Document:

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                                                                    EXHIBIT 4.2
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                                TABLE OF CONTENTS

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1.       Demand Registrations......................................     2

         (a)      Requests for Registration........................     2

         (b)      Number of Demand Registrations...................     2

         (c)      Short-Form Registrations.........................     3

         (d)      Priority on Demand Registrations.................     3

         (e)      Restrictions on Demand Registrations.............     4

         (f)      Selection of Underwriters........................     5

         (g)      Other Registration Rights........................     5

2.       Piggyback Registrations...................................     6

         (a)      Right to Piggyback...............................     6

         (b)      Piggyback Expenses...............................     6

         (c)      Priority on Primary Registrations................     6

         (d)      Priority on Secondary Registrations..............     6

         (e)      Selection of Underwriters........................     7

3.       Holdback Agreements.......................................     7

4.       Registration Procedures...................................     7

5.       Registration Expenses.....................................     9

6.       Indemnification...........................................    10

         (e)      Contribution.....................................    11

7.       Rule 144..................................................    12

8.       Participation in Underwritten Registrations...............    12

9.       Definitions...............................................    12

10.      Miscellaneous.............................................    13

         (a)      No Inconsistent Agreements.......................    13

         (b)      Adjustments Affecting Registrable Securities.....    14

         (c)      Remedies.........................................    14

         (d)      Amendments and Waivers...........................    14

         (e)      Successors and Assigns...........................    14

         (f)      Severability.....................................    14

         (g)      Counterparts.....................................    14
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                                       i.

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                                TABLE OF CONTENTS
                                   (CONTINUED)

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         (h)      Descriptive Headings.............................    15

         (i)      Governing Law....................................    15

         (j)      Notices..........................................    15

         (k)      Termination......................................    17
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                                       ii.

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               AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

         THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"AGREEMENT") is made as of June 20, 2002 by and among ANADYS PHARMACEUTICALS,
INC., a Delaware corporation (the "COMPANY"), CARE CAPITAL, LLC ("CARE CAPITAL")
and all other purchasers of the Series C Convertible Preferred Stock, par value
$.01 per share (the "SERIES C PREFERRED STOCK"), of the Company pursuant to the
Series C Convertible Preferred Stock Purchase Agreement (the "PURCHASE
AGREEMENT") dated as of the date hereof (collectively with Care Capital, the
"SERIES C STOCKHOLDERS"), SGC Partners I, LLC, SG Cowen Ventures I, L.P.
(collectively "SGCP") and all other holders of the Company's Series B Preferred
Stock, par value $.01 per share (collectively with SGCP, the "SERIES B
STOCKHOLDERS"), Societe Financiere d'Innovation, Sofinov, Biomedicine, L.P.,
Aventis, S.A. and Bristol-Myers Squibb Pharma Company (collectively, the "SERIES
A-5 STOCKHOLDERS"), Shire Pharmaceuticals Group plc (the "SERIES A-4
STOCKHOLDER"), the holders of shares of the Company's Series A-3 Preferred
Stock, par value $.01 per share (the "SERIES A-3 STOCKHOLDERS"), the holders of
shares of the Series A-2 Preferred Stock, par value $.01 per share (the "SERIES
A-2 STOCKHOLDERS"), the holders of shares of the Series A-1 Preferred Stock, par
value $.01 per share (the "SERIES A-1 STOCKHOLDERS" and together with the Series
A-2 Stockholders, Series A-3 Stockholders, Series A-4 Stockholders and Series
A-5 Stockholders, the "SERIES A STOCKHOLDERS"), each as listed on SCHEDULE A
attached hereto, and each of the persons listed on SCHEDULE B attached hereto
(the "ASKLIPIOS STOCKHOLDERS," and collectively with the Series C Stockholders,
the Series B Stockholders and the Series A Stockholders, the "STOCKHOLDERS").

                                    RECITALS

         A.       In connection with the purchase of the shares of Preferred
Stock of the Company by the Series B Stockholders, the Company, the Series B
Stockholders, certain of the Series A Stockholders and the Asklipios
Stockholders entered into that certain Amended and Restated Registration Rights
Agreement, dated as of December 5, 2000 (the "DECEMBER 2000 REGISTRATION RIGHTS
AGREEMENT"), which December 2000 Registration Rights Agreement amended and
restated that certain Registration Rights Agreement dated as of May 22, 2000 by
and among the Company and certain stockholders of the Company (the "MAY 2000
REGISTRATION RIGHTS AGREEMENT").

         B.       The Company and the Series C Stockholders are parties to the
Purchase Agreement.

         C.       In order to induce the Series C Stockholders to enter into the
Purchase Agreement, the Company has agreed to provide the Series C Stockholders
certain registration rights as set forth herein.

         D.       The parties hereto desire to amend and restate the December
2000 Registration Rights Agreement as provided herein. Unless otherwise provided
in this Agreement, capitalized terms used herein shall have the meanings set
forth in Section 9 hereof.

                                       1.
<PAGE>

         E.       By executing and delivering this Agreement, the Company and
the Stockholders have approved the amendment, restatement and termination of (i)
the December 2000 Registration Rights Agreement in accordance with the
requirements set forth in Section 10(d) of the December 2000 Registration Rights
Agreement and (ii) Section 7 of that certain Series C Preferred Stock Purchase
Agreement, dated as of May 17, 1996 (together, the "PRIOR AGREEMENTS").

         NOW, THEREFORE, in consideration of the promises and covenants
contained in this Agreement and intending to be legally bound by the terms and
conditions of this Agreement, the parties hereto agree as follows:

         1.       DEMAND REGISTRATIONS.

                  (a)      REQUESTS FOR REGISTRATION. Subject to the provisions
of Sections 1(b) and 1(c) below, (i) at any time and from time to time after the
earlier of (a) the expiration of a holdback period (as provided for in Section 3
of this Agreement), if any, and (b) December 20, 2005 (the "SERIES B
STOCKHOLDER DEMAND PERIOD"), the holders of a majority of the then outstanding
Registrable Securities held by the Series B Stockholders may request
registration, (ii) at any time and from time to time after the earlier of (a)
the expiration of a holdback period (as provided for in Section 3 of this
Agreement), if any, and (b) December 20, 2005 (the "SERIES C STOCKHOLDER
DEMAND PERIOD"), the holders of a majority of the then outstanding Registrable
Securities held by the Series C Stockholders may request registration, whether
underwritten or otherwise, under the Securities Act of all or part of the
Registrable Securities held by (I) such Series B Stockholders, or (II) such
Series C Stockholders, as the case may be, in each case on Form S-1 or any
similar long-form registration statement (collectively, "LONG-FORM
REGISTRATIONS") or on Form S-2 or S-3 or any similar short-form registration
statement ("SHORT-FORM REGISTRATIONS"), if available. All registrations
requested pursuant to this Section 1(a) are referred to herein as "DEMAND
REGISTRATIONS". Each request for a Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered and the
anticipated per share price range for such offering. Within ten days after
receipt of any such request for a Long-Form Registration or Short-Form
Registration, the Company shall give written notice of such requested
registration to all other holders of Registrable Securities and shall include
(subject to the provisions of this Agreement) in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the receipt of the Company's
notice.

                  (b)      NUMBER OF DEMAND REGISTRATIONS.

                           (i)      The holders of a majority of the then
outstanding Registrable Securities held by the Series B Stockholders shall be
entitled to request one (1) Demand Registration with respect to Registrable
Securities held by such Series B Stockholders, in which the Company will pay all
Registration Expenses as set forth in Section 5 hereof; provided, that the
aggregate value of the securities to be offered pursuant to the Demand
Registration must be at least $10,000,000. A registration shall not count as the
permitted Demand Registration until it has become effective and unless the
requesting Series B Stockholders are able to register and sell all of the
Registrable Securities that such Series B Stockholders have requested to be
included in such registration.

                                       2.
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                           (ii)     The holders of a majority of the then
outstanding Registrable Securities held by the Series C Stockholders shall be
entitled to request two (2) Demand Registrations with respect to Registrable
Securities held by such Series C Stockholders, in which the Company will pay all
Registration Expenses as set forth in Section 5 hereof; provided, that the
aggregate value of the securities to be offered pursuant to the Demand
Registration must be at least $10,000,000. A registration shall not count as one
of the permitted Demand Registrations unless it has become effective and unless
the requesting Series C Stockholders are able to register and sell all of the
Registrable Securities that such Series C Stockholders have requested to be
included in such registration.

                  (c)      SHORT-FORM REGISTRATIONS.

                           (i)      Demand Registrations shall be Short-Form
Registrations whenever the Company is permitted to use any applicable short
form. After the Company has become subject to the reporting requirements of the
Exchange Act, the Company shall use its best efforts to make Short-Form
Registrations available for the sale of Registrable Securities.

                           (ii)     The holders of (a) a majority of the then
outstanding Registrable Securities held by the Series A-1 Stockholders, (b) a
majority of the then outstanding Registrable Securities held by the Series A-2
Stockholders, (c) a majority of the then outstanding Registrable Securities held
by the Series A-3 Stockholders, (d) a majority of the then outstanding
Registrable Securities held by the Series A-4 Stockholder, and (e) a majority of
the then outstanding Registrable Securities held by the Series A-5 Stockholders,
shall each be entitled to request two Short-Form Registrations with respect to
the Registrable Securities held by them in which the Company shall pay all
Registration Expenses; provided, that (x) the aggregate value of the securities
to be offered pursuant to such Short-Form Registration must be at least
$1,000,000 and (y) the Company qualifies to use a Form S-2 or S-3 or any similar
short-form registration statement.

                           (iii)    The holders of a majority of the then
outstanding Registrable Securities held by the Series A Stockholders shall be
entitled to request an unlimited number of Short-Form Registrations with respect
to the Registrable Securities held by them in which the Company shall pay all
Registration Expenses; provided, that (a) the aggregate value of the securities
to be offered pursuant to such Short-Form Registration must be at least
$1,000,000 and (b) the Company qualifies to use a Form S-2 or S-3 or any similar
short-form registration statement.

                           (iv)     In addition to the Demand Registration
provided pursuant to Section 1(b), the holders of a majority of the then
outstanding Registrable Securities held by the Series B Stockholders shall be
entitled to request an unlimited number of Short-Form Registrations with respect
to the Registrable Securities held by them in which the Company shall pay all
Registration Expenses; provided, that (a) the aggregate value of the securities
to be offered pursuant to such Short-Form Registration must be at least $500,000
and (b) the Company qualifies to use a Form S-2 or S-3 or any similar short-form
registration statement.

                           (v)      In addition to the Demand Registrations
provided pursuant to Section 1(b), the holders of a majority of the then
outstanding Registrable Securities held by the

                                       3.
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Series C Stockholders shall be entitled to request an unlimited number of
Short-Form Registrations with respect to the Registrable Securities held by them
in which the Company shall pay all Registration Expenses; provided, that (a) the
aggregate value of the securities to be offered pursuant to such Short-Form
Registration must be at least $500,000 and (b) the Company qualifies to use a
Form S-2 or S-3 or any similar short-form registration statement.

                  (d)      PRIORITY ON DEMAND REGISTRATIONS.

