout, embargo, act of
God, or any other similar cause beyond the control of the defaulting Party,
provided that the Party claiming force majeure shall promptly notify the other
Party in writing setting forth the nature of such force majeure, shall use its
best efforts to eliminate, remedy or overcome such force majeure and shall
resume performance of its obligations hereunder as soon as reasonably
practicable after such force majeure ceases. Except as provided in the previous
sentence, if any force majeure continues for more than one hundred eighty (180)
days, the other Party may terminate this Agreement in part, on a
country-by-country basis, or in whole, if all countries are affected, upon
written notice to the affected Party.

        11.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary in order to carry out the express provisions of this Agreement.

        11.4 GOVERNMENTAL APPROVALS; COMPLIANCE WITH LAW. Parties shall make all
filings with governmental authorities as shall be required by Applicable Laws in
connection with this Agreement and the activities contemplated hereunder or
thereunder. In fulfilling its obligations under this Agreement each Party agrees
to comply in all material respects with all Applicable Laws.

        11.5 PUBLIC ANNOUNCEMENT. No announcement, news release, public
statement, publication or presentation relating to the existence of this
Agreement, or the terms hereof, shall be made without the other Party's prior
written approval; provided, however, that, subject to the provisions of Section
7.2, each Party shall have the right to make such disclosures as are required by
applicable law, including without limitation the securities regulations
applicable to each Party. Each Party agrees that it shall not publish or present
the results of the R&D Work (including any and all Inventions resulting
therefrom) carried out pursuant to this Agreement without the opportunity for
prior review by the other Party. Each Party shall provide the other Party an
opportunity to review any proposed abstract, manuscript or presentation
(including information to be presented orally) at least [***] prior to its
intended submission for publication, and each Party agrees, upon written request
from the other Party, not to submit such abstract or manuscript to any
publication, or to deliver such presentation, until the other Party has had a
reasonable opportunity and amount of time to review such publication or
presentation for its Confidential Information and to either: (i) secure patent
protection for any material in such publication or presentation that it believes
is patentable; or (ii) redact from the proposed abstract or manuscript the
Confidential Information of such reviewing Party, which redacted material shall
not be disclosed to any Third Party.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       27
<PAGE>

        11.6 NOTICES. All notices required or permitted to be given under this
Agreement shall be deemed given if delivered personally or by facsimile
transmission receipt verified, mailed by registered or certified mail return
receipt requested, postage prepaid, or sent by express courier service, to the
Parties at the following addresses, or at such other address for a Party as
shall be specified by like notice, provided that notices of a change of address
shall be effective only upon receipt thereof.

               IF TO HYSEQ:           HYSEQ, INC.
                                      670 Almanor Avenue
                                      Sunnyvale, California  94085
                                      Attention: Legal Department
                                      Telephone: 408-524-8100
                                      Facsimile: 408-524-8145

               IF TO KIRIN:           KIRIN BREWERY COMPANY, LTD.
                                      26-1, Jingumae 6-chome
                                      Shibuya-ku
                                      Tokyo 150-8011, Japan
                                      Attention: Licensing Department
                                      Telephone: 81-3-5485-6206
                                      Facsimile: 81-3-5485-6765

        The date of receipt of any notice given under this Agreement shall be
deemed to be the date given if delivered personally or by facsimile transmission
receipt verified, seven (7) days after the date mailed if mailed by registered
or certified mail return receipt requested, postage prepaid, and two (2) days
after the date sent if sent by express courier service.

        11.7 WAIVER. No failure of either Party to exercise and no delay in
exercising any right, power or remedy in connection with this Agreement (each, a
"RIGHT") shall operate as a waiver thereof, nor shall any single or partial
exercise of any Right preclude any other or further exercise of such Right or
the exercise of any other Right. To be effective, the waiver of any Right must
be set forth in a writing signed by both Parties.

        11.8 DISCLAIMER OF AGENCY. The relationship between the Parties
established by this Agreement is that of independent contractors, and nothing
contained herein shall be construed to (a) give either Party the power to direct
or control the day-to-day activities of the other, (b) constitute the Parties as
the legal representative or agent of the other Party or as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking, or (c) allow either Party to bind the other Party or to create or
assume any liability or obligation of any kind, express or implied, against or
in the name of or on behalf of the other Party for any purpose whatsoever,
except as expressly set forth in this Agreement.

        11.9 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable by a court or administrative agency of
competent jurisdiction, then (a) the remainder of this Agreement, or the
application of such term, covenant or condition to any Party or circumstance
other than those as to which it is held invalid or unenforceable, shall not be
affected

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       28
<PAGE>

thereby and each term, covenant or condition of such documents shall be valid
and be enforced to the fullest extent permitted by law, and (b) the Parties
hereto covenant and agree to renegotiate any such term, covenant or application
thereof in good faith in order to provide a reasonably acceptable alternative to
the term, covenant or condition of such documents or the application thereof
that is invalid or unenforceable, it being the intent of the Parties that the
basic purposes of this Agreement are to be effectuated.

        11.10 NATURE OF AGREEMENT. The rights and licenses granted under this
Agreement are, for purposes of Section 365(n) of the U.S. Bankruptcy Code (the
"BANKRUPTCY CODE"), licenses of "intellectual property" within the scope of
Section 101 of the Bankruptcy Code. The Parties agree that each Party, as a
licensee of such rights and licenses, shall retain and may fully exercise all of
its rights and elections under the Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy or insolvency proceeding
by or against a Party, the other Party shall be entitled to a complete duplicate
of (and complete access to) any such intellectual property and embodiments
thereof. If not already in the other Party's possession, such other Party shall
have the right to immediate delivery of such intellectual property and
embodiments upon written request.

        11.11 ENTIRE AGREEMENT. Except for the rights and obligations that
survive the expiration of the certain Collaboration and License Agreement, dated
as of November 10, 1998, between the Parties, this Agreement and Exhibits hereto
set forth all covenants, promises, agreements, warranties, representations,
conditions and understandings between the Parties hereto and supersedes and
terminates all prior and contemporaneous agreements and understandings between
the Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as set forth herein or therein. No subsequent alteration,
amendment, change or addition to this Agreement and Exhibits hereto shall be
binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties.

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

        IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed on the date below written.

   HYSEQ, INC.                              KIRIN BREWERY COMPANY, LTD.

   By /s/ Ted Love                          By /s/ Katsuhiko Asano
     --------------------------------         ------------------------------

   Typed Name         Ted Love              Typed Name  Katsuhiko Asano
              -----------------------                 ----------------------

   Title  Chief Executive Officer           Title President, Pharmaceuticals
        -----------------------------             Division
                                                 ---------------------------

        Date     8/14/01                         Date    8/28/02
            ------------------------------           ---------------------------

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       29
<PAGE>

                                    EXHIBIT A

                                 HYSEQ TERRITORY

    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    United States

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       30
<PAGE>

                                    EXHIBIT B

                                 KIRIN TERRITORY

    [***]
    Australia
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    Japan
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    New Zealand
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]
    [***]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       31
<PAGE>

                                    EXHIBIT C

                       SUBJECT MATTER FOR INITIAL R&D PLAN

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       32
<PAGE>

Kirin/Hyseq

Workplan/Timeline/Budget

[***]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       33
<PAGE>

                                    EXHIBIT D

                                  PATENT RIGHTS

                THAT CLAIM A DEVELOPMENT CANDIDATE OR NEW PRODUCT

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       34<PAGE>
                                                                   EXHIBIT 10.18

                                SECRETED PROTEIN
                    DEVELOPMENT AND COLLABORATION AGREEMENT

        THIS SECRETED PROTEIN DEVELOPMENT AND COLLABORATION AGREEMENT (this
"Agreement") is entered into and made on October 9, 2001 (the "Effective Date")
by and between DELTAGEN, INC. ("DELTAGEN"), a corporation organized and existing
under the laws of the state of Delaware and having a principal place of business
at 1003 Hamilton Avenue, Menlo Park, California 94025 and HYSEQ, INC. ("HYSEQ")
a corporation incorporated and existing under the laws of the state of Nevada
having a principal place of business at 670 Almanor Avenue, Sunnyvale,
California 94085-3513. DELTAGEN and HYSEQ are both referred to herein as
"Parties" or each individually, as a "Party."

                                    RECITALS

        WHEREAS, HYSEQ is in the business of applying its proprietary genomics
platform and utilizing its proprietary sequencing-by-hybridization technology to
find and develop biopharmaceuticals products and has discovered and identified
genes encoding for secreted proteins that may have potential as therapeutic
proteins; and

        WHEREAS, DELTAGEN possesses certain knowledge and experience in the
design, generation, and phenotypic analysis of transgenic animals, including
knock-out mice and has technologies useful in determining the in vivo function
of mammalian genes; and

        WHEREAS, HYSEQ and DELTAGEN each desire, on the terms and conditions
contained herein, to collaborate on the discovery, research, development and
commercialization of biopharmaceutical products through the analysis and study
of human gene sequences provided by HYSEQ; and

        WHEREAS, in connection with this collaboration, HYSEQ will contribute,
in accordance with the terms and conditions of this Agreement, human gene
sequences and a corresponding murine ortholog sequence sufficient for the
Steering Committee to designate [***] Project Genes to the collaboration and
will grant licenses covering such genes and related technology and derivatives
thereof; and

        WHEREAS, DELTAGEN will, in accordance with the terms and conditions of
this Agreement, create ES cell lines and generate knock-out mice based on [***]
Project Genes and

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

<PAGE>

their orthologous murine gene sequences, as identified by HYSEQ, and DELTAGEN
will study and analyze such knock-out mice to identify secreted proteins for
further development and commercialization by the Parties; and

        WHEREAS, the Parties shall undertake research and development programs
as determined by the Parties on the terms and conditions set forth in this
Agreement.

        NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the amount and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:

                                    ARTICLE 1
                                   DEFINITIONS

        1.1 "ADDITIONAL TESTS" shall have the meaning set forth in Section
5.4.1.

        1.2 "AFFILIATE" means at the time of determination any Person which
directly or indirectly is controlled by, controls or is under common control
with any Party hereto. "Control" shall in this context mean ownership of greater
than [***] of the voting stock or other interests in the Person in question. In
any country of the Territory in which local law prohibits the ownership by
DELTAGEN or HYSEQ of greater than [***] of the voting stock or other interests
of an entity, the entity shall be deemed an Affiliate of DELTAGEN or HYSEQ, as
applicable, if DELTAGEN or HYSEQ owns the maximum percentage permitted by law,
[***].

        1.3 "AGENCY" means any governmental regulatory authority responsible for
granting approvals for the sale of a product.

        1.4 "DELTABASE" means DELTAGEN's functional genomics database and
software.

        1.5 "DELTAGEN KNOCK-OUT TECHNOLOGY" means all Technical Information that
is owned or controlled by DELTAGEN as of the Effective Date or developed solely
by DELTAGEN during the Term of this Agreement relating to any methods of making,
generating, producing, creating, breeding and/or analyzing transgenic animals,
including Knockout Mice, or libraries, clones, plasmids, constructs and vectors
used in such methods (including [***]).

        1.6 "DERIVATIVE PROTEIN" means (i) any fragment of a [***], or (ii) any
altered form of a [***] or a fragment thereof, including [***]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       2
<PAGE>

        1.7 "DERIVED" OR "DERIVED" means obtained, developed, created, tested,
identified, discovered, synthesized, designed, derived or resulting from, based
upon or otherwise generated (whether directly or indirectly, or in whole or in
part), and anything so derived shall be referred to herein as "derivatives."

        1.8 "DEVELOPMENT PROGRAM" shall have the meaning set forth in Section
3.1.

        1.9 "FIRST PASS PHENOTYPIC ANALYSIS" means the tests, observations, and
analyses listed on Exhibit A.

        1.10 "FTE" means the equivalent of one person with at least a bachelor's
degree providing scientific, pre-clinical, clinical trial, or regulatory work on
a full-time basis (i.e., no less than a total of [***] hours per calendar year,
prorated in the case of a partial calendar year). Any FTE charge for the FTEs
dedicated to the applicable matter shall be the number of hours each FTE of a
Party directly spent on the applicable matter billed at a rate equal to [***]
for such FTE, but not exceeding [***] per calendar year, which rate includes
[***].

        1.11 "HYSEQ KNOW-HOW" means any and all Technical Information that is
solely owned or controlled by HYSEQ as of the Effective Date or developed solely
by HYSEQ during the Term of this Agreement that relates to any Proposed Gene or
any Project Gene, as applicable, or any mutation, fragment, allelic variant,
analog, homolog or ortholog of any Proposed Gene or Project Gene, as applicable,
and/or any expression products and/or derivatives thereof.