                           (i)      The Company shall not include in any Demand
Registration requested by a majority in interest of the then outstanding
Registrable Securities held by the Series B Stockholders during the Series B
Stockholder Demand Period (a "SERIES B DEMAND REGISTRATION") any securities that
are not Registrable Securities held by the Series B Stockholders without the
prior written consent of a majority in interest of the then outstanding
Registrable Securities held by the Series B Stockholders. If such a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder by the Series B Stockholders, other
securities requested to be included in such offering exceeds the number of
Registrable Securities and other securities, if any, which can be sold in an
orderly manner in such offering within a price range acceptable to a majority in
interest of the then-outstanding Registrable Securities held by the Series B
Stockholders, then, the number of shares to be included in such registration,
which in the opinion of such underwriters can be sold in an orderly manner
within the price range of such offering, shall be allocated first, pro rata
among the Series B Stockholders on the basis of the amount of Registrable
Securities owned by each such holder, second, pro rata among the Series C
Stockholders on the basis of the amount of Registrable Securities owned by each
such holder, third, pro rata among the Series A Stockholders and the Asklipios
Stockholders on the basis of the amount of Registrable Securities owned by each
such holder and fourth, pro rata among any stockholder of the Company (other
than a Stockholder) on the basis of the number of shares of Company capital
stock owned by such stockholder on an as-converted-to-Common Stock basis.

                           (ii)     The Company shall not include in any Demand
Registration requested by a majority in interest of the then outstanding
Registrable Securities held by the Series C Stockholders during the Series C
Stockholder Demand Period (a "SERIES C DEMAND REGISTRATION") any securities that
are not Registrable Securities held by the Series C Stockholders without the
prior written consent of a majority in interest of the then outstanding
Registrable Securities held by the Series C Stockholders. If such a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder by the Series C Stockholders, other
securities requested to be included in such offering exceeds the number of
Registrable Securities and other securities, if any, which can be sold in an
orderly manner in such offering within a price range acceptable to a majority in
interest of the then outstanding Registrable Securities held by the Series C
Stockholders, then, the number of shares to be included in such registration,
which in the opinion of such underwriters can be sold in an orderly manner
within the price range of such offering, shall be allocated first, pro rata
among the Series C Stockholders on the basis of the amount of Registrable
Securities owned by each such holder, second, pro rata among the Series B
Stockholders on the basis of the amount of Registrable Securities owned by each
such holder, third, pro rata among the Series A Stockholders and the

                                       4.
<PAGE>

Asklipios Stockholders on the basis of the amount of Registrable Securities
owned by each such holder and fourth, pro rata among any stockholder of the
Company (other than a Stockholder) on the basis of the number of shares of
Company capital stock owned by such stockholder on an as-converted-to-Common
Stock basis.

                           (iii)    Any Persons other than holders of
Registrable Securities who participate in Demand Registrations that are not at
the Company's expense must pay their share of the Registration Expenses as
provided in Section 5 hereof.

                  (e)      RESTRICTIONS ON DEMAND REGISTRATIONS. The Company
shall not be obligated to effect any Demand Registration (i) within 90 days
after the effective date of a Listing occurring after the First Listing, unless
(A) the Series B Stockholders or the Series C Stockholders, as the case may be,
requesting the Demand Registration hold more than 10% of the then outstanding
Registrable Securities, or (B) any Stockholders other than the Series B
Stockholders or the Series C Stockholders exercise any demand registration
rights granted by the Company to such holders, whereupon the Company shall
include in such registration the number of Registrable Securities requested to
be included (which in the opinion of the underwriters can be sold in an orderly
manner within the price range of such offering, if such offering is an
underwritten offering) pro rata between the Stockholders exercising such demand
registration rights on the basis of the amount of Registrable Securities owned
by each such holder, or (ii) if, at the time the Series B Stockholders or the
Series C Stockholders request such Demand Registration, (A) the Company has
during the prior 60 day period previously notified such Stockholder(s) in
writing that the Company has determined to register any of its securities on its
own behalf within the next 90 day period, (B) such Stockholder(s) have not
responded in writing to the Company within fourteen (14) days after receiving
such notice stating that such Stockholder(s) are requesting a Demand
Registration pursuant to the terms and conditions of this Agreement, and (C) the
Company has not abandoned its efforts to register its securities. In addition,
if, within 10 days after the Company's receipt of a request for a Series B
Demand Registration, the Company receives a request for a Series C Demand
Registration from the holders of a majority of the then outstanding Registrable
Securities held by the Series C Stockholders, the Company shall not effect such
Series B Demand Registration until the earlier to occur of (i) the date that is
ninety (90) days after the effective date of the Series C Demand Registration,
(ii) the abandonment of such Series C Demand Registration or (iii) the date that
is one hundred eighty (180) days after the date on which the request for a
Series C Demand Registration is received by the Company; provided, however, that
the foregoing limitations shall not apply to more than one (1) Series B Demand
Registration. The Company may postpone for up to 60 days the filing or the
effectiveness of a registration statement for a Demand Registration if the
Company's board of directors determines in its reasonable good faith judgment
that such Demand Registration would reasonably be expected to interfere with any
proposal or plan by the Company or any of its subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer, reorganization or other material
transaction; provided, that in such event, the holders of Registrable Securities
initially requesting such Demand Registration shall be entitled to withdraw such
request and, if such request is withdrawn, such Demand Registration shall not
count as one of the permitted Demand Registrations hereunder and the Company
shall pay all Registration Expenses in connection with such registration. The
Company may delay a Demand Registration hereunder only once in any twelve-month
period.

                                       5.
<PAGE>

                  (f)      SELECTION OF UNDERWRITERS. The holders of a majority
of the Registrable Securities initially requesting registration under Section 1
shall have the right to select the investment banker(s) and manager(s) to
administer the offering, provided that investment banker(s) and manager(s) are
nationally recognized; and provided, further that such investment banker(s) and
manager(s) are approved by the Company, which approval shall not be unreasonably
withheld.

                  (g)      OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request that
the Company register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of a majority in interest of the Series B Preferred Stock
and a majority in interest of the Series C Preferred Stock, unless such rights
granted to such Persons are subordinate to the rights granted to the Series B
Stockholders and Series C Stockholders.

         2.       PIGGYBACK REGISTRATIONS.

                  (a)      RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (including a Short-Form
Registration pursuant to Section 1(c) above but excluding (i) a Demand
Registration, (ii) any registration on Form S-8 or S-4 or any similar form, or
(iii) a registration the primary purpose of which is to register debt securities
(i.e., in connection with a so-called "EQUITY KICKER")) and the registration
form to be used may be used for the registration of Registrable Securities (a
"PIGGYBACK REGISTRATION"), the Company shall give prompt written notice (and in
any event within three business days after its receipt of notice of any exercise
of demand registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and shall
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 20 days
after the receipt of the Company's notice.

                  (b)      PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.

                  (c)      PRIORITY ON PRIMARY REGISTRATIONS. Subject to the
provisions of Section 2(a) above, if a Piggyback Registration is an underwritten
primary registration on behalf of the Company, the Company will include in such
registration all Registrable Securities requested to be included in such
registration; provided, that if the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number that can be sold in such offering
without adversely affecting the marketability of the offering, the Company shall
include in such registration (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Securities requested to be included by the
Series C Stockholders, allocated pro rata among the holders of such Registrable
Securities on the basis of the number of shares owned by each such holder, (iii)
third, the Registrable Securities requested to be included in such registration
by all other holders of Registrable Securities, allocated pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, and (iv) fourth, other securities requested to be
included in such registration.

                                       6.
<PAGE>

                  (d)      PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities (which registration is made pursuant to Section 1(b)
above or, if applicable, is consented to pursuant to Section 1(g) above), and
the managing underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number that can be sold in such offering without adversely affecting the
marketability of the offering, the Company shall include in such registration
(i) first, the securities requested to be included therein by the holders
requesting such registration, (ii) second, the Registrable Securities requested
to be included by the Series C Stockholders, allocated pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, (iii) third, the Registrable Securities requested to
be included in such registration by all other holders of Registrable Securities,
allocated pro rata among the holders of such Registrable Securities on the basis
of the number of shares owned by each such holder, and (iv) fourth, other
securities requested to be included in such registration.

                  (e)      SELECTION OF UNDERWRITERS. If any Piggyback
Registration is an underwritten offering, the selection of investment banker(s)
and manager(s) for the offering must be approved by (i) the Company and (ii) the
holders of a majority of the Registrable Securities included in such Piggyback
Registration, which approvals shall not be unreasonably withheld.

         3.       HOLDBACK AGREEMENTS. Each holder of Registrable Securities
shall not effect any public sale or distribution (including sales pursuant to
Rule 144) of (i) equity securities of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, during the seven days
prior to and the 180-day period beginning on the effective date of the First
Listing (except for sales of securities as part of such First Listing) or (ii)
Registrable Securities during the seven days prior to and the 90 day period
beginning on the effective date of any Listing by the Company on its own behalf
(other than the First Listing), unless the underwriters managing the registered
public offering otherwise agree.

         4.       REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:

                  (a)      prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and comment of such counsel);

                  (b)      notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement

                                       7.
<PAGE>

effective for a period of not less than 180 days and comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;

                  (c)      furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;

                  (d)      use its best efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);

                  (e)      notify each seller of such Registrable Securities on
a timely basis, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement (read in
conjunction with any documents incorporated by reference therein) contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading (following which the Company shall promptly
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading, with the time
required to prepare such supplement or amendment being added to the 180-day
period set forth in Section 4(b) above);

                  (f)      cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be quoted on the National Association of
Securities Dealers, Inc. (the "NASD") automated quotation system and, if quoted
on the NASD automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to
secure NASDAQ authorization for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such Registrable Securities with the
NASD;

                  (g)      provide a transfer agent and registrar for all such
Registrable Securities no later than the effective date of such registration
statement;

                                       8.
<PAGE>

                  (h)      enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including effecting a stock split or
a combination of shares);

                  (i)      make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;

                  (j)      otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

                  (k)      permit any holder of Registrable Securities which
holder, in its sole and exclusive judgment, might be deemed to be an underwriter
or a controlling person of the Company, to participate in the preparation of
such registration or comparable statement and to require the insertion therein
of material, furnished to the Company in writing, which in the reasonable
judgment of such holder and its counsel should be included;

                  (l)      in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any security included in such registration statement for sale
in any jurisdiction, the Company shall use its best efforts promptly to obtain
the withdrawal of such order (provided that the time required to obtain such
withdrawal shall be added to the 180-day period set forth in Section 4(b)
above);

                  (m)      use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the sellers thereof to consummate the disposition of such Registrable
Securities; and

                  (n)      obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute at least 10% of the securities
covered by such registration statement).

                                       9.
<PAGE>

         5.       REGISTRATION EXPENSES.

                  (a)      All expenses incident to the Company's performance of
or compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or "blue sky"
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, fees and disbursements of counsel for the Company, fees and
disbursements, not to exceed $25,000 in the aggregate in connection with any one
or a series of related registration statements, of one counsel selected by a
majority in interest of the sellers of Registrable Securities, and all
independent certified public accountants and other Persons retained by the
Company (all such expenses being herein called "REGISTRATION EXPENSES"), shall
be borne as provided in this Agreement, except that the Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation system.

                  (b)      The holders of Registrable Securities included in
each Demand Registration and each Piggyback Registration shall pay all
underwriting discounts and selling commissions applicable to the sale of their
securities and all fees and disbursements of their counsel.

                  (c)      To the extent Registration Expenses are not required
to be paid by the Company, each holder of securities included in any
registration hereunder shall pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of the
securities to be so registered.