        1.12 "HYSEQ PATENTS" means all Patents in any country in the Territory
that are solely owned or controlled by HYSEQ as of the Effective Date or
developed solely by HYSEQ during the Term that relate to any Proposed Gene or
any Project Gene, as applicable, or any mutation, fragment, allelic variant,
analog, homolog or ortholog of any Proposed Gene or any Project Gene, as
applicable, and/or any expression products and/or derivatives thereof,

        1.13 "INITIAL MURINE GENE ANALYSIS" means the conduct of studies and
analysis to identify a murine gene sequence orthologous to a Submitted Gene
through HYSEQ'S standard resources.

        1.14 "JOINT PROJECT INTELLECTUAL PROPERTY, DELTAGEN PROJECT INTELLECTUAL
PROPERTY AND HYSEQ PROJECT INTELLECTUAL PROPERTY" (collectively, "Project
Intellectual

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       3
<PAGE>

Property") shall have the meanings set forth in Section 10.1.1.

        1.15 "JOINT PROJECT PATENTS, DELTAGEN PROJECT PATENTS AND HYSEQ PROJECT
PATENTS" (collectively, "Project Patents") shall have the meanings set forth in
Section 10.1.1.

        1.16 "LOSS" has the meaning set forth in Section 8.1.

        1.17 "PATENT(s)" means any patent, provisional or patent application,
and all additions, divisions, continuations, continuations-in-part,
substitutions, reissues, extensions, registrations, supplementary protection
certificates and renewals of any of the foregoing.

        1.18 "PAYMENT ONE," "PAYMENT TWO," PAYMENT THREE" AND "TOTAL PAYMENT"
shall have the meanings set forth in Section 5.1.

        1.19 "PERSON" means a person, corporation, partnership, limited
liability company or any other entity.

        1.20 "CONFLICTING PIPELINE" means a gene or gene sequence that, as of
the date submitted by HYSEQ to DELTAGEN Section 4.1.1 of this Agreement, has
been designated for research and development by DELTAGEN [***].

        1.21 "PROJECT" means the activities of the Parties under the Development
Program with respect to a single Project Gene and/or its orthologous Project
Murine Gene (and with respect to any Project Knock-Out Mice, Secreted Proteins,
Derivative Proteins, Secreted Protein Candidates and Products derived
therefrom), as set forth in the Work Plan in accordance with this Agreement, or
as directed by the Steering Committee.

        1.22 "PROJECT KNOCK-OUT MOUSE" OR "PROJECT KNOCK-OUT MICE" means any
mouse or mice in which DELTAGEN has, pursuant to this Agreement, interrupted,
disrupted, or deleted a specific gene or portion thereof, orthologous to a
Project Gene, to inactivate the function of such gene in such mouse or mice.

        1.23 "PRODUCT" means any product that contains as an active ingredient
(i) a [***] (or portion thereof), or (ii) an agonist or antagonist (including,
without limitation, anti-sense, antibodies and small molecules) of a [***].

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       4
<PAGE>

        1.24 "PROJECT GENE" means a Proposed Gene that has been designated by
the Steering Committee as a "project gene" pursuant to Section 4.2.

        1.25 "PROJECT MURINE GENE" means a murine gene sequence that the
Steering Committee has designated as the orthologous murine gene for the human
gene sequence of a Project Gene.

        1.26 "PROPOSED GENE" means a gene sequence (i) submitted to the Steering
Committee for consideration for inclusion under the Development Program as a
"project gene" as set forth in Section 4.1; (ii) which is believed to encode a
[***]; (iii) for which a [***] and the [***] believed to be produced by such
[***]; and (iv) its corresponding [***].

        1.27 "PROTEIN" means a [***], polymer compound composed of a variety of
amino acids joined by peptide linkages, including allelic variants thereof and
post-translationally modified variants thereof (i.e., glycosylated proteins).

        1.28 "REJECTED PROPOSED GENE" has the meaning set forth in Section 4.3.

        1.29 "REJECTED PROJECT GENE" has the meaning set forth in Section 5.5.3.

        1.30 "REJECTED SUBMITTED GENE" has the meaning set forth in Section
4.1.2(b).

        1.31 "RESTRICTION TERM" means the period of time a Rejected Project Gene
is subject to the restrictions set forth in Section 5.5.3. Unless a different
time period is voted on and approved by a majority of the Steering Committee for
a particular Rejected Project Gene, the Restriction Term for such Rejected
Project Gene shall be [***] from the date it becomes a Rejected Project Gene
under this Agreement.

        1.32 "SECRETED PROTEIN" means a [***] released from a cell.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       5
<PAGE>

        1.33 "SECRETED PROTEIN CANDIDATE" means a Secreted Protein which the
Parties through the Steering Committee have designated as a "secreted protein
candidate" pursuant to Section 5.5.1 and any and all Derivative Proteins
thereof.

        1.34 "SUBMITTED GENE" means a human gene coding sequence (i) submitted
to DELTAGEN by HYSEQ for consideration for inclusion as a "proposed gene" as set
forth in Section 4.1.1; (ii) which is believed to [***]; and (iii) for which a
[***] and the [***] believed to be produced by such [***].

        1.35 "TECHNICAL INFORMATION" means all technology, know-how, copyrights,
trade secrets, software, techniques, data, technical information and all other
intellectual property and other proprietary information, including all
inventions (whether or not patentable), improvements and developments,
practices, applications, protocols, concepts, biological materials (including
nucleic acid sequences, RNA, DNA, organisms, proteins, polypeptides, plasmids
and vectors), processes, methods (including methods of use or treatment for
human or murine secreted proteins), pre-clinical, clinical and regulatory data
and information, clinical and regulatory strategies, test data, analytical and
quality control data, reports, manufacturing information, patent data or
descriptions, development information, drawings, specifications, designs
(whether or not registerable), plans, proposals and technical data and manuals,
documents, rights in databases, computer data and source code.

        1.36 "TERM" has the meaning set forth in Section 11.1.

        1.37 "TERRITORY" means the entire world.

        1.38 "THIRD PARTY" means any Person other than a Party to this Agreement
or an Affiliate of either Party.

        1.39 "VALID CLAIM" means any claim within [***] which (i) has not been
[***] and (ii) has not been [***].

        1.40 "WORK PLAN" means the work plan developed by the Steering
Committee, as may be modified from time to time by the Steering Committee
(initially Exhibit C), that sets forth the responsibilities of the Parties under
the Development Program, including in connection with the selection of the
Project Genes from Proposed Genes and with respect to the generation and

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       6
<PAGE>

analysis of the Project Knock-Out Mice. The First Pass Phenotypic Analysis and
Exhibit A shall be part of the Work Plan and therefore references to the Work
Plan shall include the First Pass Phenotypic Analysis and Exhibit A.

                                    ARTICLE 2
                                  LICENSE GRANT

        2.1 HYSEQ LICENSE. During the Term of this Agreement and subject to the
terms and conditions hereof, HYSEQ hereby grants to DELTAGEN the following
licenses:

               2.1.1 SUBMITTED GENES. On a Submitted Gene-by-Submitted Gene
basis, a non-exclusive right and license, until the earlier of (a) the date upon
which a Submitted Gene becomes a Rejected Submitted Gene under this Agreement or
(b) the date upon which a Submitted Gene becomes a Proposed Gene under this
Agreement (at which time the license under Section 2.1.2 shall become
effective), under the HYSEQ Patents and HYSEQ Know-How solely for the purpose of
conducting review and analysis activities with respect to such Submitted Gene in
accordance with the terms and conditions of this Agreement including determining
whether such Submitted Gene is in Deltagen's Conflicting Pipeline, and
performing an intellectual property analysis with respect to DELTAGEN's use of
such Submitted Genes.

               2.1.2 PROPOSED GENES. On a Proposed Gene-by-Proposed Gene basis,
and upon submission by HYSEQ of the information related to such Proposed Genes
under Section 4.1.3, a non-exclusive right and license, until the earlier of (a)
the date upon which a Proposed Gene becomes a Rejected Proposed Gene under this
Agreement or (b) the date upon which a Proposed Gene becomes a Project Gene
under this Agreement [***], under the HYSEQ Patents and HYSEQ Know-How solely
for the purpose of conducting review and analysis activities with respect to
such Proposed Gene in accordance with the terms and conditions of this
Agreement, including the Work Plan, including to identify murine gene sequences
orthologous to the Proposed Gene if such activities are not already performed by
HYSEQ or if instructed by the Steering Committee.

               2.1.3 PROJECT GENES. On a Project Gene-by-Project Gene basis, and
upon designation of a Proposed Gene as a Project Gene under this Agreement, a
co-exclusive right and license until the earlier of (a) the date upon which such
Project Gene becomes a Rejected Project

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       7
<PAGE>

Gene [***], or (b) termination of the collaboration in accordance with the
provisions of Section 11.2.2 of this Agreement; including the right to grant
sublicenses to Affiliates and Third Party contractors as set forth in Section
2.4, under the HYSEQ Patents and HYSEQ Know-How to perform the following
activities: (i) to analyze and use such Project Gene and any derivatives thereof
in accordance with the terms and conditions of this Agreement, including the
Work Plan, (ii) to use, make, create, generate, produce, breed, test and conduct
research and development activities in connection with Project Knock-Out Mice
and progeny and other derivatives thereof in accordance with the terms and
conditions of this Agreement, including the Work Plan, (iii) to use, make,
generate, produce, create, isolate, purify, identify and conduct research and
development activities in connection with such Project Gene (and/or any
mutation, fragment, allelic variant, analog, homolog or ortholog of such Project
Gene and/or any expression products (including any Secreted Proteins, Derivative
Proteins and/or Products) and/or derivatives thereof in accordance with the
terms and conditions of this Agreement, including the Work Plan, and (iv)
subject to a separate agreement entered into in accordance with Article 6, to
develop, make, have made, use, distribute, offer for sale, import, export and
sell Products. If the license under this Section 2.1.3 has terminated in
accordance with (a) or (b) above, such license shall again become effective
until termination in accordance with (a) or (b) if, in accordance with either
Section 5.5.3.1 or Section 5.5.3.2 of this Agreement, the Steering Committee
votes to designate a particular Rejected Project Gene a Project Gene again under
this Agreement.

               2.1.4 REJECTED PROJECT GENES.

                      (a) On a Rejected Project Gene-by-Rejected Project Gene
basis, and upon designation of a Project Gene as a Rejected Project Gene under
this Agreement, a co-exclusive internal use license until [***] for research
purposes only to the Rejected Project Gene and its related Project Murine Gene
under the HYSEQ Patents and HYSEQ Know-How to allow DELTAGEN to conduct similar
research activities for itself during the Restriction Term as contemplated for
Project Knock-Out Mice and Project Genes under this Agreement.

                      (b) On a Rejected Project Gene-by-Rejected Project Gene
basis pursuant to the procedure set forth in Section 5.5.3, and upon [***] to
perform the following activities: (i) to [***] such Rejected Project Gene and
any derivatives, (ii) to [***], (iii) to [***], and (iv) to

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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[***] such Rejected Project Gene (or portion thereof), or an agonist or
antagonist (including, without limitation, anti-sense, antibodies and small
molecules) of a protein encoded by such Rejected Project Gene. Upon and after
[***] to a Rejected Project Gene under this Section 2.14(b) for which HYSEQ has
[***], DELTAGEN will (i) notify HYSEQ when [***], (ii) notify HYSEQ upon [***],
(iii) [***], and (iv) keep complete and accurate [***] and allow a [***] audit
by a third party independent auditor of such records, [***], in order to [***].
In addition to any other remedies available to HYSEQ under this Agreement, HYSEQ
shall have the right to [***] under this paragraph upon written notice to
DELTAGEN if DELTAGEN [***] under this Section 2.1.4(b).

        2.2 CO-EXCLUSIVE LICENSE. The term "co-exclusive" as used herein shall
operate to exclude all other Persons, except for HYSEQ or DELTAGEN, as
applicable.

        2.3 DELTAGEN LICENSE. Subject to the terms and conditions of this
Agreement, DELTAGEN hereby grants to HYSEQ the following licenses:

               2.3.1 PROJECT GENES. On a Project Gene-by-Project Gene basis, and
upon designation of a Proposed Gene as a Project Gene under this Agreement, a
co-exclusive right and license until the earlier of (a) the date upon which such
Project Gene becomes a Rejected Project Gene, or (b) termination of the
collaboration in accordance with the provisions of Section 11.2.2 of this
Agreement; including the right to grant sublicenses to Affiliates and Third
Party contractors as set forth in Section 2.4, under the DELTAGEN Knock-Out
Technology and DELTAGEN Project Intellectual Property, and subject to a separate
agreement entered into in accordance with Article 6, to develop, make, have
made, use, distribute, offer for sale, import, export and sell Products.

               2.3.2  REJECTED PROJECT GENES.

                      (a) On a Rejected Project Gene-by-Rejected Project Gene
basis, and upon designation of a Project Gene as a Rejected Project Gene under
this Agreement, a co-exclusive internal use license until [***] for research
purposes only to the Rejected Project Gene and its related Project Murine Gene
under the DELTAGEN Knock-Out Technology and DELTAGEN Project Intellectual
Property to allow HYSEQ to conduct similar research activities for itself

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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during the Restriction Term as contemplated for Project Knock-Out Mice and
Project Genes under this Agreement.

                      (b) On a Rejected Project Gene-by-Rejected Project Gene
basis pursuant to the procedure set forth in Section 5.5.3, and [***] to perform
the following activities: (i) to [***], (ii) to [***], (iii) to [***], and (iv)
to [***] by such Rejected Project Gene.

        2.4 SUBLICENSES. The licenses granted to each Party pursuant to Sections
2.1.3, 2.1.4(b), 2.3.1 and 2.3.2(b) include the right to sublicense all or part
of such rights to such Party's Affiliates and/or to Third Party contractors to
perform any obligations of such Party under the Development Program (with
respect to Sections 2.1.3 and 2.3.1), provided that such Party provides written
notice to the other Party of any such sublicense and the terms and conditions of
such grant of sublicense (i) are consistent with and do not violate the terms
and conditions of this Agreement, and (ii) ensure that such Persons are
obligated in writing to comply with the terms and conditions of this Agreement,
including being bound by obligations of confidentiality which are comparable to,
or more stringent than, the provisions of Article 9. Notwithstanding anything to
the contrary in this Agreement, if the Steering Committee designates a Proposed
Gene as a Project Gene for work by DELTAGEN after being informed pursuant to
Section 4.1.3 that HYSEQ has already submitted the corresponding Proposed Gene
to a Third Party contractor for analysis under a legally binding contract for
such Proposed Gene, then HYSEQ shall be authorized under this paragraph to
license or sublicense to the Third Party contractor for the purposes of
conducting such analysis. The results of such analysis shall be reported to the
Steering Committee.

        2.5 NO IMPLIED RIGHTS OR LICENSES. No right or license is granted under
this Agreement by either Party to the other Party, either expressly or by
implication, except as expressly set forth herein.

        2.6 OTHER ACTIVITIES OF THE PARTIES. During the Term, neither Party
shall, either itself or through or with any Affiliate or Third Party, (a) use or
conduct any [***] with respect to any Proposed Genes (unless and until such
Proposed Genes are Rejected Project Genes), Project Genes, Project Knock-Out
Mice, Project Murine Genes, Secreted Proteins, Derivative Proteins, Secreted
Protein Candidates or Products, except if and to the extent expressly permitted
under

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
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this Agreement or as otherwise mutually agreed by the Parties in writing,
whether pursuant to Article 6 or otherwise; or (b) [***] any Proposed Genes
(unless and until such Proposed Genes are Rejected Project), Project Genes,
Project Knock-Out Mice, Project Murine Genes, Secreted Proteins, Derivative
Proteins, Secreted Protein Candidates or Products that are subject to this
Agreement, including with respect to any progeny, mutations, fragments, allelic
variants, analogs, homologs or orthologs, and/or any expression products
(including any such Secreted Proteins, Derivative Proteins and/or Products) or
derivatives of any of the foregoing.

                                    ARTICLE 3
                   DEVELOPMENT PROGRAM AND STEERING COMMITTEE

        3.1 DEVELOPMENT PROGRAM.

               3.1.1 OVERVIEW OF DEVELOPMENT PROGRAM. HYSEQ and DELTAGEN shall
engage in a development program for the identification, research and development
of Secreted Protein Candidates and Product(s) through the analysis and study of
Project Genes provided by HYSEQ, and to generate, study and analyze Project
Knock-Out Mice from murine genes orthologous to the Project Genes (the
"Development Program"). Deltagen shall use commercially reasonable efforts to
generate ES cells for each of the [***] Project Genes selected pursuant to
Section 4.1.1, with the goal of generating [***] ES cell lines, [***]. After
identification of Secreted Protein Candidates, the Steering Committee shall
decide whether to conduct further research and development activities under the
Development Program with respect to such Secreted Protein Candidates (and/or any
Products which incorporate such Secreted Protein Candidates), or to develop and
commercialize such Secreted Protein Candidates (and/or any Products which
incorporate such Secreted Protein Candidates), pursuant to the terms and
conditions of a separate agreement, whether in a collaboration between the
Parties, or with Third Party partners or licensees or as otherwise determined by
the Steering Committee pursuant to Section 6.2.

               3.1.2 DEVELOPMENT PROGRAM COSTS AND EXPENSES. The Parties shall
share [***] all costs and out-of-pocket expenses arising out of the Development
Program other than the activities under Sections 4.1.3 and 5.3, and as otherwise
may be agreed to by the Parties in a

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
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separate agreement for the development of a Secreted Protein Candidate or
Product. The costs and expenses of activities pursuant to Sections 4.1.3 and 5.3
shall be paid for solely by [***].

        3.2 COOPERATION AND SHARING OF INFORMATION. The Parties shall cooperate,
coordinate and consult with each other in connection with performing their
activities under the Development Program, including under the Work Plan. Each
Party shall also share with the other Party, as determined by the Steering
Committee, or as reasonably requested by the other Party, data and information
and other Technical Information, derived from their activities under the
Development Program, including with respect to DELTAGEN related data and
information arising in connection with DELTAGEN's analysis and study of the
Project Knock-Out Mice under the Work Plan.

               3.2.1 ACCESS TO FACILITIES. Representatives of each Party,
including members of the Steering Committee, may, upon reasonable notice during
normal business hours, (a) visit any facilities where Development Program
activities are being conducted, and (b) consult informally, during such visits
and by telephone, concerning the Development Program. The visiting Party's
representatives shall be advised of, and bound by, the confidentiality
obligations set forth in Article 9 (or confidentiality obligations that are at
least comparable or more stringent than those set forth in Article 9), and shall
follow such security and facility access procedures as directed, and designated
by the Party who's facilities are being visited. The Party whose facilities are
being visited may require that the representatives of the visiting Party be
accompanied by its representatives, at all times while the visiting Party is at
its facilities.

               3.2.2 RECORD KEEPING. Each Party shall maintain complete and
accurate records in accordance with its internal practices for keeping such
records, in good scientific manner and in appropriate detail for patent and
regulatory purposes, of its activities conducted under the Development Program
and including such data and materials as are required to be maintained pursuant
to applicable laws and regulations. To the extent practical, such written
records shall be kept separately from written records documenting other
activities of each Party and shall be maintained on a Project-by-Project basis.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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               3.2.3 COMPLIANCE. Each Party shall, and shall ensure that its
employees, consultants, contractors and agents, perform their respective
activities under the Development Program in accordance with all applicable laws,
rules and regulations in the Territory.

               3.2.4 UPDATES AND QUARTERLY AND FINAL REPORTS. Each Party shall
provide updates to the Steering Committee, on at least a monthly basis, and
written reports by the end of each calendar quarter, detailing the then current
status and results of the activities of the Parties under the Development
Program, including with respect to DELTAGEN, the then current status and results
of the First Pass Phenotypic Analysis for each Project, as set forth in Section
5.3.

        3.3 STEERING COMMITTEE RESPONSIBILITIES, COMPOSITION AND PROCEDURES.

               3.3.1 ORGANIZATION AND ROLE. DELTAGEN and HYSEQ shall promptly
after the Effective Date organize a steering committee (the "Steering
Committee") to plan, manage and oversee the Development Program. Without
limiting the foregoing, the Steering Committee's responsibilities shall include
the following:

                      (a) developing, reviewing, updating and modifying in
writing the Work Plan set forth in Exhibit A and developing the mediation
procedure to be set forth in Exhibit B; provided, however, that if the Parties
cannot agree, after good faith efforts, to a time frame for generation of the ES
lines to be generated from the [***] Project Genes under this Agreement, then
the Work Plan shall be deemed to provide that, within [***] from the date
DELTAGEN commences work on such Project Genes, DELTAGEN shall use [***] efforts
to generate ES cells for the first [***] Project Genes (provided all [***]
Project Genes have been designated as such upon the beginning of such [***]
period) and, within an additional [***], DELTAGEN shall use [***] efforts to
generate ES cells for the remaining [***] Project Genes (provided all [***]
remaining Project Genes have been designated as such upon beginning of such
[***] period).

                      (b) designating genes as Project Genes from the Proposed
Genes submitted by HYSEQ to the Steering Committee pursuant to Section 4.1;

                      (c) performing due diligence on each Proposed Gene and
reviewing and determining, based on such due diligence, the relative strength of
any IP positions around

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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any Project Genes under consideration, and including such determination in the
decision whether to designate a Project Gene as a Secreted Protein Candidate.

                      (d) determining which Project Genes to submit to DELTAGEN
for further analysis and study under the Development Program pursuant to Section
5.2;

                      (e) reviewing the First Pass Phenotypic Analysis of each
of the Project Genes submitted to DELTAGEN and determining the necessity of
conducting phenotypic testing, observation, or analysis not included in the
First Pass Phenotypic Analysis (including any further research and development
activities to be conducted by any Third Parties) and which, if any, of such
additional phenotypic tests, observations, or analyses are appropriate, as set
forth in Article 5;

                      (f) determining the necessity of conducting further
research and development on each of the Project Genes (including any further
research and development activities to be conducted by any Third Parties);
provided, however, that the foregoing shall in no ay limit HYSEQ's right to
independently conduct such further research and development in accordance with
the terms and conditions of this Agreement, such information to be provided to
the Steering Committee for such Project Gene in accordance with the terms and
conditions of this Agreement;

                      (g) determining, under Section 5.5.1, which, if any, of
the Secreted Proteins together with the Derivative Proteins, will be designated
as "secreted protein candidates";

                      (h) reviewing the Parties' reports and updates in
connection with their respective activities under the Development Program,
including the reports submitted by DELTAGEN pursuant to Section 5.3; and

                      (i) deciding whether and how to develop any Secreted
Protein Candidates and Products (e.g., whether under a collaboration between the
Parties or with Third Party partners or licensees or otherwise), as set forth in
Article 6.

               3.3.2 COMPOSITION. The Steering Committee shall consist of three
(3) members from DELTAGEN and three (3) members from HYSEQ. Each Party shall
have the right to

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appoint one (1) of its three (3) members to be a co-chairperson of the Steering
Committee. The Parties shall each have the right, upon notifying the other, to
change its members of the Steering Committee at any time during the Term.

               3.3.3 MEETINGS; AND MINUTES. The Parties shall hold meetings of
the Steering Committee as mutually agreed by the Parties (but in no event less
than once each calendar quarter) to review the Development Program and to
discuss future activities under this Agreement. The first meeting of the
Steering Committee shall be held within thirty (30) days of the Effective Date.
Minutes of all meetings setting forth decisions of the Steering Committee,
including with respect to the Development Program, shall be prepared by one of
the Parties, each Party alternating assuming this responsibility at each
meeting, and circulated to both Parties within fifteen (15) days after each
meeting, but minutes shall not become official until approved by both Parties
(which approval the Parties shall use reasonable efforts to give within fifteen
(15) days of receipt of such minutes).

               3.3.4 STEERING COMMITTEE DECISIONS. Each vote of the Steering
Committee shall include all current members of the Steering Committee . Except
as otherwise expressly provided for in this Agreement, all decisions of the
Steering Committee shall be by [***] members of the Steering Committee after
good faith discussions. [***] Should, however, the Parties not be able to reach
such [***] despite such good faith efforts, and should a [***] of the Steering
Committee exist thirty (30) days after the date on which a disagreement arose,
then, if the subject matter of the decision is [***] under this Agreement,
including but not limited to decisions as to whether to [***], such disagreement
shall be elevated to the senior executives of the Parties for good faith
discussion to try and reach consensus between the Parties. In the event that the
senior executives have not reached agreement (despite such good faith
discussions) within sixty (60) days after the date on which the disagreement
arose, then (i) if the subject of such disagreement is whether or not [***],
then such [***] under this Agreement, and (ii) except as set forth in the
preceding subsection (i), unless otherwise mutually agreed by the Parties, all
other disagreements of a material nature shall be submitted for resolution to
the dispute resolution process pursuant to Section 13.5.