         6.       INDEMNIFICATION.

                  (a)      The Company agrees to indemnify and hold harmless, to
the extent permitted by law, each holder of Registrable Securities, its officers
and directors or general and limited partners, members, managers and each Person
who controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities, joint or several, and expenses (as such
are incurred) caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus, preliminary prospectus,
offering circular or other document incident to such registration or any
amendment thereof or supplement thereto, any "blue sky" application or other
document executed by the Company specifically for that purpose or any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading or any violation by the
Company or its agents of the Securities Act or any rule or regulation
promulgated thereunder applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such regulation,
except insofar as the same are (i) incurred as a result of the use or delivery
of a prospectus by such holder subsequent to the holder's receipt of
notification pursuant to Section 4(e) and prior to the delivery to such holder
of the supplement or amendment referenced in said Section 4(e) or (ii) caused by
or contained in any information furnished in writing to the Company by such
holder expressly for use therein or by such holder's failure to deliver a copy
of

                                      10.
<PAGE>

the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished such holder with a sufficient number of
copies of the same. In connection with an underwritten offering, the Company
shall indemnify such underwriters, their officers and directors and each Person
who controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.

                  (b)      In connection with any registration statement in
which a holder of Registrable Securities is participating, each such holder
shall furnish to the Company in writing such information and affidavits as the
Company reasonably requests and expressly states are for use in connection with
any such registration statement or prospectus and, to the extent permitted by
law, shall indemnify the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses (as such are incurred)
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
such holder; provided that the obligation to indemnify shall be individual, not
joint and several, for each holder and shall be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement.

                  (c)      Any Person entitled to indemnification hereunder
shall (i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure to give
prompt notice shall not impair any Person's right to indemnification hereunder
to the extent such failure has not materially prejudiced the indemnifying party)
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party without its consent
(but such consent shall not be unreasonably withheld). An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.

                  (d)      The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director, general partner,
limited partner, member, manager or controlling Person of such indemnified party
and shall survive the transfer of securities.

                  (e)      CONTRIBUTION. If the indemnification provided for in
this Section 6 shall for any reason be held by a court to be unavailable to an
indemnified party under paragraphs (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof,

                                      11.
<PAGE>

then, in lieu of the amount paid or payable under paragraph (a) or (b) hereof,
the indemnified party and the indemnifying party under paragraph (a) or (b)
hereof shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating the same), (i) in such proportion as is appropriate to reflect the
relative fault of the Company and the prospective sellers of Registrable
Securities covered by such registration statement that resulted in such loss,
claim, damage or liability, or action in respect thereof, with respect to the
statements or omissions which resulted in such loss, claim, damage, liability,
or action in respect thereof, as well as any other relevant equitable
consideration, or (ii) if the allocation provided by such clause (i) above is
not permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such prospective
sellers from the offering of such securities covered by such registration
statement. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation; provided,
however, that the contribution of any seller under this Section 6(e) shall be
limited to the amount of net proceeds received by such seller from the offering
giving rise to such contribution. Such prospective Sellers' obligations to
contribute as provided in this paragraph (e) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement, and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld.

         7.       RULE 144. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, except as
provided in paragraph (c) below, at all times after ninety (90) days after any
registration statement covering a public offering of securities of the Company
under the Securities Act shall have become effective, the Company agrees to:

                  (a)      Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act (or any
successor rule);

                  (b)      Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and

                  (c)      Furnish to each holder of Registrable Securities
forthwith upon request a written statement by the Company as to its compliance
with the reporting requirements of such Rule 144 (or any successor rule) and, at
any time after it has become subject to such reporting requirements, of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing such holder to sell any
Registrable Securities without registration.

         8.       PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or

                                      12.
<PAGE>

Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements; provided, that, no holder of Registrable Securities included in
any underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters (other than representations and
warranties regarding such holder and such holder's intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in Section 6
hereof.

         9.       DEFINITIONS.

         "COMMISSION" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "FIRST LISTING" means the effective date of the first Listing.

         "LISTING" means the admission of the Company's common stock, par value
$.01 per share (the "COMMON STOCK"), on any national stock exchange or the sale
of the Common Stock in an underwritten public offering registered under the
Securities Act.

         "PREFERRED STOCKHOLDERS" means the Series A Stockholders, Series B
Stockholders and Series C Stockholders.

         "PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.

         "REGISTRABLE SECURITIES" means (i) any shares of Common Stock issued or
issuable to the Preferred Stockholders upon conversion of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, or otherwise
acquired by, or issued or issuable to, the Preferred Stockholders on or after
the date hereof, it being understood that none of the Preferred Stockholders
shall be obligated to convert their shares into shares of Common Stock in order
to make a Demand Registration or otherwise avail themselves of the rights
granted pursuant to this Agreement, (ii) any shares of Common Stock issued to
the Asklipios Stockholders, (iii) any capital stock of the Company acquired by
the Preferred Stockholders or the Asklipios Stockholders on or after the date
hereof, and (iv) any shares of capital stock of the Company issued or issuable
with respect to the securities referred to in clauses (i), (ii) or (iii) above
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation, or other reorganization. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been distributed to the public pursuant to
an offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force). For purposes of this Agreement, a
Person shall be deemed to be a holder of Registrable Securities, and the
Registrable Securities shall be deemed to be in existence, whenever such Person
has the right to acquire directly or indirectly such Registrable Securities
(upon conversion or exercise in connection with a transfer of securities or
otherwise, but

                                      13.
<PAGE>

disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected, and such Person
shall be entitled to exercise the rights of a holder of Registrable Securities
hereunder.

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

         Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Purchase Agreement.

         10.      MISCELLANEOUS.

                  (a)      NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
adverse or superior to the rights granted to the Series A-4 Stockholders, the
Series A-5 Stockholders, the Series B Stockholders and the Series C Stockholders
pursuant to the terms and conditions of this Agreement.

                  (b)      ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The
Company shall not take any action, or permit any change to occur, with respect
to its securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).

                  (c)      REMEDIES. Any Person having rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may in its
sole discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.

                  (d)      AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of (i) the Company, (ii) Stockholders who hold at least
75% of the Registrable Securities underlying the Company's Series B Preferred
Stock, (iii) Stockholders who hold at least 75% of the Registrable Securities
underlying the Company's Series C Preferred Stock, (iv) Stockholders who hold at
least a majority of the Registrable Securities underlying the Company's Series
A-1 Preferred Stock, (v) Stockholders who hold at least a majority of the
Registrable Securities underlying the Company's Series A-2 Preferred Stock, (vi)
Stockholders who hold at least a majority of the Registrable Securities
underlying the Company's Series A-3 Preferred Stock, (vii) Stockholders who hold
at least a majority of the Registrable Securities underlying the Company's
Series A-4 Preferred Stock, (viii) Stockholders who hold at least a majority of
the Registrable Securities underlying the Company's Series A-5 Preferred Stock,
and (ix) the Series A Stockholders and the Asklipios Stockholders who hold at
least 50% of the Registrable Securities held by all such Series A Stockholders
and Asklipios Stockholders, taken as a group.

                                      14.
<PAGE>

                  (e)      SECOND CLOSING BUYERS. Notwithstanding anything to
the contrary contained herein, if the Company shall issue additional shares of
its Series C Preferred Stock pursuant to the Purchase Agreement (as such may be
amended from time to time in accordance with the provisions thereof), any
purchaser of such shares of Series C Preferred Stock may become a party to this
Agreement by executing and delivering an additional counterpart signature page
to this Agreement and shall be deemed a "Series C Stockholder" hereunder.

                  (f)      ENTIRE AGREEMENT. Except as otherwise expressly set
forth herein, this Agreement embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way. Without limiting the generality of the foregoing, the
Prior Agreements are hereby amended in their entirety and restated herein. Such
amendments and restatements shall be effective upon the execution of this
Agreement by (i) the Company, (ii) the Series A-4 Stockholder, (iii) Series A-5
Stockholders who hold at least 66% of the Registrable Securities held by all
Series A-5 Stockholders, (iv) Series B Stockholders who hold at least 75% of the
Registrable Securities held by all Series B Stockholders and (v) Series A-1
Stockholders, Series A-2 Stockholders, Series A-3 Stockholders and Asklipios
Stockholders who hold at least 50% of the Registrable Securities held by all
such Series A-1 Stockholders, Series A-2 Stockholders, Series A-3 Stockholders
and Asklipios Stockholders, taken as a group. Upon such execution, all
provisions of, rights granted and covenants made in the Prior Agreements are
hereby waived, released and superseded in their entirety and shall have no
further force or effect.

                  (g)      SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors (including successors created
by amalgamation, merger, or otherwise) and assigns of the parties hereto whether
so expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities. Notwithstanding
anything to the contrary contained herein, no holder of Registrable Securities
may transfer or assign any rights granted to such holder under the terms and
conditions of this Agreement unless such holder transfers or assigns at least
25% of the Registrable Securities held by such holder.

                  (h)      SEVERABILITY. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.

                  (i)      COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counter-parts taken together
shall constitute one and the same Agreement.

                  (j)      DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.

                                      15.
<PAGE>

                  (k)      GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the law of the State of New York without giving effect to the choice
of law or conflict of laws principles thereof.

                  (l)      NOTICES. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid; provided,
however, that certified or registered mail shall not be used to effectuate
delivery of any such notices to addresses outside of the United States. Such
notices, demands and other communications shall be sent to the addresses
indicated below:

         IF TO THE COMPANY:

                  ANADYS PHARMACEUTICALS, INC.
                  9050 Camino Santa Fe
                  San Diego, CA  92121
                  Attention: President
                  Telecopy No.: (858) 527-1540

         WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE COMPANY) TO:

                  COOLEY GODWARD LLP
                  4401 Eastgate Mall
                  San Diego, CA  92121-9109
                  Attention: Thomas A. Coll
                  Telecopy No.: (858) 550-6420

         IF TO THE SERIES A-1 STOCKHOLDERS, SERIES A-2 STOCKHOLDERS OR SERIES
         A-3 STOCKHOLDERS:

                  To their last known addresses contained in the books and
records of the Company.

                                      16.
<PAGE>

         WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO SUCH STOCKHOLDERS)
         TO:

                  MCDERMOTT, WILL & EMERY
                  28 State Street
                  Boston, MA 02109-1775
                  Attention: Mark B. Stein
                  Telecopy No. (617) 535-3800

         IF TO THE SERIES A-4 STOCKHOLDER:

                  SHIRE PHARMACEUTICALS GROUP PLC
                  275 Armand-Frappier Boulevard
                  Laval, Quebec  H7V4A7
                  Canada
                  Attention: Vice President, Legal Affairs
                  Telecopy No. (514) 978-7755

         WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE SERIES A-4
         STOCKHOLDER) TO:

                  KIRKLAND & ELLIS
                  153 East 53rd Street
                  New York,  NY  10022
                  Attention: Michael Kalish, Esq.
                  Telecopy No.: (212) 446-4900

         IF TO THE SERIES A-5 STOCKHOLDERS:

         All communications with copies shall be sent as specified in the
Purchase Agreement between the Company and the Series A-5 Stockholders dated as
of December 15, 1998.