                                    ARTICLE 4

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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                           SELECTION OF PROJECT GENES

        4.1 STEERING COMMITTEE REVIEW AND SELECTION OF PROPOSED GENES

               4.1.1 SUBMITTED GENES. Within [***] after the first Steering
Committee meeting, HYSEQ shall submit in writing to DELTAGEN for its review and
consideration an initial written list(s) of [***] Submitted Genes and, within
[***] after the Effective Date, shall submit in writing to DELTAGEN for its
review and consideration a written list(s) of an additional [***] Submitted
Genes for DELTAGEN to review under this Section 4.1.1. HYSEQ shall use [***]
efforts to submit additional Submitted Genes under this Agreement during such
[***] period to replace Rejected Submitted Genes that DELTAGEN has rejected
under this Section 4.1.1 until [***] Project Genes have been selected. HYSEQ
agrees to [***] when deciding which human gene sequences to include in the list
of Submitted Genes to be submitted to DELTAGEN. Any submission of Submitted
Genes subsequent to such [***] period shall be subject to the approval of the
Steering Committee. All Submitted Genes submitted by HYSEQ to the Steering
Committee under this Section 4.1 shall be accompanied by at least a partial
murine ortholog gene sequence believed by HYSEQ to correspond to the gene
sequence of such Submitted Gene (unless HYSEQ is unable to identify such an
orthologous partial murine gene sequence for a Submitted Gene, in which case
HYSEQ shall report such results to the Steering Committee) and DELTAGEN shall
notify HYSEQ as to whether or not, [***] as of the date of its submission by
HYSEQ. If any of the Submitted Genes have [***], HYSEQ shall provide this
information promptly to the Steering Committee with its information under
Section 4.1.3 and HYSEQ hereby expressly acknowledges and agrees that if the
Steering Committee designates such a Submitted Gene as a Proposed Gene or a
Project Gene, as between DELTAGEN and HYSEQ that HYSEQ is [***], while such
Proposed Gene or Project Gene, as applicable, remains under this Agreement, and
HYSEQ shall not [***] except as provided in Section 2.1.4(b) for a Rejected
Project Gene.

               4.1.2 PROPOSED GENES. DELTAGEN shall notify HYSEQ within thirty
(30) days after its receipt of the Submitted Gene and, if applicable, its
accompanying murine ortholog sequence, whether DELTAGEN accepts or rejects such
Submitted Gene, such acceptance or rejection being within DELTAGEN's sole
discretion.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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                      (a) Any such accepted Submitted Gene for which
notification has been provided shall be deemed a Proposed Gene. Within [***]
after such written notification, HYSEQ will provide to DELTAGEN the supporting
information for such Proposed Gene in accordance with Section 4.1.3.

                      (b) If DELTAGEN rejects a Submitted Gene such Submitted
Gene shall be deemed a Rejected Submitted Gene. With respect to any such
Rejected Submitted Gene, any of HYSEQ's rights under HYSEQ's Patents or HYSEQ
Know-How related solely to such Submitted Gene shall return to HYSEQ under this
Agreement and shall not be subject to further restriction under this Agreement
other than DELTAGEN's obligations of confidentiality under Article 9 of this
Agreement. Each of the Parties shall perform no additional services under this
Agreement with regard to such Rejected Submitted Gene. Each of the Party's
right, title and interest in and to such Rejected Submitted Gene shall remain
with and vest fully in that Party, and the other Party shall have no right,
title, or interest therein or thereto.

               4.1.3 SUPPORTING INFORMATION AND DISCLOSURES. Together with each
written list of Submitted Genes, HYSEQ shall fully disclose to the Steering
Committee in writing or electronic form, with respect to each such Submitted
Gene, the information actually known to HYSEQ regarding such Submitted Gene's
murine ortholog sequence and the results of HYSEQ's Initial Murine Gene
Analysis. With respect to each Proposed Gene, HYSEQ shall disclose to the
Steering Committee in writing or in electronic form the following information
actually known to HYSEQ: (i) any and all Technical Information and Patents
(including but not limited to HYSEQ Patents and HYSEQ Know-How) covering such
Proposed Gene that are owned or controlled by HYSEQ, (ii) any restrictions on
the use of such Proposed Gene, (iii) [***], (iv) any and all facts and
information which are limiting or preventing, or that could or would limit or
prevent, HYSEQ's right or ability to grant the license to DELTAGEN pursuant to
Section 2.1, or are causing, [***], and (iv) [***] under this Agreement,
including the following:

                      (a) any pre-existing or other rights, interests and/or
options in or to, or any other encumbrances (including any liens) on, such
Proposed Gene and/or any HYSEQ Patents or HYSEQ Know-How covering or relating to
such Proposed Gene;

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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                      (b) any licenses or other agreements with any Person
relating to such Proposed Gene (including any in-licensed technology relating to
such Proposed Gene), or relating to the HYSEQ Patents or HYSEQ Know-How covering
or relating to such Proposed Gene; and

                      (c) any [***] of such Proposed Gene and/or any HYSEQ
Patents or HYSEQ Know-How covering or relating to such Proposed Gene.

HYSEQ shall also provide further information, as may reasonably be requested by
the Steering Committee, and if requested, shall make available to the Steering
Committee the appropriate technical and other HYSEQ employees to answer
questions posed by the Steering Committee with respect to the Proposed Genes and
the information and disclosures submitted under this Section 4.1.3. With respect
to a Proposed Gene, if HYSEQ makes a [***] in writing pursuant to this Section
4.1.3 of [***], prior to or concurrently with its submission to the Steering
Committee of such Proposed Gene, HYSEQ [***]; provided that DELTAGEN shall have
the right to refuse to conduct any activities with respect to such Proposed
Gene, if DELTAGEN, in its sole discretion, so chooses, under this Section 4.1.3
or Section 4.1.1 above, either due to HYSEQ's inability to provide information,
or as a result of the information provided by HYSEQ or information DELTAGEN
acquires independently of HYSEQ. If DELTAGEN chooses to not conduct any
activities with respect to such Proposed Gene under this Section 4.1.3, such
Proposed Gene shall become a Rejected Proposed Gene in accordance with the terms
and conditions of Section 4.3 of this Agreement. DELTAGEN may also choose not to
continue with a Proposed Gene under this Agreement if technical obstacles make
it commercially reasonable not to proceed. In such event, DELTAGEN shall notify
the Steering Committee, and the Steering Committee may vote affirmatively to
continue with such Proposed Gene as a Project Gene with a [***] sharing between
the Parties of all costs arising from such technical obstacles.

        4.2 SELECTION OF PROJECT GENES. After reviewing a Proposed Gene and the
information and disclosures received from HYSEQ pursuant to Sections 4.1.1 and
4.1.3, and the information and reports received from DELTAGEN, and if
applicable, HYSEQ, pursuant to Sections 4.1.3 with respect to such Proposed
Gene, the Steering Committee members shall vote on whether to include such
Proposed Gene as a "project gene" hereunder. If the Steering Committee members

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vote affirmatively to include a Proposed Gene as a "project gene" under this
Agreement, then upon such vote, such Proposed Gene shall become a Project Gene.

        4.3 REJECTED PROPOSED GENES. Unless otherwise decided by the Parties or
the Steering Committee, any Proposed Gene which (i) DELTAGEN has notified HYSEQ
it shall not work on under this Agreement (ii) the Steering Committee members
have voted to reject as a "project gene," and/or (iii) the Steering Committee
members have not voted affirmatively to include as a "project gene" under this
Agreement within ninety (90) days after submission of information regarding the
Proposed Gene to the Steering Committee pursuant to Section 4.1.3, shall be a
"Rejected Proposed Gene." Each of the Parties shall perform no additional
services under this Agreement with regard to such Rejected Proposed Gene. Each
of the Party's right, title and interest in and to such Rejected Proposed Gene
(if any) shall remain with and vest fully in that Party, and the other Party
shall have no right, title, or interest therein or thereto.

                                    ARTICLE 5
                HYSEQ FUNDING AND DEVELOPMENT PROGRAM ACTIVITIES

        5.1 HYSEQ DEVELOPMENT FUNDING. As partial consideration for the research
and development activities to be conducted by DELTAGEN under this Agreement,
HYSEQ shall pay DELTAGEN as follows:

                      (a) within [***] after the Effective Date, HYSEQ shall pay
to DELTAGEN [***] U.S. Dollars (U.S.$[***]) ("Payment One");

                      (b) within [***] of the Effective Date, HYSEQ shall pay to
DELTAGEN [***] U.S. Dollars (U.S.$[***]) ("Payment Two") if the Steering
Committee has designated [***] two hundred (200) Project Genes within [***]
after the Effective Date; [***];

                      (c) within [***] of the Effective Date, HYSEQ shall pay to
DELTAGEN [***] U.S. Dollars (U.S.$[***]) ("Payment Three") if DELTAGEN has
created two hundred (200) ES cell lines for Project Genes; [***]; and

                      (d) within twenty-four (24) months after the Effective
Date, HYSEQ shall pay to DELTAGEN the remaining amount of a pro-rated Ten
Million U.S. Dollars (U.S.$10,000,000) ("Total Payment") [***].

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HYSEQ acknowledges and agrees that the payments payable to DELTAGEN pursuant to
this Section are non-refundable, and may be used and disposed of as DELTAGEN, in
its reasonable business judgment, determines is appropriate in accordance with
the terms and conditions of this Agreement.

        5.2 INITIATION OF PROJECTS; AND PERFORMANCE AND DELAYS. The Steering
Committee shall determine which Projects to submit to DELTAGEN to initiate work
on such Projects under the Development Program. Each Party shall use reasonable
commercial efforts to fulfill their obligations with respect to each Project as
set forth herein (including the Work Plan), and to perform its other obligations
under this Agreement; provided that, with respect to DELTAGEN's activities under
the Development Program, HYSEQ acknowledges and agrees that the performance of
such activities may involve a number of technologically complex steps and that
any time periods for performance, whether set out in the Work Plan or elsewhere
in this Agreement, may be subject to change due to potential technological
difficulties encountered, and any such delays or technical issues shall not be
considered a breach by DELTAGEN under this Agreement. If a Project is delayed
because either Party determines that there are any technical issues with respect
to a Project of a material nature, it shall notify the Steering Committee in
writing describing the delayed task and the reasons for such delay. After
receiving such notice, if necessary, the Steering Committee shall meet to review
the reason for such delays and any technical issues raised by the notifying
Party, to consider how best to proceed and whether to modify the Work Plan
(including to adjust any timelines contained therein), if and to the extent
necessary. If requested by the Steering Committee, the Parties shall provide
information to the Steering Committee to assist it in its review of the Project.
The Steering Committee may vote at any time to discontinue or suspend a Project
if the Steering Committee determines that it is commercially reasonable or
necessary to do so. DELTAGEN may determine, in its reasonable business judgment,
to [***]; provided, however, that DELTAGEN shall notify HYSEQ in writing within
three (3) business days of such determination and shall [***]. Upon such
decision by the Steering Committee or DELTAGEN, as applicable, to [***], the
applicable Project Gene shall immediately become a Rejected Project Gene.

        5.3 GENERATION AND TESTING OF PROJECT KNOCK-OUT MICE; AND FIRST PASS
PHENOTYPIC

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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ANALYSIS; AND UPDATES AND REPORTS.

               5.3.1 CERTAIN DELTAGEN ACTIVITIES. For each Project initiated by
the Steering Committee pursuant to Section 5.2, DELTAGEN shall, as set out in
the Work Plan, use [***] efforts to: (i) [***] to create and generate a
corresponding Project Knock-Out Mouse, (ii) generate Project Knock-Out Mice
[***] using the Project Murine Gene that is orthologous to the Project Gene
which is the subject of the Project; and (iii) conduct a First Pass Phenotypic
Analysis of such Project Knock-Out Mice. Exhibit A may be reasonably modified in
writing from time to time [***] to add tests, observations and/or analyses to be
performed by DELTAGEN at any time under this Agreement and DELTAGEN shall notify
HYSEQ of such changes as part of its report regarding First Pass Phenotypic
Analysis.

               5.3.2 UPDATES. Within ten (10) days after the end of each
calendar quarter, DELTAGEN shall provide all Steering Committee members with a
written report describing the status, and expected completion date, of its work
on each Project under the Work Plan and with data from any portion(s) of the
First Pass Phenotypic Analysis completed on a Project during the just-ended
Calendar Quarter, if any, and if it has not already provided such information to
the Steering Committee. If and as reasonably requested by the Steering
Committee, DELTAGEN shall make persons working on its behalf on a Project
available during normal business hours for a reasonable number of consultations
with the Steering Committee regarding such Project. Such consultations will
either be in-person at such person's place of employment or via videoconference
or teleconference.