         IF TO THE SERIES B STOCKHOLDERS:

                  SGC PARTNERS I, LLC
                  1221 Avenue of the Americas
                  New York, NY 10020
                  Attention: Justin Hall-Tipping, Managing Director
                  Telecopy No. (212) 278-5454

         WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE SERIES B
         STOCKHOLDERS) TO:

                  MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
                  The Chrysler Center
                  666 Third Avenue
                  New York, NY  10017
                  Attention: Richard R. Kelly, Esq.
                  Telecopy No.: (212) 983-3115

                                      17.
<PAGE>

         IF TO THE SERIES C STOCKHOLDERS:

                  CARE CAPITAL, LLC
                  [ADDRESS]
                  [TELECOPY NO.]

         WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE SERIES C
         STOCKHOLDERS) TO:

                  MORGAN LEWIS
                  502 Carnegie Center
                  Princeton, New Jersey 08540
                  Attention: Steven M. Cohen
                  Telecopy No.: (609) 919-6639

         IF TO ALL OTHER STOCKHOLDERS:

         All communications shall be sent to the address for each other
Stockholder listed at the offices of the Company, or to such other address or to
the attention of such other person as the recipient party has specified by prior
written notice to the sending party. All such communications shall be sent to
all parties to this Agreement other than the Series A-4 Stockholder, the Series
A-5 Stockholders, the Series B Stockholders and the Series C Stockholders to
their last known addresses contained in the books and records of the Company.

                  (m)      TERMINATION. The terms and conditions of this
Agreement shall terminate and be of no further force and effect upon the third
anniversary of the effective date of the First Listing.

                                      18.
<PAGE>

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

                                       ANADYS PHARMACEUTICALS, INC.

                                       By:______________________________________
                                              Kleanthis G. Xanthopoulos, Ph.D.
                                           President and Chief Executive Officer

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

CW VENTURES II, L.P.,                     ACCEL IV L.P.

By: CW Partners III, L.P.,                By: Accel IV Associates, L.P.,
    Its General Partner                       Its General Partner

By:___________________________________    By:___________________________________

Name:_________________________________    Name:_________________________________
             General Partner                            General Partner

ACCEL INVESTORS `93 L.P.                  ACCEL JAPAN L.P.

                                          By: Accel Japan Associates, L.P.,
By:___________________________________        Its General Partner

Name:_________________________________
             General Partner              By:___________________________________

                                          Name:_________________________________
                                                        General Partner

ACCEL KEIRETSU L.P.                       ELLMORE C. PATTERSON PARTNERS

By: Accel Partners & Co., Inc.,
    Its General Partner                   By:___________________________________

                                          Name:_________________________________
By:___________________________________                  General Partner

Name:_________________________________    ATLAS VENTURE FUND II, L.P.

Title:________________________________    By: Atlas Venture Associates II, L.P.,
                                              Its General Partner
PROSPER PARTNERS

                                          By:___________________________________
By:___________________________________
                                          Name:_________________________________
Name:_________________________________                  General Partner

Title:________________________________

                    [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]
<PAGE>

NEW ENTERPRISE ASSOCIATES 5               ROVENT II LIMITED PARTNERSHIP

                                          By: Advent International Limited
                                              Partnership, General Partner
By:___________________________________
                                          By: Advent International Corporation,
Name:_________________________________        General Partner
             General Partner

VENROCK ASSOCIATES II, L.P.               By:___________________________________
                                                        Vice President

By:___________________________________    ADVENT INTERNATIONAL INVESTORS II
                                          LIMITED PARTNERSHIP

By:___________________________________    By: Advent International Corporation,
                                              General Partner
Name:_________________________________
             General Partner
                                          By:___________________________________
VENROCK ASSOCIATES                                      Vice President

By:___________________________________

Name:_________________________________
             General Partner

                                          GOLDEN GATE DEVELOPMENT AND
VENROCK ASSOCIATES I, L.P.                INVESTMENT LIMITED PARTNERSHIP

                                          By: Advent International Limited
By:___________________________________        Partnership, General Partner

Name:_________________________________    By: Advent International
             General Partner                  Corporation,General Partner

VENROCK ASSOCIATES L.P.                   By:___________________________________
                                                        Vice President
By:___________________________________

Name:_________________________________
             General Partner

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

ADVENT PERFORMANCE MATERIALS              LOMBARD ODIER & CIE
LIMITED PARTNERSHIP

By: Advent International Limited          By:___________________________________
    Partnership, General Partner
                                          Name:_________________________________

By: Advent International Corporation,
    General Partner                       Title:________________________________

By:___________________________________
             Vice President
                                          ______________________________________
                                          Thomas A. Bologna
ADVENT PARTNERS LIMITED PARTNERSHIP

By: Advent International Corporation,
    General Partner

By:___________________________________
             Vice President

______________________________________
Bernard Mach

SHIRE PHARMACEUTICALS GROUP PLC, AS
SUCCESSOR IN INTEREST TO BIOCHEM
PHARMA, INC.

By:___________________________________

Name:_________________________________

Title:________________________________

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

SCRIPT PARTNERS LIMITED PARTNERSHIP

By:___________________________________

Name:_________________________________

Title:________________________________

CDP CAPITAL TECHNOLOGY VENTURES, AS
SUCCESSOR IN INTEREST TO SOCIETE FINANCIERE
D'INNOVATION, SOFINOV

By:___________________________________

Name:_________________________________

Title:________________________________

BIOMEDICINE, L.P.

By: INTERNATIONAL BM BIOMEDICINE
    HOLDINGS (CAYMAN) LTD.,
    its General Partner

By:___________________________________

Name: Dr. Gaudenz I. Staehelin

Title: Chairmen

By:___________________________________

Name: Philip J. Suttcliffe

Title: Director

By:___________________________________

Name: Julie Arnall

Title: Director

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

AVENTIS, S.A.

By:___________________________________________

Name:_________________________________________

Title:________________________________________

______________________________________________
K. G. Xanthopoulos, Trustee of the K.G.
Xanthopoulos Trust, established January 30,
2002, as successor in interest in Kleanthis G.
Xanthopoulos

______________________________________________
Spyros Artavanis-Tsakonas

______________________________________________
Charles Cohen

______________________________________________
Stelios Papadopoulos

______________________________________________
Carrolee Barlow

______________________________________________
Kathleen Wiltsey

______________________________________________
Peer Bork

DUPONT PHARMA

By:___________________________________________

Name:_________________________________________

Title:________________________________________

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

______________________________________
K.C. Nicolaou

SGC PARTNERS I LLC

By: SG Merchant Banking Fund L.P.
    its managing member

By: SG Capital Partners L.L.C.
    its general partner

By:___________________________________

Name:_________________________________

Title:________________________________

SG COWEN VENTURES I, L.P.

By:___________________________________

Name:_________________________________

Title:________________________________

PACIFIC RIM LIFE SCIENCE NO. 1
INVESTMENT PARTNERSHIP

By:___________________________________

By:___________________________________

Name:_________________________________

Title:________________________________

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

PACIFIC RIM LIFE SCIENCE NO. 2
INVESTMENT PARTNERSHIP

By:___________________________________

By:___________________________________

Name:_________________________________

Title:________________________________

PACIFIC RIM LIFE SCIENCE NO. 3
INVESTMENT PARTNERSHIP

By:___________________________________

By:___________________________________

Name:_________________________________

Title:________________________________

NORTHERN STREAM CAPITAL, LLC

By:___________________________________

By:___________________________________

Name:_________________________________

Title:________________________________

______________________________________
Devron Averett

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

______________________________________
W. Neil Fox

______________________________________
Ronald W. Jawor (with Irmgard Jawor,
as JTWROS)

______________________________________
Irmgard Jawor (with Ronald W. Jawor,
as JTWROS)

______________________________________
Neil J. Sandler

LYNWOOD CORPORATION

By:___________________________________

Name:_________________________________

Title:________________________________

LANDESKREDITBANK                          PRISMA INVEST LTD.
BADEN-WUERTTEMBER-FODERBANK

By:___________________________________    By:___________________________________

Name:_________________________________    Name:_________________________________

Title:________________________________    Title:________________________________

______________________________________
Peter Reikes

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

CARE CAPITAL INVESTMENTS II, LP           ATLAS VENTURE FUND II, L.P.

By:___________________________________    By:___________________________________

Name:_________________________________    Name:_________________________________

Title:________________________________    Title:________________________________

HBM BIOVENTURES (CAYMAN) LTD.

By:___________________________________

Name: John Arnold

Title: Chairman and Managing Director

                                          FCPR SGAM BIOTECHNOLOGY FUND

VENROCK ASSOCIATES                        By: By SG Asset Management
                                              its management Company

By:___________________________________    By:___________________________________

Name:_________________________________    Name: Jean Grimaldi

Title:________________________________    Title: Head of Private Equity

By:___________________________________    By:___________________________________

Name:_________________________________    Name:_________________________________

Title:________________________________    Title:________________________________

______________________________________
Stelios Papadopoulos

______________________________________
Michael Kamdar

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

______________________________________
Rodney Young

______________________________________
Charles Mather

______________________________________
Declan Quirke

CHORY WORLAND FAMILY TRUST OF 2001

By:___________________________________

Name: Stephen T. Worland

Title: Co-Trustee

______________________________________
Mark Secrest

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

<PAGE>

                                   SCHEDULE A

CW VENTURES II, L.P.
ACCEL IV L.P.
ACCEL INVESTORS `93 L.P.
ACCEL JAPAN L.P.
ACCEL KEIRETSU L.P.
ELLMORE C. PATTERSON PARTNERS
PROSPER PARTNERS
ATLAS VENTURE FUND II, L.P.
NEW ENTERPRISE ASSOCIATES 5
VENROCK ASSOCIATES
VENROCK ASSOCIATES II, L.P.
ROVENT II LIMITED PARTNERSHIP
GOLDEN GATE DEVELOPMENT AND INVESTMENT LIMITED PARTNERSHIP
ADVENT INTERNATIONAL INVESTORS II LIMITED PARTNERSHIP
ADVENT PERFORMANCE MATERIALS LIMITED PARTNERSHIP
ADVENT PARTNERS LIMITED PARTNERSHIP
BERNARD MACH
LOMBARD ODIER & CIE
SCRIPT PARTNERS LIMITED PARTNERSHIP
THOMAS A. BOLOGNA
CARE CAPITAL INVESTMENTS II, L.P
BIOMEDICINE L.P.
HBM BIOVENTURES CAYMAN LTD
LYNWOOD CORPORATION
SGC PARTNERS I, LLC
SG ASSET MANAGEMENT
STELIOS PAPADOPOULOS
PETER REIKES
MICHAEL KAMDAR
CHORY WORLAND FAMILY TRUST OF 2001
RODNEY YOUNG
DECLAN QUIRKE
CHARLES MATHER
MARK SECREST
LANDESKREDITBANK BADEN-WUERTTEMBER-FODERBANK
PRISMA INVEST LTD.

<PAGE>

                                   SCHEDULE B

K. G. XANTHOPOULOS, TRUSTEE OF THE K.G. XANTHOPOULOS TRUST,
ESTABLISHED JANUARY 30, 2002
SPYROS ARTAVANIS-TSAKONAS
CHARLES COHEN
STELIOS PAPADOPOULOS
K.C. NICOLAOU
CARROLEE BARLOW
KATHLEEN WILTSEY
PEER BORK<PAGE>

                                                                   EXHIBIT 10.1

                   AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

           STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -.GROSS
                (DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)

1.   BASIC PROVISIONS ("BASIC PROVISIONS")

         1.1      PARTIES: This Lease ("Lease"), dated for reference purposes
only November 3, 2000, is made by and between Campson Corporation, a California
corporation ("Lessor") and Anadys Pharmaceuticals, Inc., a Delaware corporation
("Lessee"), (collectively the "Parties," or individually a "Party").

         1.2      PREMISES: That certain real property, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
and commonly known as 9050 Camino Santa Fe, San Diego, California located in the
County of San Diego, State of California and generally described as (describe
briefly the nature of the property and, if applicable, the "Project", if the
property is located within a Project) See Addendum ("Premises"). (See also
Paragraph 3)

         1.3      TERM: See Addendum years and _________ months ("Original
Term") commencing See Addendum ("Commencement Date") and ending See Addendum
("Expiration Date"). (See also Paragraph 3)

         1.4      EARLY POSSESSION: N / A ("Early Possession Date") (See also
Paragraphs 3.2 and 3.3)

         1.5      BASE RENT: $ See Addendum per month ("Base Rent"), payable on
the 1st day of each month commencing See Addendum (See also Paragraph 4)

[X] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted and/or for common area maintenance charge

         1.6      BASE RENT PAID UPON EXECUTION: $ See Addendum as Base Rent for
the period See Addendum

         1.7      SECURITY DEPOSIT: $ See Addendum ("Security Deposit"). (See
also Paragraph 5)

         1.8      AGREED USE: See Addendum (See also Paragraph 6)

         1.9      INSURING PARTY. Lessor is the "Insuring Party"________________
_________________________________________________________ (See also Paragraph 8)

         1.10     REAL ESTATE BROKERS:

                  (a) REPRESENTATION: The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist in it
transaction (check applicable boxes):

[X] Business Real Estate Brokerage represents Lessor exclusively ("Lessor's
Broker")

[X] C B Richard Ellis represents Lessee exclusively ("Lessee's Broker"); or

[ ] _________________________represents both Lessor and Lessee ("Dual Agency'").

                  (b) PAYMENT TO BROKERS: See Addendum

         1.11     GUARANTOR. The obligations of the Lessee under this Lease are
to be guaranteed by N/A ("Guarantor").

         1.12     ADDENDA AND EXHIBITS. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 1.2( a) through 5 4 and Exhibits 1 through 3,
all of which constitute a part of this Lease.

2.       PREMISES.

         2.1      LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in the Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual sire is more or less.

         2.2      CONDITION. Lessor shall deliver the Premises broom clean and
free of debris on the Commencement Date ("Start Date"), and warrants that the
existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating
and air conditioning systems ("HVAC"), loading doors, if any, and all other such
elements of the building, In the Premises, other than those constructed by
Lessee, shall be in good operating condition on said date and that the surface
and structural elements of the roof, bearing walls and foundation of any
buildings on the Premises (the "Building") shall be free of material defects. If
a non-compliance with said warranty exists as of the Start Date, Lessor shall,
except as otherwise provided in this Lease, promptly after receipt of written
notice from Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify same at Lessor's expense.

         2.3      COMPLIANCE. Lessor warrants that the improvements on the
Premises comply with all applicable laws, covenants or restrictions of record,
building codes, regulations and ordinances ("Applicable Requirements") in
effect. Said warranty does not apply to the use to which Lessee will put the
Premises or to any Alterations or Utility Installations (as defined in Paragraph
7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's intended use,
and acknowledges that past uses of the Premises may no longer be allowed. If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within six (6) months following the Start
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. If the Applicable Requirements are hereafter
changed (as opposed to being in existence at the Start Date, which is addressed
in Paragraph 6.2(e) below) so as to require during the term of this Lease the
construction of an addition to or an alteration of the Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("Capital Expenditure"), Lessor and Lessee shall allocate the
cost of such work as follows: *at the time each such improvement was
constructed.

                  (a) Subject to Paragraph 2.3(c) below, if such Capital
Expenditures are required as a result of the specific and unique use of the
Premises by Lessee as compared with uses by tenants in general, Lessee shall be
fully responsible for the cost thereof, provided, however that the cost thereof
exceeds two (2) months' Base Rent, Lessee may instead terminate this Lease
unless Lessor notifies Lessee, in writing, within ten (10) days after receipt of
Lessee's termination notice that Lessor has elected to pay the difference
between the actual cost thereof and the amount equal to two (2) months' Base
Rent. If Lessee elects termination, Lessee shall immediately cease the use of
the Premises which requires such Capital Expenditure and deliver to Lessor
written notice

                                       1.
<PAGE>

specifying a termination date at least ninety (90) days thereafter. Such
termination date shall, however, in no event be earlier than last day that
Lessee could legally utilize the Premises without commencing such Capital
Expenditure.

                  (b) If such Capital Expenditure is not the result of the
specific and unique use of the Premises by Lessee (such as, governmentally
mandated seismic modifications), then Lessor shall pay for such costs.

                  (c) Notwithstanding the above, the provisions concerning
Capital Expenditures are intended to apply only to non-voluntary, unexpected,
and new Applicable Requirements. If the Capital Expenditures are instead
triggered by Lessee as a result of an actual or proposed change in use, change
in intensity of use, or modification to the Premises then, and in that event,
Lessee shall be fully responsible for the cost thereof, and Lessee shall not
have any right to terminate this lease.

3.       TERM.

         3.1      TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.

         3.2      EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
shall, however, be in effect during such period. Any such early possession shall
not affect the Expiration Date.

         3.3      DELAY IN POSSESSION. Lessor agrees to use its best
commercially reasonable efforts to deliver possession of the Premises to Lessee
by the Commencement Date.

         3.4      LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.

4.       RENT.

         4.1.     RENT DEFINED. All monetary obligations of Lessee to Lessor
under the terms of this Lease (except for the Security Deposit) are deemed to be
rent ("Rent").

         4.2      PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. Rent for any period during the term hereof which is for less than one (1)
full calendar month shall be prorated based upon the actual number of days of
said month. Payment of Rent shall be made to Lessor at its address stated herein
or to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.

5.       SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. Lessor shall not be required
to keep the Security Deposit separate from its general accounts. Within fourteen
(14) days after the expiration or termination of this Lease, if Lessor elects to
apply the Security Deposit only to unpaid Rent, and otherwise within thirty (30)
days after the Premises have been vacated pursuant to Paragraph 7.4(c) below,
Lessor shall return that portion of the Security Deposit not used or applied by
Lessor. No part of the Security Deposit shall be considered to be held in trust,
to bear interest or to be prepayment for any monies to be paid by Lessee under
this Lease.

6.       USE.

         6.1      USE. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which no
shall include an explanation of Lessor's objections; to the change in use.

         6.2      HAZARDOUS SUBSTANCES.

                  (a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, or waste
whose presence, use, manufacture, disposal, transportation, or release, either
by itself or in combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the Installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary a customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use up receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration termination) of protective modifications
(such as concrete encasements) and/or Increasing the Security Deposit.

                  (b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises, other than as previously consented to by Lessor,
Lessee shall immediately give written notice of such fact to Lessor, and provide
Lessor with a copy of any report, notice, claim or other documentation which it
has concerning the presence of such Hazardous Substance.

                                       2.
<PAGE>

                  (c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought, onto the Premises during the term of this Lease, by or for
Lessee, or any third party.

                  (d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and attorney's and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, or any third party (provided, however, that Lessee shall have no
liability under this Lease with respect to underground migration of any
Hazardous Substance under the Premises from adjacent properties). Lessee's
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. No termination, cancellation or release agreement entered Into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so agreed by Lessor In
writing at the time of such agreement.

                  (e) LESSOR INDEMNIFICATION. Lessor and its successors and
assigns shall indemnify, defend, reimburse and hold Lessee, its employees and
lenders, harmless from and against any and all environmental damages, including
the cost of remediation, which existed as a result of Hazardous Substances on
the Premises prior to the Start Date or which are caused by the gross negligence
or willful misconduct of Lessor, its agents or employees. Lessor's obligations,
as and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration arid/or
abatement, and shall survive the expiration or termination of this Lease.

                  (f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
alterations) of the Premises, in which event Lessee shall be responsible for
such payment. Lessee shall cooperate fully in any such activities at the request
of Lessor, including allowing Lessor and Lessor's agents to have reasonable
access to the Premises at reasonable times in order to carry out Lessor's
investigative and remedial responsibilities.

                  (g) LESSOR TERMINATION OPTION. If a Hazardous Substance
Condition occurs during the term of this Lease, unless Lessee is legally
responsible therefor (in which case Lessee shall make the investigation and
remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to Les-sot's rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee, within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the date of such notice. In the event Lessor elects to
give a termination notice, Lessee may, within ten (10) days thereafter, give
written notice to Lessor of Lessee's commitment to pay the amount by which the
cost of the remediation of such Hazardous Substance Condition exceeds an amount
equal to twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater. Lessee shall provide Lessor with said funds or satisfactory assurance
thereof within thirty (30) days following such commitment. In such event, this
Lease shall continue in full force and effect, and Lessor shall proceed to make
such remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide then required funds
or assurance thereof within the time provided, this Lease shall terminate as of
the date specified in Lessor's notice of termination.

         6.3      LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified) by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.

         6.4      INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as
defined in Paragraph 30 below) and consultants shall have the right to enter
into Premises at any time, in the case of an emergency, and otherwise at
reasonable times*, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease. The cost of any such
inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a contamination is found to exist or be imminent, or the
inspection is requested or ordered by a governmental authority. In such case,
Lessee shall upon request reimburse Lessor for the cost of such inspections, so
long as such inspection is reasonably related to the violation or contamination.

         *on reasonable advance notice

7.       MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.

         7.1      LESSEE'S OBLIGATIONS See Addendum

                  (a) IN GENERAL. *See Addendum

         7.3      UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.

                  (a) DEFINITIONS; CONSENT REQUIRED. The term "Utility
Installations" refers to all floor and window coverings, air lines, power
panels, electrical distribution, security and fire protection systems and signs,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing
in or on the Premises. The term "Trade (Fixtures" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the Premises.
The term "Alterations" shall mean any modification of the improvements, other
than Utility Installations or Trade Fixtures, whether by addition or deletion.
"Lessee Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed $50,000 in
the aggregate or $10,000 in any one year.

                  (b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation.

                                       3.
<PAGE>

                  (c) INDEMNIFICATION. Lessee shall pay, when due, all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Promises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend arid protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. If Lessor elects to participate In any such action, Lessee shall pay
Lessor's attorneys' fees and costs.

         7.4      OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.

                  (a) OWNERSHIP. Subject to Lessor's right to require removal or
elect ownership as hereinafter provided, all Alterations and Utility
Installations made by Lessee shall be the property of Lessee, but considered a
part of the Premises. Lessor may, at any time, elect in writing to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises.

                  (b) REMOVAL. By delivery to Lessee of written notice from
Lessor not earlier than ninety (90) and not later than thirty (30) days prior to
the end of the term of this Lease, Lessor may require that any or all Lessee
Owned Alterations or Utility Installations be removed by the expiration or
termination of this Lease. Lessor may require the removal at any time of all or
any part of any Lesson Owned Alterations or Utility Installations made without
the required consent. See Addendum.

                  (c) SURRENDER/RESTORATION. Lessee shall surrender the Premises
by the Expiration Date or any earlier termination date, with all of the
improvements*parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Lessee shall repair
any damage occasioned by the installation, maintenance or removal of Trade
Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings,
and equipment as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate
the Premises pursuant to this Paragraph 7.4(c) without the express written
consent of Lessor shall constitute a holdover under the provisions of Paragraph
26 below.