               5.3.3 FIRST PASS PHENOTYPIC ANALYSIS REPORT. Once DELTAGEN
completes the First Pass Phenotypic Analysis on a Project under the Work Plan,
it shall (to the extent not already provided pursuant to Section 5.3.2) submit
to the Steering Committee for the Steering Committee's review a final report of
the results of such Project.

        5.4 ADDITIONAL TESTING; COSTS.

               5.4.1 ADDITIONAL TESTING. If, at any time during this Agreement,
HYSEQ or DELTAGEN believes an additional test, observation, or analysis not
included in the First Pass Phenotypic Analysis, or covered by the Work Plan
would be useful to a Project, the Party may submit its proposal to the Steering
Committee for the Steering Committee's approval. If the

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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Steering Committee approves any such additional tests, observations, or analysis
requested by either Party, or if the Steering Committee determines that it is
necessary to assist it with determining whether to designate as a "secreted
protein candidate," a Secreted Protein produced by the Project Gene that is the
subject of such Project, the Steering Committee may request that DELTAGEN or
HYSEQ perform additional assays, including phenotypic tests, observations, or
analyses not included in the First Pass Phenotypic Analysis on such Project
(collectively, "Additional Tests"). DELTAGEN or HYSEQ, as applicable, shall
perform the Additional Tests, as requested by the Steering Committee pursuant to
this Section; provided that the Parties shall share the costs as set forth in
Section 5.4.2. Once DELTAGEN or HYSEQ, as applicable, has completed such
Additional Tests on a Project, DELTAGEN or HYSEQ, as applicable, shall submit to
the Steering Committee for the Steering Committee's review of the Project under
Section 5.5 a report of the results of such additional services.

               5.4.2 SHARING OF COSTS. HYSEQ or DELTAGEN, as applicable, shall
reimburse the Party performing the Additional Tests for [***] of the reasonable
costs (including FTEs) and reasonable out-of-pocket expenses incurred in
performing the Additional Tests, within thirty (30) days of HYSEQ's or
DELTAGEN's, as applicable, receipt of an invoice from the Party performing the
Additional Tests, including reasonable supporting documentation, covering such
costs and out-of-pocket expenses incurred in connection with conducting such
activities under this Agreement. In the event there is a good faith dispute over
an amount owed by a Party under this Section 5.4.2, the disputed portion of the
payment may be delayed, and such payment shall not be considered delinquent
pending a resolution of the Parties' dispute.

        5.5 DESIGNATION OF SECRETED PROTEIN CANDIDATES; DESIGNATION GUIDELINES.

               5.5.1 DESIGNATION OF SECRETED PROTEIN CANDIDATES. After reviewing
the information provided to it pursuant to Sections 3.2.4, 5.3 and 5.4, with
respect to a Project, the Steering Committee members shall vote whether to
designate the Secreted Protein produced by the Project Gene which is the subject
of such Project, together with its Derivative Proteins, as a "secreted protein
candidate." If the Steering Committee members vote affirmatively, within [***]
after receiving such information provided to it regarding a Secreted Protein, a
Secreted Protein shall be a Secreted Protein Candidate hereunder. If less than
[***] of the Steering

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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Committee members vote affirmatively to designate a Secreted Protein as a
Secreted Protein Candidate or if the Steering Committee fails to vote
affirmatively within such [***] period to designate a Secreted Protein as a
Secreted Protein Candidate, then the Project Gene that produced such Secreted
Protein shall immediately become a Rejected Project Gene.

               5.5.2 DESIGNATION GUIDELINES. A Steering Committee member's
standard for voting to designate a Project Gene's Secreted Protein as a
"secreted protein candidate" shall be [***].

               5.5.3 [***] PROJECT GENE. Unless otherwise decided by the Parties
or the Steering Committee, any Project Gene which (i) the Steering Committee
members have voted to [***]," (ii) the Steering Committee members have not voted
[***] under this Agreement within [***] of its submission to the Steering
Committee pursuant to Section 5.5.1, and/or (iii) has been [***] Neither Party
shall [***] any of the [***].

                      5.5.3.1 DURING RESTRICTION TERM. If, during the
Restriction Term, either Party obtains [***] on a Rejected Project Gene, such
Party may present such Rejected Project Gene to the Steering Committee for
another vote on whether to designate such Rejected Project Gene as a Secreted
Protein Candidate. At the time of presentation of a Rejected Project Gene to the
Steering Committee, each of the Parties must disclose to the other Party the
[***] performed during the Restriction Term.

                      5.5.3.2 EXPIRATION OF RESTRICTION TERM. Upon expiration of
the Restriction Term for any Rejected Project Gene, each Party must disclose to
the other Party the [***] and the Steering Committee shall determine if such
Rejected Project Gene shall be further analyzed and studied under the
Development Program.

                      5.5.3.3 STEERING COMMITTEE VOTE ON REJECTED PROJECT GENE.
If the Steering Committee votes to return a Rejected Project Gene to the
Development Program, the license grants under Sections 2.1.3 and 2.3.1 shall
again become effective in accordance with their terms. If the Steering Committee
cannot reach an agreement on a Rejected Project Gene presented to it under this
Section 5.5.3, the Chief Executive Officers of the Parties shall make such
determination. If the Chief Executive Officers cannot reach an agreement on such
Rejected Project Gene, then such determination shall not be subject to the
dispute resolution procedure set

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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forth in Section 13.5, but rather: (a) if DELTAGEN votes not to return such
Rejected Project Gene to the Development Program and HYSEQ votes to return such
Rejected Project Gene to the Development Program, then [***] or (b) if HYSEQ
votes not to return such Rejected Project Gene to the Development Program and
DELTAGEN votes to return such Rejected Project Gene to the Development Program,
then [***] If the Party that [***] pursuant to this Section 5.5.3.3 wishes to
[***], the Parties shall negotiate in good faith concerning [***].

                      5.5.3.4 MAINTENANCE OF PROJECT KNOCK-OUT MICE. If HYSEQ
desires to maintain the line of a Rejected Project Gene's Project Knock-Out
Mouse beyond the Restriction Term, it shall so notify DELTAGEN in writing prior
to the expiration of the Restriction Term. The Parties shall use good faith
efforts to agree upon an appropriate manner to preserve the Project Knock-Out
Mouse, its ES cells or frozen sperm sufficient to regenerate such Project
Knock-Out Mouse, at HYSEQ's sole cost and expense.

                      5.5.3.5 RIGHT OF FIRST REFUSAL. If, during the Restriction
Term, a Third Party approaches a Party ("Approached Party") and presents a
[***], such Approached Party shall [***]

                                    ARTICLE 6
                     COMMERCIALIZATION AND OTHER ACTIVITIES

        6.1 FURTHER RESEARCH AND DEVELOPMENT OF A SECRETED PROTEIN CANDIDATE.

               6.1.1 FURTHER DEVELOPMENT ACTIVITIES. Once a Secreted Protein
Candidate has been designated by the Steering Committee pursuant to Section 5.5,
the Steering Committee shall either modify the Work Plan, or create a separate
work plan, if and as may be appropriate, to outline the scope of development
activities and the responsibilities of the Parties with respect thereto and the
Parties shall enter into a separate agreement with respect to development and
commercialization of such Secreted Protein Candidate Product derived therefrom.
Unless otherwise decided by the Parties, the Parties shall [***] share all costs
(including FTEs) and out-of-pocket expenses associated with conducting such
research and development activities on a [***] basis, in accordance with the
procedures set forth in Section 6.1.2.

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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               6.1.2 ACCOUNTING OF SHARED COST; AND REPORTS. All costs and
out-of-pocket expenses that are to be shared by the Parties on a [***] basis
pursuant to Section 3.1.2, ("Shared Costs") shall be reviewed by the Parties
each calendar quarter to determine the amount of Shared Costs incurred by each
Party for such calendar quarter hereunder. Within sixty (60) days of the end of
each calendar quarter (or as otherwise mutually agreed by the Parties), each
Party shall provide to the other Party and the Steering Committee a report
detailing the total Shared Costs incurred by it, with respect to Section 6.1.1
on a Secreted Protein Candidate-by-Secreted Protein Candidate basis and for
Products incorporating such Secreted Protein Candidate whose apportionment of
costs are not otherwise the subject of a separate agreement between the Parties
(or, if applicable, between a Party and its Affiliate and/or a Third Party), on
a Product-by-Product basis, and:

                      (a) if DELTAGEN incurred more than [***] of the total
Shared Costs for a calendar quarter, then DELTAGEN shall invoice HYSEQ for the
amount representing the difference between the percentage paid by DELTAGEN and
the [***] (the "HYSEQ Deficiency") and HYSEQ shall pay DELTAGEN the HYSEQ
Deficiency within thirty (30) days of its receipt of such invoice; or

                      (b) if HYSEQ incurred more than [***] of the total Shared
Costs for a calendar quarter, then DELTAGEN shall pay HYSEQ the amount
representing the difference between the percentage paid by HYSEQ and the [***]
(the "DELTAGEN Deficiency") within thirty (30) days of notifying HYSEQ of the
total Shared Costs incurred by the Parties. In the event there is a good faith
dispute over an amount owed by HYSEQ under this Section 6.1.2, the disputed
portion of the payment may be delayed, and such payment shall not be considered
delinquent pending a resolution of the Parties' dispute, other than with respect
to the terms and conditions of Section 13.7.

        6.2 COMMERCIALIZATION OF SECRETED PROTEIN CANDIDATES AND PRODUCTS. If
the Steering Committee decides not to conduct further development activities
with respect to a Secreted Protein Candidate or any Products identified by
either Party under the Development Program that utilize such Secreted Protein
Candidate, the Parties shall, through the Steering Committee, hold good faith
discussions to determine how, and whether, to proceed with further development

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
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and/or commercialization of any such Secreted Protein Candidate (and/or any
identified Products that utilize such Secreted Protein Candidate), either
themselves or through or with any Affiliate and/or Third Parties. Any such
development and/or commercialization activities shall be conducted pursuant to
the terms and conditions of a separate agreement to be negotiated between the
Parties and any other relevant parties to such agreement(s). If the Parties
decide not to proceed under this Section 6.2, and if neither of the Parties
invokes the provisions of Section 6.3 below, then upon the expiration of the
[***] period provided for in Section 6.3.1 the applicable Project Gene shall
become a Rejected Project Gene under this Agreement.

        6.3 DEADLOCK.

               6.3.1 SUBMISSION OF TERM SHEET TO STEERING COMMITTEE. If the
Steering Committee is unable to agree on how to proceed with respect to a
Secreted Protein Candidate (or any Products identified by either Party under the
Development Program that utilize such Secreted Protein Candidate) pursuant to
Section 6.2 within [***] of first considering such Secreted Protein Candidate
(or its corresponding Product(s)), then within [***] of such DATE, each Party
may, if it so chooses, present to the Steering Committee a proposed term sheet
(a "Proposed Term Sheet") that sets out terms and conditions under which such
Party wishes to develop and commercialize such Secreted Protein Candidate
(and/or any Products identified by either Party under the Development Program
that utilize such Secreted Protein Candidate) which the submitting Party would
like to pursue itself or with or through an Affiliate and/or Third Party. Any
such Proposed Term Sheet submitted to the Steering Committee by a Party shall
include [***] and shall provide for [***]. The Steering Committee shall review
and consider any Proposed Term Sheet submitted by a Party [***]. If the Steering
Committee votes and approves a Party's Proposed Term Sheet, such Party is
authorized to negotiate an agreement based upon such Proposed Term Sheet, the
Party may proceed with such negotiations, but shall provide the Steering
Committee with a copy of the Agreement prior to signing for final review and
approval (such approval not to be unreasonably withheld or delayed). Subject to
any confidentiality obligations to which a Party may be bound, such Party shall
keep the Steering Committee updated with respect to such negotiations, if and as
reasonably requested by the Steering Committee. If at any time during the Term,
each Party agrees to submit a Proposed

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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Term Sheet to the Steering Committee under this Section 6.3.1, and the Steering
Committee rejects both, or does not approve either, Party's Proposed Term
Sheets, then either Party [***] upon written notice to the other Party. If only
one Party submits a Proposed Term Sheet to the Steering Committee, and the
Steering Committee rejects such Party's Proposed Term Sheet, or neither Party
submits a Proposed Term Sheet, then neither Party may [***] except as authorized
by the Steering Committee or as mutually agreed by the Parties in writing;
provided that if the Parties both agree at a later date to submit Proposed Term
Sheets to the Steering Committee covering the development and/or
commercialization of such Secreted Protein Candidate (or any Products that
utilize such Secreted Protein Candidate) under this Section, then the Parties
can at that time [***] on written notice to the other Party if the Steering
Committee rejects both, or does not approve either, Party's Proposed Term
Sheets.