8.       INSURANCE; INDEMNITY. *required to be surrendered hereunder

         8.1      PAYMENT OF PREMIUM INCREASES.

         8.2      LIABILITY INSURANCE.

                  (a) CARRIED BY LESSEE. Lessee shall obtain and (keep in force
a Commercial General Liability Policy of Insurance protecting Les; and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit cover, in an amount not less than $2,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement" Z contain the "Amendment of the Pollution Exclusion Endorsement"
for damage caused by heat, smoke or fumes from a hostile fire. 1 Policy shall
not contain any infra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurer shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be prim; to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.

                  (b) CARRIED BY LESSOR. Lessor shall maintain liability
insurance as described in Paragraph 8.2(a), In addition to, and not in lieu the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.

         8.3      PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.

                  (a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force a policy or policies in the name of Lessor, w loss payable to
Lessor, any ground lessor, and to any Lender(s) insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lenders, but no event more than the commercially reasonable and
available! insurable value thereof. If Lessor is the Insuring Party, however,
Lessee Own Alterations and Utility Installations, Trade Fixtures, and Lessee's
personal property shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such policy
or policies shall insure against all risks of direct physical to or damage
(except the perils of flood and/or earthquake unless required by a Lender or
included in the Base Premium), including coverage I debris removal and the
enforcement of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of al portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
Inflation guard protection causing an increase in the annual property Insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located. See Addendum

                  (b) RENTAL VALUE. The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor, with loss payable Lessor and
any Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminate by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs replacement of the Premises, to provide for
one full year's loss of Rent from the dale of any such loss. Said Insurance
shall contain an agree valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Re otherwise payable by Lessee, for the next twelve (12) month period.

                  (c) ADJACENT PREMISES.

         8.4      LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.

                  (a) PROPERTY DAMAGE. Lessee shall obtain and maintain
Insurance coverage on all of Lessee's personal property, Trade Fixture and
Lessee Owned Alterations and Utility Installations. Such insurance shall be full
replacement cost coverage. The proceeds from any such insurance shall be used by
Lessee for the replacement of personal property, Trade Fixture and Lessee Owned
Alterations and Utility Installations. Lessee shall provide Lessor with written
evidence that such insurance is in force.

                  (b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain
loss of Income and extra expense insurance In amounts as w reimburse Lessee for
direct or Indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees In the business Lessee or attributable to prevention
of access to the Premises as a result of such perils.

                  (c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.

                                       4.
<PAGE>

         8.5      INSURANCE POLICIES. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in If--most current
issue of "Best's Insurance Guide", or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certified copies of policies such insurance or certificates evidencing
the existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the,
expiration of sue policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of least one
year, or the length of the remaining term of this Lease, whichever is less. If
either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.

         8.6      WAIVER OF SUBROGATION: Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is limited by the amount
of insurance carried or required, 1 by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carriers waive
any right i subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.

         8.7      INDEMNITY. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall be cooperate with Lessee in such defense. Lessor need
not have first paid any such claim in order to be defended or indemnified.

         8.8      EXEMPTION OF LESSOR FROM LIABILITY.* Lessor shall not be
liable for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom. *Except for injury or damage caused by Lessor's
gross negligence or willful misconduct.

9.       DAMAGE OR DESTRUCTION.

         9.1      DEFINITIONS.

                  (a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the Improvements on the Premises, other than Lessee Owned Alterations,
Utility Installations and Trade Fixtures, which can reasonably be repaired in
six (6) months or less from the date of the damage or destruction. Lessor shall
notify Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.

                  (b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired In six (6)
months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (301) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.

                  (c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required to be
covered by the Insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.

                  (d) "REPLACEMENT COST" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of Applicable Requirements, and
without deduction for depreciation.

                  (e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence
or discovery of a condition involving the presence of, or contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), In, on, or under the
Premises.

         9.2      PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the foregoing, if the
required insurance was not in force or the insurance proceeds are not sufficient
to effect such repair, the Insuring Party shall promptly contribute the shortage
in proceeds as and when required to complete said repairs. In the event,
however, such shortage was due to the fact that, by reason of the unique nature
of the improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Lessor shall have no obligation to pay
for the shortage in insurance proceeds or to fully restore the unique aspects of
the Premises unless Lessee provides Lessor with the funds to cover same, or
adequate assurance thereof, within ten (10) days following receipt of written
notice of such shortage and request therefor. If Lessor receives said funds or
adequate assurance thereof within said ten (10) day period, the party
responsible for making the repairs shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If such funds or
assurance are not received, Lessor may nevertheless elect by written notice to
Lessee within ten (10) days thereafter to: (i) make such restoration and repair
as is commercially reasonable with Lessor paying any shortage in proceeds, in
which case this Lease shall remain in full force and effect; or (ii) have this
Lease terminate thirty (30) days thereafter. Lessee shall not be entitled to
reimbursement of any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be subject
to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either Party.

         9.3      PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor.*Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice. *for the repair cost in excess of $300,000.00 see Addendum

                                       5.
<PAGE>

         9.4      TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs, this Lease shall terminate sixty (60)
days following such Destruction. If the damage or destruction was caused by the
gross negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

         9.5      DAMAGE NEAR END OF TERM. If at any tune during the last six
(6) months of this Lease there is damage for which the cost to repair exceeds
one (1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate
this Lease effective sixty (60) days following the date of occurrence of such
damage by giving a written termination notice to Lessee within thirty (30) days
after the date of occurrence of such damage. Notwithstanding the foregoing, if
Lessee at that time has an exercisable option to extend this Lease or to
purchase the Premises, then Lessee may preserve this Lease by, (a) exercising
such option and (b) providing Lessor with any shortage in insurance proceeds (or
adequate assurance thereof) needed to make the repairs on or before the earlier
of (i) the date which is ten days after Lessee's receipt of Lessor's written
notice purporting to terminate this Lease, or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option during such
period and provides Lessor with funds (or adequate assurance thereof) to cover
any shortage in insurance proceeds, Lessor shall, at Lessor's commercially
reasonable expense, repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during such period, then this Lease
shall terminate on the date specified in the termination notice and Lessee's
option shall be extinguished.

         9.6      ABATEMENT OF RENT; LESSEE'S REMEDIES.

                  (a) ABATEMENT. In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shall be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.

                  (b) REMEDIES. If Lessor shall be obligated to repair or
restore the Promises and does not commence, in a substantial and meaningful way,
such repair or restoration with in*niRe1Y-E94 days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice, of Lessee's election to terminate this Lease on a dale not
less than sixty (60) days following the giving of such notice. If Lessee gives
such notice and such repair or restoration is not commenced within thirty (30)
days thereafter, this Lease shall terminate as of the date specified in said
notice. If the repair or restoration is commenced within said thirty (30) days,
this Lease shall continue in full force and effect. "Commence" shall mean either
the unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs. *30

         9.7      TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or Is not then required to be, used by Lessor.

         9.8      WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.

10.      REAL PROPERTY TAXES.

         10.1     DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or real estate taxes); improvement bond; and/or
license fee imposed upon or levied against any legal or equitable interest of
Lessor In the Premises, Lessor's right to other income therefrom, and/or
Lessor's business of leasing, by any authority having the direct or indirect
power to tax and where the funds are generated with reference to the Building
address and where the proceeds so generated are to be applied by the city,
county or other local taxing authority of a jurisdiction within which the
Premises are located. The term "Real Property Taxes" shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring during the term of this Lease, including but not limited to, a
change in the ownership of the Premises.

         10.2

         10.4     PERSONAL PROPERTY TAXES. Lessee shall pay, prior to
delinquency, all taxes assessed against and levied upon Lessee Owned
Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and
all personal property of Lessee. When possible, lessee shall cause such property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement.

         11.      UTILITIES. Lessee shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises. See Addendum.

         12.1     LESSOR'S CONSENT REQUIRED. See Addendum

                  (a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or encumber (collectively, "assign assignment") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent.

                  (b) A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of (50%) or
more of the voting control of Lessee shall constitute a change in control for
this purpose.

                  (c) The involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale, acquisition,
financing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee by an amount
greater than twenty-five percent (25%) of such Net Worth as it was represented
at the time of the execution of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, whichever was or
is greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.

                  (d) An assignment or subletting without consent shall, at
Lessor's option, be a Default curable after notice per Paragraph 13.1(c) or a
noncurable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice, increase the monthly Base Rent to one hundred ten percent
(110%) of the Base Rent then in effect. Further, in the event of such Breach and
rental adjustment, (i) the purchase price of any option to purchase the Premises
held by Lessee shall be subject to similar adjustment to one hundred ten percent
(110%) of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.

                                       6.
<PAGE>

                  (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.

         12.2     TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

                  (a) Regardless of Lessor's consent, any assignment or
subletting shall not: (1) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease; (ii)
release Lessee of any obligations hereunder; or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.

                  (b) Lessor may accept Rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise Its remedies for Lessee's Default or Breach.

                  (c) Lessors consent to any assignment or subletting shall hot
constitute a consent to any subsequent assignment or subletting.

                  (d) In the event of any Default or Breach by Lessee, Lessor
may proceed directly against Lessee, any Guarantors or anyone else responsible
for the performance of Lessee's obligations under this Lease, Including any
assignee or sublessee, without first exhausting Lessor's remedies against any
other person or entity responsible therefore to Lessor, or any security held by
Lessor.

                  (e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, Including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a fee of $1,000 as consideration for Lessor's considering and
processing said request. Lessee agrees to provide Lessor with such other or
additional information and/or documentation as may be reasonable requested.

                  (f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed to
have assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented to in writing.

         12.3     ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

                  (a) Lessee hereby assigns and transfers to Lessor all of
Lessee s Interest in all Rent payable on any sublease, and Lessor may collect
such Rent and apply same toward Lessee s obligations under this Lease; provided,
however, that until a Breach shall occur in the performance of Lessee s
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease nor by reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee. Lessee hereby
Irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a Breach exists In the performance-of Lessee s
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.

                  (b) In the event of a Breach by Lessee, Lessor may, at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time of
the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior Defaults or Breaches
of such sublessor.

                  (c) Any mailer requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.

                  (d) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.

                  (e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, If any, specified- In such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.

13.      DEFAULT; BREACH; REMEDIES.

         13.1     DEFAULT; BREACH. A "Default" is 'defined as a failure by the
Lessee to comply with or perform any of the terms, covenants conditions or rules
under this Lease. A "Breach" is defined as the occurrence of one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period: (a) The abandonment of the Premises; or the vacating of
the Premises without providing a commercially reasonable level of security,
and/or Security Deposit or where the coverage of the property Insurance
described in Paragraph 8.

                  (a) Is jeopardized as a result thereof, or without providing
reasonable assurances to minimize potential vandalism.

                  (b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) business days following written notice to Lessee.

                  (c) The failure by Lessee to provide (i) reasonable written
evidence of compliance with Applicable Requirements , (ii) the service
contracts, (iii) the rescission of an unauthorized assignment or subletting,
(iv) a Estoppel Certificate, (v) a requested subordination, (vi) evidence
concerning any guaranty and/or Guarantor, (vii) any document requested under
Paragraph 42 (easements), or (viii) any other documentation or information which
Lessor may reasonably require of Lessee under the terms of this Lease , where
any such failure continues for a period of ten (10) days following written
notice to Lessee.