               6.3.2 THIRD PARTY MEDIATION. Upon a Party's receipt of a notice
from the other Party initiating the mediation procedures under this Section, the
Parties shall meet to attempt in good faith to resolve this matter through
face-to-face negotiations between senior executives of HYSEQ and DELTAGEN,
including consideration of any Proposed Term Sheets. If the matter is not
resolved within thirty (30) days (or such other period of time mutually agreed
upon by the Parties) of commencing such face-to-face negotiations, or if the
Party against which a claim has been asserted refuses to attend such
negotiations or does not otherwise participate in such negotiations within
thirty (30) days (or such other period of time mutually agreed upon by the
Parties) from the date of notice of to the other Party under this Section 6.3.2,
then either Party may initiate the procedures set forth on Exhibit B upon notice
to the other Party.

                                    ARTICLE 7
                         REPRESENTATIONS AND WARRANTIES

        7.1 HYSEQ REPRESENTATIONS AND WARRANTIES. As of the Effective date and
during the Term (unless expressly stated in this Section 7.1), HYSEQ hereby
represents and warrants the following to DELTAGEN:

               7.1.1 HYSEQ is (i) a company duly organized, validly existing,
and in good standing under the laws of Nevada with its respective principal
place of business as indicated in the first paragraph of this Agreement; (ii)
duly qualified as a corporation and in good standing

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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under the laws of each jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, where the failure to be
so qualified would have a material adverse effect on its financial condition or
its ability to perform its obligations hereunder; (iii) has the requisite
corporate power and authority and the legal right to conduct its business as now
conducted and hereafter contemplated to be conducted; (iv) has all necessary
licenses, permits, consents, or approvals from or by, and has made all necessary
notices to, all governmental authorities having jurisdiction, to the extent
required for such ownership and operation; and (v) is in compliance with its
certificate of incorporation and by-laws.

               7.1.2 The execution, delivery and performance of this Agreement
by HYSEQ and all documents to be delivered by HYSEQ hereunder: (i) are within
the corporate power of HYSEQ; (ii) have been duly authorized by all necessary or
proper corporate action; (iii) are not in contravention of any provision of the
certificate of incorporation or by-laws of HYSEQ; (iv) will not violate any law
or regulation or any order or decree of any court of governmental
instrumentality; (v) will not violate the terms of any indenture, mortgage, deed
of trust, lease, agreement, or other instrument to which HYSEQ is a party or by
which HYSEQ or any of its property is bound; and (vi) do not require any filing
or registration with or the consent or approval of, any governmental body,
agency, authority or any other Person, which has not been made or obtained
previously.

               7.1.3 This Agreement has been duly executed and delivered by
HYSEQ and constitutes a legal, valid and binding obligation of both HYSEQ,
enforceable against both and either of HYSEQ in accordance with its terms.

               7.1.4 Except as expressly provided on Exhibit D, (which may be
modified in accordance with the terms and conditions of this Agreement for a
particular Submitted Gene up until the time that information is submitted for a
Proposed Gene under Section 4.1.3), HYSEQ is the sole and exclusive owner of the
entire right, title and interest in and to the HYSEQ Patents and the HYSEQ
Know-How, free and clear of any liens or other encumbrances, and no other Person
(including any government or university) has any license, claim or other right
or interest in or to any HYSEQ Patents or the HYSEQ Know-How. The HYSEQ Patents
and the HYSEQ Know-How may be co-exclusively licensed to DELTAGEN hereunder, and
as contemplated

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
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under Article 6 under a separate agreement to commercialize Secreted Protein
Candidate and/or Products, without payment of any royalty, fee or incurring any
other obligation to any other Person (including any government or university).

               7.1.5 HYSEQ has disclosed or made available to DELTAGEN, to the
extent of HYSEQ's actual knowledge, all information relevant to [***].

               7.1.6 HYSEQ has disclosed or made available to DELTAGEN, to the
extent of HYSEQ's actual knowledge, [***].

               7.1.7 HYSEQ has disclosed or made available to DELTAGEN, to the
extent of HYSEQ's actual knowledge, [***].

               7.1.8 HYSEQ is [***].

               7.1.9 Except as provided in the information under Section 4.1.3
submitted for a Proposed Gene pursuant to this Agreement, all of the research
and development work performed in connection with any of the HYSEQ Know-How or
any Submitted Gene, Proposed Genes (subject to any disclosures made by HYSEQ in
writing pursuant to Section 4.1.3 with respect to any such Proposed Gene), or
Project Genes prior to the Effective Date was [***] and was performed in
accordance with applicable law and in compliance with all applicable regulatory
requirements, and all such rights have been properly assigned to HYSEQ including
any and all rights of any consultants of HYSEQ.

               7.1.10 HYSEQ [***] to protect its proprietary and confidential
information, including requiring its , consultants and agents to be bound in
writing by obligations of confidentiality and non-disclosure, and requiring its
employees to assign to it any and all inventions and discoveries discovered by
such employees made within the scope of, and during their employment, and only
disclosing proprietary and confidential information to Third Parties pursuant to
written confidentiality and non-disclosure agreements.

               7.1.11 HYSEQ has not, up through and including the Effective
Date, [***].

        7.2 DELTAGEN REPRESENTATIONS AND WARRANTIES. As of the Effective date
and during the Term(unless expressly stated in this Section 7.2), DELTAGEN
hereby represents and warrants the following to HYSEQ:

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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               7.2.1 DELTAGEN is (i) a company duly organized, validly existing,
and in good standing under the laws of Delaware with its respective principal
place of business as indicated in the first paragraph of this Agreement; (ii)
duly qualified as a corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, where the failure to be so qualified would
have a material adverse effect on its financial condition or its ability to
perform its obligations hereunder; (iii) has the requisite corporate power and
authority and the legal right to conduct its business as now conducted and
hereafter contemplated to be conducted; (iv) has all necessary licenses,
permits, consents, or approvals from or by, and has made all necessary notices
to, all governmental authorities having jurisdiction, to the extent required for
such ownership and operation; and (v) is in compliance with its certificate of
incorporation and by-laws.

               7.2.2 The execution, delivery and performance of this Agreement
by DELTAGEN and all documents to be delivered by DELTAGEN hereunder: (i) are
within the corporate power of DELTAGEN; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of any
provision of the certificate of incorporation or by-laws of DELTAGEN; (iv) will
not violate any law or regulation or any order or decree of any court of
governmental instrumentality; (v) will not violate the terms of any indenture,
mortgage, deed of trust, lease, agreement, or other instrument to which DELTAGEN
is a party or by which DELTAGEN or any of its property is bound; and (vi) do not
require any filing or registration with or the consent or approval of, any
governmental body, agency, authority or any other Person, which has not been
made or obtained previously.

               7.2.3 This Agreement has been duly executed and delivered by
DELTAGEN and constitutes a legal, valid and binding obligation of both DELTAGEN,
enforceable against both and either of DELTAGEN in accordance with its terms.

               7.2.4 DELTAGEN [***] to protect its proprietary and confidential
information, including requiring its consultants and agents to be bound in
writing by obligations of confidentiality and non-disclosure, and requiring its
employees to assign to it any and all inventions and discoveries discovered by
such employees made within the scope of, and during

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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their employment, and only disclosing proprietary and confidential information
to Third Parties pursuant to written confidentiality and non-disclosure
agreements.

               7.2.5 DELTAGEN has not, up through and including the Effective
Date, [***].

                                    ARTICLE 8
                                 INDEMNIFICATION

        8.1 INDEMNIFICATION. Each Party agrees to indemnify and hold forever
harmless the other Party and its Affiliates and each of their agents, directors,
officers, employees, consultants, contractors and (sub)licensees from and
against any loss, damage, action, proceeding, cost, expense or liability
(including reasonable attorneys' fees) (collectively, "Loss") arising from or in
connection with any Third Party claim or action relating to or arising from (a)
the breach of any representation, warranty or covenant of the indemnifying Party
under this Agreement; or (b) the [***] of the indemnifying Party or any its
Affiliates or any of its or its Affiliates' agents, directors, officers,
employees, consultants, contractors and/or (sub)licensees.

        8.2 PROCEDURE. The indemnities set forth in this Article 8 are subject
to the condition that the Party seeking indemnity shall (a) promptly notify the
indemnified Party under Section 8.1 (the "Indemnifying Party") on being notified
or otherwise made aware of a suit, action or claim; (b) tender to the
Indemnifying Party control of any proceedings regarding such matter [***];
provided that the Indemnifying Party may not settle the suit or otherwise
consent to any judgment in such suit without the written consent of the
Indemnified Party [***]. The Indemnifying Party has no obligation hereunder in
connection with any settlement made without the Indemnifying Party's written
consent (provided that such consent was not unreasonably withheld). The
non-Indemnifying Party shall cooperate with the Indemnifying Party in the
defense of any Third Party claim, as reasonably requested by the Indemnifying
Party.

        8.3 LIMITATIONS ON LIABILITY. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
SECTION 8.1 WITH RESPECT TO THIRD PARTY CLAIMS, NEITHER PARTY SHALL BE LIABLE TO
THE OTHER FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES,
INCLUDING ANY LOSS OF PROFITS OR LOSS OF ANY BUSINESS OPPORTUNITY.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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        8.4 DISCLAIMERS.

               8.4.1 EXCEPT FOR THE WARRANTIES SET FORTH IN ARTICLE 7, NEITHER
PARTY MAKES ANY WARRANTIES HEREUNDER AND EXPRESSLY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.

               8.4.2 WITHOUT LIMITING SECTION 8.4.1, HYSEQ HEREBY ACKNOWLEDGES
AND AGREES THAT THE PROJECT KNOCK-OUT MICE AND ANY DERIVATIVES OR PROGENY
THEREOF ARE PROVIDED "AS IS," WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. FURTHERMORE, DELTAGEN MAKES NO REPRESENTATION OR WARRANTY THAT THE USE
OF THE PROJECT KNOCK-OUT MICE AND ANY DERIVATIVES OR PROGENY THEREOF WILL NOT
INFRINGE, MISAPPROPRIATE OR OTHERWISE CONFLICT WITH ANY PATENT OR OTHER
PROPRIETARY RIGHTS OF ANY OTHER PERSON.

                                    ARTICLE 9
              CONFIDENTIALITY, PRESS RELEASES AND OTHER DISCLOSURES

        9.1 NONDISCLOSURE.

               9.1.1 During the Term and [***] thereafter without regard to the
means of termination, neither DELTAGEN nor HYSEQ shall use for any purpose other
than the purpose of this Agreement or reveal or disclose to any Third Party
information and materials disclosed by, or obtained from, the other Party
(whether prior to or during the Term), and which is marked as "Confidential" or
for information or materials disclosed or obtained orally or otherwise in a
non-written form, which is described or summarized in a writing identified as
"Confidential" and forwarded to the other Party within thirty (30) days of such
disclosure ("Confidential Information") without first obtaining the written
consent of the other Party, except (i) as required by law or court order
(subject to prior notification to the other Party and seeking redaction and
confidential treatment where available); (ii) as required in connection with any
filings made with,

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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or by the disclosure policies of a stock exchange (subject to prior notification
to the other Party and seeking redaction and confidential treatment where
available); and (iii) as expressly permitted under this Agreement, including as
permitted under Section 10.3.5.

               9.1.2 The obligations of confidentiality set forth in this
Section 9.1 shall not apply to such information which (a) is or becomes a matter
of public knowledge, through no fault of the receiving Party; (b) is already
rightfully in the possession of the receiving Party without an obligation of
confidentiality at the time of disclosure, as reasonably evidenced by the
receiving Party; (c) is disclosed non-confidentially to the receiving Party by a
Third Party having lawful possession of such information and the right to do so;
or (d) is subsequently and independently developed by employees of the receiving
Party or Affiliates thereof without reference to or knowledge of the
Confidential Information disclosed, as reasonably evidenced by the receiving
Party. The Parties shall take reasonable measures to assure that no unauthorized
use or disclosure is made by others to whom access to such information is
granted.

               9.1.3 HYSEQ and DELTAGEN each agree to limit the disclosure of
any Confidential Information of the other Party received or obtained hereunder
to such of its Affiliates and its and its Affiliates' employees, consultants,
sublicensees permitted under Article 2 and agents, as are necessary to carry out
the provisions of this Agreement and who are likewise bound by written
obligations of confidentiality which are comparable to, or more stringent than,
the provisions of this Article 9. Each Party agrees to provide the other Party
with written notice of any such consultants, sublicensees, or agents.