                  (d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described In subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee s Default Is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period' and thereafter diligently prosecutes such cure to completion.

                  (e) The occurrence of any of the following events: (i) the
making of any general arrangement or assignment for the benefit of creditors;
(ii) becoming a "debtor" as defined in 11 U.S.C. ~ 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee s assets located at
the Premises or of Lessee s interest In this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee s assets located at the
Premises or of Lessee s interest in this Lease, where such seizure is not
discharged within thirty (30) days; provided,

                                       7.
<PAGE>

however, in the event that any provision of this subparagraph (e) is contrary to
any applicable law, such provision shall be of no force or effect, and not
affect the validity of the remaining provisions.

                  (f) The discovery that any financial statement of Lessee given
to Lessor was materially false.

         13.2     REMEDIES. If Lessee fails to perform any of. its affirmative
duties or obligations, within ten (10) days after written notice (or in case of
an emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any suet performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall no be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier': check. In the event of a Breach. Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right of remedy which Lessor may have by reason of such Breach:

                  (a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceed the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve [lank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by
statute.

                  (b) Continue this Lease and Lessee's right to possession and
recover the Rent as it becomes due, in which event Lessee may sublet or assign,
subject only to reasonable limitations. Acts of maintenance, efforts to relet,
and/or the appointment of a receiver to protect the Lessor's interests, shall
not constitute a termination of the Lessee's right to possession.

                  (c) Pursue any other remedy now or thereafter available under
the laws or judicial decisions of the state wherein the Premises located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy the Premises.

         13.3     INDUCEMENT RECAPTURE. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into this
Lease, all of which concessions are hereinafter referred to as "Inducement
Provisions;' shall be deemed conditioned upon Lessee's full and faithful
performance of all of the terms, covenants and conditions of this Lease. Upon
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall The immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or
the cure of the Breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.

         13.4     LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to ten percent (10%) of each such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.

         13.5     INTEREST. Any monetary payment due Lessor hereunder, other
than late charges, not received by Lessor, when due as to scheduled payments
(such as Base Rent) or within thirty (30) days following the date on which it
was due for non-scheduled payment, shall bear interest from the date when due,
as to scheduled payments, or the thirty-first (31st) day after it was due as to
non-scheduled payments. The interest ("Interest") charged shall be equal to the
prime raffle reported In the Wall Street Journal as published closest prior to
the date when due plus 4%, but shall not exceed the maximum rate allowed by law.
Interest Is payable in addition to the potential late charge provided for in
Paragraph 13.4.

         13.6     BREACH BY LESSOR.

                  (a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessors obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.

                  (b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event
that neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said written notice, or if having commenced said cure they do not
diligently pursue it to completion, then Lessee may elect to cure said breach at
Lessee's expense and offset from Rent an amount equal to the greater of one
month's Base Rent or the Security Deposit, and to pay an excess of such expense
under protest:, reserving Lessee's right to reimbursement from Lessor. Lessee
shall document the cost of said cure and supply said documentation to Lessor.

         14.      CONDEMNATION. If the Premises or any portion thereof are taken
under the power of eminent domain or sold under the threat of the exercise of
said power (collectively "Condemnation"'), this Lease shall terminate as to the
part taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of any building portion
of the premises, or more than twenty-five percent (25%) of the land area portion
of the premises not occupied by any building, is taken by Condemnation, Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee

                                       8.
<PAGE>

written notice of such taking (or in the absence of such notice, within ten (10)
days after the condemning authority shall have taken possession) terminate this
Lease as of the date the condemning authority takes such possession. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the Base Rent shall be reduced in proportion to the reduction in
utility of the Premises caused by such Condemnation. Condemnation awards and/or
payments shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold, the value of the part
taken, or for severance damages; provided, however, that Lessee shall be
entitled to any compensation for Lessee's relocation expenses, loss of business
goodwill and/or Trade Fixtures, without regard to whether or not this Lease Is
terminated pursuant to the provisions of this Paragraph. All Alterations and
Utility Installations made to the Premises by Lessee, for purposes of
Condemnation only, shall be considered the property of the Lessee and Lessee
shall be entitled to any and all compensation which is payable therefor. In the
event that this Lease Is not terminated by reason of the Condemnation, Lessor
shall repair any damage to the Premises caused by such Condemnation.

15.      BROKERS' FEE

         15.1.    ADDITIONAL COMMISSION.

         15.2.    ASSUMPTION OF OBLIGATIONS.

16.      ESTOPPEL CERTIFICATES.

                  (a) Each Party (as "Responding Party") shall within ten (10)
days after written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Estoppel Certificate" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

                  (b) If the Responding Party shall fail to execute or deliver
the Estoppel Certificate within such ten day period, the Requesting Party may
execute an Estoppel Certificate stating that (i) the Lease is in full force and
effect without modification except as may be represented by the Requesting
Party; (ii) there are no uncured defaults in the Requesting Party's performance;
and (iii) if Lessor is the Requesting Party, not more than one month's rent has
been paid in advance. Prospective purchasers and encumbrances may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

                  (c) If Lessor desires to finance, refinance, or sell the
Premises, or any part thereof, Lessee and all Guarantors shall deliver to any
potential lender or purchaser designated by Lessor such financial statements as
may be reasonably required by such lender or purchaser, and such lender or
purchaser in confidence and shall be used only for the purposes herein set
forth.

17.      DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, 8-0jn such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, and subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.

18.      SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provisions hereof.

19.      DAYS. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.

20.      LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17,
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against he individual partners of Lessor, or its or their individual partners,
directors officers or shareholders, or any of their personal assets for such
satisfaction.

21.      TIME OF ESSENCE. Time is of the essence with respect to he performance
of all obligations to be performed or observed by the Parties under this Lease.

22.      NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective.

23.      NOTICES.

         23.1     NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by courier)
or may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing. See Addendum

         23.2     DATE OF NOTICE. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail the notice shall be deemed given forty-eight
(48) hours after the same is addressed as required herein and mailed with
postage prepaid. Notices delivered by United States Express Mail or overnight
courier that guarantee next day delivery shall be deemed given twenty-four (24)
hours after delivery of the same to the Postal Service or courier. Notices
transmitted by facsimile transmission or similar means shall be deemed delivered
upon telephone confirmation of receipt, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday, Sunday or legal holiday,
it shall be deemed received on the next business day.

24.      WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. The acceptance of
Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any
payment by Lessee may be accepted by Lessor on account of moneys or damages due
Lessor, notwithstanding any qualifying statements or conditions made by Lessee
in connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.

                                       9.
<PAGE>

25.      RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.

26.      NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.

27.      CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28.      COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and titles are for the
convenience of the parties only and shall not be considered a part of this
Lease. Whenever required by the context,, the singular shall Include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
parties, but rather according to its fair meaning as a whole, as if both parties
had prepared it.

29.      BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the (Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30.      SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.

         30.1     SUBORDINATION. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage;. deed of trust, or
other hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease*. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof. *provided that the
holders of the Security Devices have not succeeded to Lessor's fee ownership of
the Premises.

         30.2     ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attom to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (i)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership; (ii) be subject to any offsets or
defenses which Lessee might have against any prior lessor; or (iii) be bound by
prepayment of more than one (1) month's rent.

         30.3     NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises.

         30.4     SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non- Disturbance Agreement provided for herein.

31.      ATTORNEYS' FEES. It any Party brings an action or proceeding involving
the Premises to enforce the terms hereof or to declare rights hereunder, the
Prevailing Party (as hereafter defined) In any such proceeding, action, or
appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may
be awarded In the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term, "PREVAILING
PARTY" shall include, without limitation, a Party who substantially obtains or
defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party of its claim or
defense. The attorneys' fees award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred. In addition,, Lessor shall be entitled to attorneys' fees,
costs and expenses incurred in the preparation and service of notices o% Default
and consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach. See
Addendum

32.      LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "For Sale" signs and
Loss may during the last six (6) months of the term hereof place on the Premises
any ordinary "For Lease" signs. Lessee may at any time place on or about the
Premises any ordinary "For Sublease" sign.

33.      AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness In determining
whether to permit an auction.

34.      SIGNS. Except for ordinary 'For Sublease" signs, Lessee shall not place
any sign upon the Premises without Lessor's prior written consent. All signs
must comply with all Applicable Requirements.

35.      TERMINATION; MERGER. Unless specifically stated otherwise In writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.

36.      CONSENTS. Except as otherwise provided herein, wherever In this Lease
the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including but not limited to architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any the existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given. In the event that either Party disagrees with
any

                                      10.
<PAGE>

determination made by the other hereunder and reasonably requests the reasons
for such determination, the determining party shall furnish its reasons in
writing and in reasonable detail within ten (10) business days following such
request.

37.      GUARANTOR.

         37.1     EXECUTION.

38.      QUIET POSSESSION. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quite enjoyment of the Premises during the term hereof.

39.      OPTIONS. See Addendum

         39.1     DEFINITION. "OPTION" shall mean: (a) the right to extent the
term or renew this Lease.

         39.2     OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in t his lease is personal to the original Lessee, and cannot be assigned
or exercised by anyone other than said original Lessee and only while the
original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee h as no intention of thereafter
assigning or subletting.

         39.3     MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.

         39.4     EFFECT OF DEFAULT ON OPTIONS.

                  (a) Lessee shall have no right to exercise an Option: (i)
during the period commencing with the giving of any notice of Default and
continuing until said Default is cured; (ii) during the period of time any Rent
is unpaid (without regard to whether notice thereof is given Lessee); (iii)
during the time Lessee is in Breach of this Lease; or (iv) in the event that
Lessee has been given three (3) or more notices of separate Default, whether or
not the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.

                  (b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

                  (c) An Option shall terminate and be of no further force or
effect, notwithstanding Lessee's due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended term, (i)
Lessee fails to pay Rent for a period of thirty (30) days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), (ii)
Lessor gives to Lessee three (3) or more notices of separate Default during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Lessee commits a Breach of this Lease.

40.      MULTIPLE BUILDINGS.

41.      SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

42.      RESERVATIONS. Lessor reserves to itself the right, from time to time,
to grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate. any such easement rights, dedication, map or restrictions.

43.      PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded a s a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay.

44.      AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each party
shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.

45.      CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.

46.      OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

47.      AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.

48.      MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.

49.      MEDIATION AND ARBITRATION OF DISPUTES.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

                                      11.
<PAGE>

1.       SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE.

2.       RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION
OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF' THE PREMISES FOR LESSEE'S INTENDED USE.

WARNING:. IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.