        9.2 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither Party shall
otherwise issue any press releases or other publicity materials, or make any
public announcements relating to the terms or conditions of this Agreement or
relating to the Development Program or any Confidential Information of the other
Party without the prior written consent of the other Party. This restriction
shall not apply to disclosures required by law or regulation, including as may
be required in connection with any filings made with, or by the disclosure
policies of a stock exchange (subject to prior notification to the other Party
and seeking redaction and confidential treatment where available).

        9.3 PUBLICATIONS AND PRESENTATIONS. Without limiting Section 9.2,
neither Party shall

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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make any publications or presentations relating to any Proposed Genes (unless
and until it is a Rejected Proposed Gene), Project Genes, Project Knockout Mice,
Project Murine Genes, Secreted Proteins, Derivative Proteins, Secreted Protein
Candidates or Products or otherwise relating to the Development Program or any
activities thereunder, including any of the results or data arising from the
activities conducted under Development Program or containing, disclosing or
relating to any Confidential Information of the other Party, without the other
Party's prior written consent.

        9.4 TERMINATION. The Parties agree that if this Agreement is terminated,
neither Party shall disclose to any Third Party [***] without the express
written consent of the other Party, and the Parties shall agree on statements
for public disclosure, such agreement not to be unreasonably withheld or
delayed. This restriction shall not apply to disclosures required by law or
regulation.

                                   ARTICLE 10
                              OWNERSHIP AND RIGHTS

        10.1 PROJECT INTELLECTUAL PROPERTY OWNERSHIP AND RIGHTS.

               10.1.1 All right, title and interest in and to all inventions,
discoveries, know-how, derivatives and improvements and other Technical
Information (whether or not patentable), conceived, made, created, invented or
developed solely by DELTAGEN in connection with the activities conducted under
the Development Program or otherwise in connection with this Agreement
(including in connection with the selection of the Project Genes pursuant to
Section 4.1) shall be solely owned by DELTAGEN ("DELTAGEN Project Intellectual
Property"). All right, title and interest in and to all inventions, discoveries,
know-how, derivatives and improvements and other Technical Information (whether
or not patentable), conceived, made, created, invented or developed solely by
HYSEQ in connection with the activities conducted in connection with the
Development Program or otherwise in connection with this Agreement (including in
connection with the selection of the Project Genes pursuant to Section 4.1)
shall be solely owned by HYSEQ ("HYSEQ Project Intellectual Property"). All
right, title and interest in and to all inventions, discoveries, know-how,
derivatives and improvements and other Technical Information (whether or not
patentable), conceived, made, created, invented or developed jointly

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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by DELTAGEN and HYSEQ in connection with the activities conducted in connection
with the Development Program or in otherwise connection with this Agreement
(including in connection with the selection of the Project Genes pursuant to
Section 4.1) shall be jointly owned by DELTAGEN and HYSEQ ("Joint Project
Intellectual Property"); provided, however, that Joint Project Intellectual
Property relating to the DELTAGEN Knock-Out Technology, including any methods or
processes relating thereto, shall be owned by, and shall vest solely in,
DELTAGEN and shall be deemed "DELTAGEN Project Intellectual Property". Patents
covering HYSEQ Project Intellectual Property shall be referred to as "HYSEQ
Project Patents" and shall be owned by, and shall vest in, HYSEQ and Patents
covering DELTAGEN Project Intellectual Property shall be referred to as
"DELTAGEN Project Patents" and shall be owned by and shall vest in, DELTAGEN.
Patents covering Joint Project Intellectual Property shall be referred to as
"Joint Project Patents" and shall be jointly owned by, and jointly vest in, the
Parties. The Parties hereby agree that [***] for a Rejected Project Gene they
shall make [***] of Joint Project Intellectual Property, including Joint Project
Patents. If the Parties cannot mutually agree on such [***], such Joint Project
Intellectual Property and Joint Project Patents shall remain jointly owned by
the Parties.

               10.1.2 Each Party shall [***] to advise the other Party and the
Steering Committee in writing of any Project Intellectual Property if and as it
arises under the Development Program.

               10.1.3 Notwithstanding Section 10.1.1, as between HYSEQ and
DELTAGEN, all HYSEQ's Technical Information and other of HYSEQ's rights in and
to the Proposed Genes that became Rejected Proposed Genes pursuant to Section
4.3 that were identified, or submitted to, the Steering Committee and/or
DELTAGEN pursuant to Section 4.1, shall be solely owned by and remain vested in,
HYSEQ.

        10.2 FURTHER ASSURANCES. Each Party shall execute, or cause to be
executed, any and all documentation, assignments, declarations, applications
and/or other instruments that may be reasonably necessary or desirable to effect
each Party's respective ownership rights as set forth in Section 10.1.1,
including each Party's respective rights in and to the Joint Project
Intellectual Property and the Joint Project Patents, as set forth in Section
10.1.1.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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        10.3 PATENT PROSECUTION AND MAINTENANCE

               10.3.1 RESPONSIBLE PARTY AND COOPERATION. Each Party shall be
responsible for the preparation, filing, prosecution and maintenance of its
respectively solely owned Project Patents (each a "Responsible Party"). Unless
otherwise agreed pursuant to Article 6 or Section 10.1.1, DELTAGEN shall be
responsible for the preparation, filing, prosecution and maintenance of all
Joint Project Patents (in such case, the "Responsible Party"), provided that
DELTAGEN shall provide the Steering Committee with access to all drafts of
provisional and patent applications for such Joint Project Patents. Upon the
designation of a Project Gene as a Secreted Protein Candidate, the Parties will
use good faith efforts to include in the joint development agreement: (i) the
Responsible Party for prosecution of such Joint Project Patents; (ii) that the
Responsible Party shall consult with the other Party with respect to Patent
matters for which it is responsible under this Section 10.3; and (iii) that the
Parties shall meet (whether in person or by video or telephone conference) on a
regular basis to review and discuss, such matters. Without limiting the
foregoing, with respect to Deltagen Project Patents and Joint Project Patents,
DELTAGEN shall consult with HYSEQ as to where and when to file patent
applications which are included in the Patents for which it is responsible under
this Section, and concerning the preparation, filing, prosecution, maintenance,
and shall solicit HYSEQ's advice and provide HYSEQ with sufficient time prior to
DELTAGEN having to respond or take action with respect to any such preparation,
filing, prosecution, and maintenance of such matter, and shall take into account
HYSEQ's comments related thereto and incorporate or act on such comments if and
to the extent reasonable.

               10.3.2 PATENT FILING AND PROSECUTION; AND UPDATES. If either
Party identifies any invention covered by the HYSEQ Know-How or the Project
Intellectual Property for which it would like to seek patent protection, it
shall notify the other Party, and the Parties shall review and discuss the
filing of a patent application covering such invention. If, after such
discussion, the Responsible Party decides to file a patent application covering
any such inventions, it shall prepare a patent application and provide the other
Party with a copy of such draft application together with a preliminary
determination of inventors and scope of claims. Each Party shall advise the
other Party within [***] of receiving any substantive action or development in
the

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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prosecution of any patent application it is responsible for prosecuting pursuant
to this Section 10.3 (in particular any actions or developments concerning which
countries to continue prosecution of, questions of the scope, issuance or
rejection of, any interference involving, any such patent application or any
opposition to any such patent application or resulting patent).

               10.3.3 ELECTION NOT TO PROCEED. On a Patent-by-Patent basis, if a
Responsible Party, either prior or subsequent to filing any patent applications
for Project Patents, elects not to file, prosecute or maintain such patent
applications, or maintain any ensuing Project Patents, it shall notify the other
Party within [***] prior to allowing such Project Patent to lapse or become
abandoned or unenforceable, and the other Party may elect to prepare, file,
prosecute, maintain and enforce such Project Patent. Without limiting the
foregoing, if a Responsible Party plans to abandon any patent application in any
Territory relating to a Project Gene in a Project Patent, the Responsible Party
shall promptly notify the other Party, and shall not abandon such patent
application for [***] after such notification to allow the other Party, if it
chooses, to continue to prosecute such patent application solely at its own cost
and expense. The costs of filing, prosecuting, and maintaining any Project
Patent assumed by a Party pursuant to this Section 10.3.3 shall be the
responsibility of such Party (but only if and to the extent such Party, in its
sole discretion, decides to incur such costs), and shall not be considered a
Shared Patent Cost under Section 10.3.3(a).

                      (a) SHARED PATENT COSTS. Except for costs and expenses
incurred by a Party as set forth above in this Section 10.3.3, unless otherwise
mutually agreed by the Parties, all costs of prosecuting and maintaining Joint
Project Patents shall be shared [***] by the Parties on a [***] basis ("Shared
Patent Costs").

In the event there is a good faith dispute over an amount owed by either Party
under this Section 10.3.3(a), the disputed portion of the payment may be
delayed, and such payment shall not be considered delinquent pending a
resolution of the Parties' dispute other than with respect to the terms and
conditions of Section 13.7.

               10.3.4 REPORTS. The Party performing the prosecution of any
patent application under this Section 10.3 shall provide the other Party with a
report no less frequently than once every six (6) month period (or as otherwise
mutually agreed by the Parties) listing all such

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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patents and patent applications, identifying them by country and patent or
application number, and briefly describing the status thereof.

               10.3.5 OTHER COOPERATION AND ASSISTANCE. At the request of the
Party performing the prosecution of any patent application under this Section
10.3, the other Party shall cooperate, as reasonably requested, in connection
with the prosecution of all such patent applications. Each Party shall make
available to the other or its respective authorized attorneys, agents or
representatives such of its employees as the other Party in its reasonable
judgment deems necessary in order to assist such other Party with the
prosecution of such patents. Each Party shall sign or [***] have signed and
delivered at no charge to the other Party all legal documents reasonably
necessary in connection with such prosecution and maintenance. Without in any
way limiting anything contained in this Section 10.3, (a) HYSEQ shall act in
good faith to advise, and to consult with, DELTAGEN in connection with the
preparation and prosecution of the Patent applications included in the HYSEQ
Patents as they arise under this Agreement and to mutually seek with DELTAGEN
opportunities to prepare and file HYSEQ Patents, with the Parties goal being in
each instance [***]; and (b) DELTAGEN shall act in good faith to advise, and to
consult with, HYSEQ in connection with the preparation and prosecution of the
Patent applications included in the DELTAGEN Project Patents and Joint Project
Patents as they arise under this Agreement and to mutually seek with HYSEQ
opportunities to prepare and file DELTAGEN Project Patents and Joint Project
Patents, with the Parties' goal being in each instance [***]. Without limiting
the foregoing, HYSEQ may use any Project data and results generated from any
Project Knock-out Mouse, including data from the First Pass Phenotypic Analysis,
to support prosecution of HYSEQ Patents as reasonably necessary for such
prosecution, and such use of data and results will not be considered a violation
of the confidentiality provisions of Article 9 provided that such data and
results have already been incorporated into a patent application by DELTAGEN.

               10.3.6 HYSEQ AND DELTAGEN PROJECT PATENTS. For the avoidance of
doubt, as between DELTAGEN and HYSEQ, HYSEQ shall control all preparation,
filing, prosecution and maintenance of any and all HYSEQ Project Patents and/or
any Patents covering any HYSEQ Project Intellectual Property or HYSEQ Know-How,
and DELTAGEN shall control all

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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preparation, filing, prosecution and maintenance of any and all DELTAGEN Project
Patents and/or any Patents covering any DELTAGEN Project Intellectual Property
or any other Technical Information owned or controlled by DELTAGEN.

                                   ARTICLE 11
                              TERM AND TERMINATION

        11.1 TERM. The term of this Agreement (the "Term") shall commence as of
the Effective Date and, unless sooner terminated by mutual agreement or pursuant
to any other provision of this Agreement, shall terminate upon the later to
occur of: (a) the expiry of the last Valid Claim relating to a Project Gene or a
Secreted Protein Candidate within the HYSEQ Patents or Project Patents, or (b)
five (5) years from the Effective Date. Upon expiration of this Agreement, the
Parties shall have the licenses expressly provided for in Sections 2.1.3 and
2.3.1 of this Agreement.

        11.2 TERMINATION EVENTS.

               11.2.1 [***]. If HYSEQ commits a material breach of any term or
condition of this Agreement solely as a result of its failure [***], and HYSEQ
fails to cure such breach within [***] days after receiving written notice of
the breach from DELTAGEN, DELTAGEN may immediately terminate this Agreement in
its entirety upon written notice to HYSEQ at the end of such [***] day period
for the HYSEQ's uncured breach; provided, however, that in the event that the
[***] is the subject of a good faith dispute between the Parties, such dispute
shall be deemed as and treated as a Dispute (as such term is defined in Section
13.5.1) for the purposes of this Agreement and addressed by means of the dispute
resolution provisions of Section 13.5 and until such time as the board of
arbitrators, pursuant to Section 13.5, renders a final decision with respect to
such Dispute the Parties shall continue to perform their obligations hereunder,
except to the extent mutually agreed to by the Parties or as directed by the
arbitrators pursuant to Section 13.5.

               11.2.2 OTHER DEFAULTS. Except as set forth in Section 11.2.1, if
either Party commits a material breach of any term or condition of this
Agreement, the non-breaching Party may give the other Party written notice of
the breach, and if the breach is not cured within ninety (90) days after
receiving written notice of the breach, the non-breaching Party shall (i) have
the

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HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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right to terminate this Agreement upon written notice to the breaching Party;
and (ii) to submit the subject matter of the alleged breach to the dispute
resolution process pursuant to Section 13.5 within thirty (30) days of the end
of such ninety (90) day period by giving the other Party written notice
requesting arbitration within such thirty (30) day period. Unless this Agreement
is terminated by the non-breaching Party pursuant to this Section 11.2.2, the
Parties shall continue to perform their obligations hereunder during the
pendency of such arbitration, except to the extent mutually agreed otherwise by
the Parties or except as directed by the arbitrators. The arbitrators decision
shall be binding upon the Parties except that in no event shall the arbitrators
have the power or authority to terminate this Agreement, either in whole or in
part.

                                   ARTICLE 12
             EFFECT OF EXPIRATION AND TERMINATION; AND SURVIVABILITY

        12.1 [***].

        12.2 RETURN OF CONFIDENTIAL MATERIALS AND INFORMATION. Upon expiration
of this Agreement, upon the other Party's written request, each Party shall
either, as directed by the other Party, return to the other Party or certify in
writing to the other Party that it has destroyed all documents and other
tangible items provided by the other Party that contain or relate to
Confidential Information of the other Party (other than information that is
considered joint Confidential Information of both Parties), including abstracts
and summaries thereof; except if and to the extent, that the Parties have
otherwise expressly agreed in writing, including as the Parties may have agreed
pursuant to Article 6 with respect to the development and/or commercialization
of any Secreted Protein Candidate or any Products, either themselves, or through
or with any Affiliates or Third Parties.

        12.3 SURVIVABILITY. Expiration or termination of this Agreement shall
not affect each Party's obligations to pay any amount accruing to the other
Party under the provisions of this Agreement while it was in effect. Further,
the expiration or termination of this Agreement shall not affect any rights and
obligations of the Parties under this Agreement which survive such termination.
Without limiting the generality of the foregoing, the following provisions of
this Agreement shall survive expiration or termination hereof: Articles 1, 2
(only as expressly provided therein with respect to license grants that have not
terminated by their terms), 7, 8, 9,

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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10, 12 and 13 and Section 5.5.3.3.

                                   ARTICLE 13
                                  MISCELLANEOUS

        13.1 FORCE MAJEURE. If either Party is prevented from complying, either
totally or in part, with any of the terms or provisions of this Agreement (other
than a payment obligation), by reason of force majeure, including, but not
limited to fire, flood, earthquake, explosion, storm, strike, lockout or other
labor trouble, riot, war, rebellion, accident, acts of God and/or any other
cause or externally induced casualty beyond its reasonable control, whether
similar to the foregoing matters or not, then, upon written notice by the Party
liable to perform to the other Party, the requirements of this Agreement or such
of its provisions as may be affected, and to the extent so affected, shall be
suspended during the period of such disability.

        13.2 NO ASSIGNMENT. Neither Party shall, without the prior written
consent (not to be unreasonably withheld) of the other Party having been
obtained, assign or transfer this Agreement, or any right or obligation under
this Agreement, to any Person; provided, however, that each Party may assign or
transfer this Agreement to any successor by merger of such Party, or upon a sale
of all or substantially all of such Party's assets without the prior written
consent of the other Party hereto. This Agreement shall be binding upon and
shall inure to the benefit of the Parties and their successors and permitted
assigns.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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        13.3 NOTICES. Any notices required or permitted to be given hereunder
shall be in writing in the English language and shall be delivered in person or
by Federal Express (or other courier service requiring signature upon receipt)
or sent by air mail, postage prepaid, or facsimile (confirmed by a telephone
conversation with the recipient) to the addresses set forth below. The Parties
may change the address at which notice is to be given by giving notice to the
other Party as herein provided. All notices shall be deemed effective upon
receipt by the Party to whom it is addressed.

               If to HYSEQ:

               Hyseq Inc.
               670 Almanor Avenue
               Sunnyvale, California  94085-3513
               Attention:  President & CEO
               cc: General Counsel, at the same address
               Fax:        (408) 524-8145
               Phone:      (408) 524-8100

               If to DELTAGEN:

               Deltagen Inc.
               740 Bay Road
               Redwood City, CA 94063-2469

               Attention:  President
               cc: General Counsel, at the same address
               Fax:        (650) 569-5280
               Phone:      (650) 569-5100

        13.4 GOVERNING LAW. This Agreement and its execution, validity and
interpretation shall be interpreted in accordance with and governed in all
respects in accordance with the laws of the State of California, and all rights
and remedies shall be governed by such laws without regard to principles of
conflicts of law. Subject to Section 13.5, the Parties hereby consent to the
exclusive personal jurisdiction and venue of the Superior Court of the County of
Santa Clara in the State of California or, as applicable, the United States
District Court for the Northern District of California, for all matters arising
under or in connection with this Agreement.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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        13.5 DISPUTE RESOLUTION.

               13.5.1 The Parties shall initially attempt in good faith to
resolve any significant controversy, claim, or dispute arising out of or
relating to this Agreement or any significant breach thereof (hereinafter
collectively referred to as a "Dispute") through face-to-face negotiations
between senior executives of HYSEQ and DELTAGEN. If the Dispute is not resolved
within thirty (30) days (or such other period of time mutually agreed upon by
the Parties) of commencing such face-to-face negotiations, or if the Party
against which a claim has been asserted refuses to attend such negotiations or
does not otherwise participate in such negotiations within thirty (30) days (or
such other period of time mutually agreed upon by the Parties) from the date of
notice of a Dispute, then the Parties agree to submit the Dispute to arbitration
as provided herein. Unless otherwise mutually agreed by the Parties, only if the
Dispute is not resolved through face-to-face negotiations as set forth in this
Section 13.5.1, may a Party resort to arbitration.

               13.5.2 Except as provided in Section 13.5.1 and Sections 3.3.4
and 6.3, all Disputes relating in any way to this Agreement shall be resolved
exclusively through arbitration conducted under the auspices of the American
Arbitration Association (the "AAA") pursuant to its Commercial Dispute
Resolution Procedures; provided, however, that any disputes between the Parties
concerning the infringement or validity of any intellectual property right
subject to this Agreement shall be heard by a court of competent jurisdiction.
The arbitration shall be conducted in the English language before three (3)
arbitrators, one selected by each Party and the third to be selected by the
other two. For any Dispute arising out of a non-concurrence of the Steering
Committee such arbitrators shall have the appropriate technical and scientific
background. Unless otherwise mutually agreed by the Parties, any arbitration
brought hereunder shall be brought only and exclusively in the State of
California. The arbitrators shall hear evidence by each Party and resolve each
of the issues identified by the Parties. The arbitrators shall render a formal,
binding non-appealable resolution and award on each issue as expeditiously as
possible, but not more than fifteen (15) business days after the hearing. In any
arbitration, the prevailing Party shall be entitled to reimbursement of its
reasonable attorneys' fees and the Parties shall use all reasonable efforts to
keep arbitration costs to a minimum.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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               13.5.3 Notwithstanding anything contained herein, in no event
shall arbitrators have the power or authority to terminate this Agreement in
whole or in part.

               13.5.4 Nothing in this Agreement shall be deemed as preventing
either Party from seeking injunctive relief (or any other provisional remedy)
from any court having jurisdiction over the Parties and the subject matter of
the dispute as necessary to protect either Party's intellectual property.

        13.6 LICENSE SURVIVAL DURING BANKRUPTCY. All rights and licenses granted
under or pursuant to this Agreement are, and shall otherwise be deemed to be,
for purposes of Paragraph 365(n) of the U.S. Bankruptcy Code, licenses of rights
to "intellectual property" as defined under Paragraph 101(35A) of the U.S.
Bankruptcy Code. The Parties agree that each Party, as a licensee of such rights
under this Agreement, shall retain and may fully exercise all of its rights and
elections under the U.S. Bankruptcy Code, subject to performance by the other
Party of its preexisting obligations under this Agreement. The Parties further
agree that, in the event of the commencement of a bankruptcy proceeding by or
against a Party, including under the U.S. Bankruptcy Code, the other Party shall
be entitled to a complete duplicate of (or complete access to, as appropriate)
any such intellectual property, and all embodiments of such intellectual
property, shall be promptly delivered to the other Party upon any such
commencement of a bankruptcy proceeding upon written request therefor by the
other Party.

        13.7 INTEREST. The Parties shall pay interest on any amounts overdue
under this Agreement at a rate of the lesser of the maximum allowed by
applicable law or [***] above the U.S. dollar prime or equivalent rate quoted by
Citibank N.A. or another mutually acceptable bank, as in effect during the
period from the date due until payment, including from the date any amounts
disputed in good faith by the Parties were originally due and payable hereunder.
This Section 13.7 shall apply to any amounts either Party may dispute under this
Agreement for any reason, even disputes initiated in good faith; provided,
however, that such amounts shall not be due and payable if a final decision by a
court of competent jurisdiction or AAA under Section 13.5 is rendered in favor
of the Party withholding the payment and such final decision declares such
disputed amounts not due under this Agreement.

        13.8 INTERPRETATION. The parties hereby acknowledge and agree that they
each

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       44
<PAGE>

required that this Agreement and all documents and notices in connection
herewith be drawn up in English. This Agreement shall be deemed to comprise the
language mutually chosen by the Parties, has been prepared jointly and no rule
of strict construction shall be applied against either Party. In this Agreement,
the singular shall include the plural and vice versa and the word "including"
shall be deemed to be followed by the phrase "without limitation".

        13.9 SEVERABILITY. In the event that any provision of this Agreement
shall be held to be unenforceable, invalid or in contravention of applicable
law, such provision shall be of no effect, and the Parties shall negotiate in
good faith to replace such provision with a provision which effects to the
extent possible the original intent of such provision.

        13.10 COMPLETE AGREEMENT. This Agreement, including all Exhibits hereto,
supersedes all prior understandings, agreements, representations and warranties
between the Parties, oral or written with respect to the present subject matter,
and comprises the complete agreement between the Parties with respect to the
present subject matter.

        13.11 MODIFICATIONS. No terms or provisions of this Agreement shall be
varied or modified by any prior or subsequent statement, conduct or act of
either of the Parties, except that the Parties may amend this Agreement by
written instruments specifically referring to this Agreement and executed by a
duly authorized officer of each of the Parties.

        13.12 NO AGENCY. Neither Party shall by virtue of this Agreement have
any power to make on behalf of the other Party any statements, representations
or commitments of any kind or to bind the other to any obligation nor shall this
Agreement create any relationship of agency, partnership or joint venture or any
fiduciary relationship between the Parties.

        13.13 NO WAIVER. No term or condition of this Agreement shall be
considered waived unless reduced to writing and duly executed by a duly
authorized officer of the waiving Party. Any waiver by any Party of a breach of
any term or condition of this Agreement will not be considered as a waiver of
any subsequent breach of this Agreement, of that term or condition or any other
term or condition hereof.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       45
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        13.14 COUNTERPARTS. The Agreement may be executed simultaneously in one
or more counterparts, each one of which need not contain the signature of more
than one Party but such counterparts taken together shall constitute one and the
same agreement.

                                *   *   *   *   *

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       46
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        IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.

HYSEQ, INC.                                  DELTAGEN INC.

By: /s/ Ted W. Love                          By: /s/ John Burke
   --------------------------------             --------------------------------

Name:  Ted W. Love                           Name:  John Burke
      -----------------------------                -----------------------------

Title: President and CEO                     Title: V.P. Intellectual Property
      -----------------------------                 ----------------------------

Date:     10/9/01                            Date:     10/9/01
      -----------------------------                -----------------------------

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

<PAGE>

                                    EXHIBIT A

                                      [***]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                      A - 1
<PAGE>

                                    EXHIBIT B

                             SECTION 6. 3 MEDIATION

                                      [***]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                      B - 1
<PAGE>

                                    EXHIBIT C

                                    Work Plan

[***]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                      C - 1
<PAGE>

                                    EXHIBIT D

                                   DISCLOSURES

                                      [***]

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                      D - 1

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