The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

Executed at: __________________________  Executed at: __________________________
on: ___________________________________  on: ___________________________________
By LESSOR:                               By LESSEE:
   Campson Corporation, a                   Anadys Pharmaceuticals, Inc.
   California corporation                   a Delaware corporation

By: ___________________________________  By:____________________________________
Name Printed:  Lee M. Chesnut            Name Printed: _________________________
Title: Manager                           Title: ________________________________
By: ___________________________________  By:____________________________________
Name Printed: _________________________  Name Printed: _________________________
Title: ________________________________  Title: ________________________________
Address: 9627 Grossmont Summit Drive     Address: See Addendum
         La Mesa, California  91941
Telephone: ( ) (619) 697-777             Telephone: ( )_________________________
Facsimile: ( ) (619) 697-7846            Facsimile: ( )_________________________
Federal ID No._________________________  Federal ID No._________________________

NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower
Street, Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213)
687-8616

                                      12.
<PAGE>

                                Addendum to Lease

         This Addendum, dated November 3, 2000, is executed by and between (1)
Campson Corporation, a California corporation ("Lessor"), and (2) Anadys
Pharmaceuticals, Inc., a Delaware corporation ("Lessee"). This Addendum
constitutes an addendum to that certain Standard Industrial/Commercial Single
Tenant Lease - Gross ("the Lease") dated November 3, 2000. The terms of the
Lease are hereby amended and supplemented as follows:

         1.2(a).  The "Premises" consist of the land legally described in
Exhibit 1 attached hereto and all improvements thereon including a building
("the Building") having a common address of 9050 Camino Santa Fe, San Diego,
California 92121. The Building consists of 35,212 rentable square feet. During
the term of the Lease, Lessee shall have the right -to use all parking spaces
located within the Premises. There shall be no separate fee for parking during
the term of this Lease.

         1.3.     Term/Option to Extend. The "Original Term" of the Lease shall
commence and Lessee shall be entitled to possession of the Premises on the
Commencement Date. As used herein, "the Commencement Date" shall mean the later
of November 1, 2000, or the date Lessor completes Lessor's work described in
Section 51 below. Unless sooner terminated as herein provided, the original Term
of the Lease shall expire at. 11:59 p.m. on May 31, 2003 ("the Expiration
Date"). Subject to Paragraph 39 of the Lease, Lessee shall have the right and
option to renew the term of the Lease for a further term of one year commencing
on the Expiration Date. Exercise of the option to extend the term must be
accomplished by delivery by Lessee to Lessor of written notice of such exercise
not later than nine months prior to the Expiration Date. Lessee's occupancy
during the term as extended by exercise of the option shall be subject to all
terms and conditions of this Lease; provided, however, Lessee's obligation to
pay Base Rent shall be adjusted as provided below.

         1.5.     Base Rent.

                  1.5.1.   Base Rent. Commencing on the Commencement Date, and
so continuing on the first day of each calendar month for the remainder of the
Term of the Lease, Lessee shall pay to Lessor, Base Rent, in advance, without
deduction, off-set, notice or demand as provided in the following schedule:

<TABLE>
<S>                                               <C>
Commencement Date - Nov. 30, 2000                 $ 43,829.50/mo.*
Dec. 1, 2000 - Nov. 30, 2001                      $ 96,833.00/mo.
Dec. 1, 2001 - Nov. 30, 2002                      $100,706.32/mo.
Dec. 1, 2002 - Nov. 30, 2003                      $104,734.57/mo.
Dec. 1, 2003 - May 31, 2004                       $108,923.96/mo.**
</TABLE>

*  The amount of Base Rent for the period from the Commencement Date through
November 30, 2000, shall be prorated (e.g., if the Commencement Date were
November 10, 2000, then such Base Rent would be $29,219.67).

** Assumes Lessee's exercise of option to extend the term of this Lease.

         1.5.2.   Sums Paid on Execution. Concurrently with the execution of the
Lease, Lessee shall pay to Lessor $193,666.00 which shall be applied (1)
$96,833.00 for Base Rent for the period December 1 - 31, 2000 and (2) $96,833.00
for the Security Deposit.

         1.8.     Agreed Use. Lessee's Agreed Use shall be research and
development and associated general office use. Lessee shall also have the right
to use all parking areas in the Premises.

         1.10.    Payment to Brokers. Lessor shall pay to Brokers a commission
at the time(s) and in the amount(s) set forth in a separate written agreement.

         7.1.     Lessee's Maintenance Obligations. Lessee shall, at Lessee's
cost (1) furnish interior janitorial services to the Building, (2) maintain and
repair the Equipment (defined below) from and after January 1, 2001, and (3)
furnish exterior janitorial services to remove trash and rubbish from any
exterior areas used by Lessee's employees for eating, drinking and/or smoking.

         7.2.     Lessor's Maintenance Obligations. Except as provided in the
preceding paragraph, Lessor shall, at Lessor's cost, repair and maintain the
Premises and all systems and improvements contained therein.

         7.4(b).  Surrender Restoration. Notwithstanding Section 7.3(a) of the
Lease, Lessor shall not require Lessee to remove any Lessee Owned Alterations or
Utility Installations unless the Lessee Owned Alterations or Utility
Installations were (1) installed without Lessor's consent, (2) installed with
Lessor's consent but Lessor conditioned such consent upon Lessor reserving the
right to require removal or (3) installed without any required building permit
and/or without complying with applicable building codes. As to any Lessee Owned
Alterations or Utility Installations which Lessor may require Lessee to remove,
Lessor must provide to Lessee written notice of Lessor's demand for such removal
within 60 days following expiration or earlier termination of the term of the
Lease. Upon surrender of possession of the Premises, Lessee shall furnish to
Lessor evidence that all of the fume hoods and other equipment included in the
Premises have been thoroughly cleaned and that all hazardous materials; have
been removed.

         8.       Payment of Deductible Amounts. Lessee's obligation with
respect to payment of any "deductible amount" under Lessor's liability, fire
and/or casualty policies of insurance shall be as follows:

                  (i)      If the damage or destruction is caused by a negligent
or intentional act or omission by Lessee or Lessee's agents, employees or
contractors or otherwise arises out of the operation of the Lessee's business
and/or occupancy of the Premises, then Lessee shall pay the full "deductible
amount."

                  (ii)     If the damage or destruction arises from any other
cause other than a cause described either of the preceding Subparagraph (i),
then the "deductible amount" shall be paid by Lessor.

         8.8.     Lessor's Indemnity Obligations. Notwithstanding Paragraph 8.8
of the Lease to the contrary, Lessor agrees (1) the exemption from Lessor's;
liability contained in Paragraph 8.8 of the Lease shall not apply to limit any
rights or remedies Lessee may have arising from intentional misconduct by Lessor
and/or Lessor's employees, agents and/or members and (2) Lessor shall indemnify
Lessee for (i) negligence by Lessor and/or Lessor's employees, agents or
contractors and/or (ii) breach by Lessor of Lessor's obligations under the terms
of the Lease.

         9.3.     Partial Damage-Uninsured Loss. Lessor may exercise Lessor's
right to terminate for Premises Partial Damage that is not an Insured Loss only
if the estimated cost or repair exceeds $300,000.00. If (1) Lessor elects to
keep this Lease in force by committing to pay repair costs in excess of
$300,000.00, then (i) Lessor shall pay $300,000.00 of the cost of repair and
(ii) Lessor and Lessee shall make payments to the contractor performing the
repair work on a prorata basis as and 'when due (e.g., if the total cost of
repair were $400,000.00, then Lessor and Lessee would pay 75% and 250,
respectively, of each payment owed to the contractor).

                                       1.
<PAGE>

         11.      Utilities. Notwithstanding Paragraph 11 of the Lease, Lessor
shall pay for water furnished to the Premises for exterior landscape
maintenance.

         12.1     Lessor's Consent to Assignment or Subletting/ Excess Rent
Recapture. Lessee has disclosed to Lessor that Lessee may desire to sublet a
portion of the Premises and the decision whether or not to sublease a portion of
the Premises shall be based upon Lessee's business needs. Notwithstanding
Paragraph 12.1 of the Lease to the contrary, Lessee may assign this Lease or
sublease all or any portion(s) of the Premises without Lessor's consent to (1)
any entity resulting from a merger or a consolidation with Lessee, (2) any
entity purchasing all or substantially all of Lessee's business assets provided
that, following the completion of a sale of such assets the net worth of the
assignee or sublessee is comparable to the net worth of Lessee immediately prior
to the sale and/or (3) the assignee or sublessee, has, at the time of the
assignment or sublease, a net worth comparable to Lessee's net worth immediately
preceding the assignment or sublease; provided, however, any such assignment or
sublease shall not be effective unless (1) Lessee has provided to Lessor written
notice of the name and address of the assignee or sublessee and (2) in the case
of an assignment, the assignee has delivered to Lessor a written agreement by
which the assignee expressly assumes all of Lessee's obligations under the
Lease. Lessor acknowledges that Lessee's shares are publicly traded and further
agrees that an aggregate transfer of more than 50 percent of Lessee's
outstanding shares when accomplished by ordinary trading shall not constitute an
assignment or change of control under Section 12.1(b) of the Lease. Lessor shall
have 10 days following receipt by Lessor of the documents to be reviewed in
connection with the proposed assignment or subletting within which to provide to
Lessee written notice of Lessor's approval or disapproval. Any request for
Lessor's consent to an assignment or subletting shall be accompanied by
appropriate financial information pertaining to the proposed assignee or
sublessee including a financial statement (consisting of balance sheet and
income and expense statement for the preceding 12 months certified as accurate
by the proposed assignee or sublessee). Lessee shall pay to Lessor, as
additional rent, if and when received by Lessee, 50 percent of any Excess Rent
(defined below) received by Lessee for (1) the assignment of the Lease or (2)
subleasing the Premises if 20 percent or more of the floor area of the Premises
is occupied by subtenants. As used herein, the term "Excess Rent" means the
amount that the assignee or subtenant is to pay to Lessee in excess of the Base
Rent and other charges due under the Lease after first deducting the reasonable
costs incurred by Lessee in obtaining the assignment or sublease, including,
without limitation, reasonable brokerage commissions and. reasonable costs of
leasehold improvements made by Lessee, which costs shall be amortized over the
shorter of the useful life of such improvements or the remaining term of this
Lease as of the installation of such leasehold improvements. If Excess Rent is
being determined for a subtenant(s) which occupy(ies) less than. all of the
Premises, then Excess Rent shall be the difference between (1) the amount of the
rent and other amounts paid by the subtenant and (2) the amount of Base Rent and
other charges due under the Lease multiplied by a fraction, the numerator of
which is the usable floor area of the Premises occupied by the subtenant(s) and
the denominator of which is the total usable floor area of the Premises.

         23.1.    Lessee's Address for Notice. Prior to the date Lessee
commences to occupy the Premises, Lessee's address for notice shall be 6605
Nancy Ridge Drive, San Diego, California 92121. After Lessee commences to occupy
the Premises, Lessee's address for notice shall be the address of the Premises.

         30.      Attornment and Nondisturbance. At any time(s) during the term
of the Lease, Lessee shall, within 20 days following Lessor's written request
therefor, execute and deliver to Lessor's lender a commercially reasonable
subordination, nondisturbance and attornment agreement. For purposes of
Paragraph 30 of the Lease and this paragraph of the Addendum, Lessee
acknowledges and agrees that the subordination, nondisturbance and attornment
agreement in form and of content as Exhibit 2 attached hereto is commercially
reasonable and is reasonably acceptable to Lessee. The obligations of Lessor and
Lessee under this Lease are conditioned upon receipt by Lessor, on or before
December 15, 2000, of (1) written approval from San Diego National. Bank (i.e.,
Lessor's lender) ("Lender") of the terms of this Lease and (2) a nondisturbance
agreement signed by Lender in a form reasonably acceptable to Lessee. If on or
before December 15, 2000, Lender fails to deliver written approval of this Lease
and a signed nondisturbance agreement reasonably acceptable to Lessee, then the
following shall apply:

                  30.1.    At any, time after December 15, 2000, either party
may deliver to the other party written notice of intention to terminate this
Lease ("a Termination Notice").

                  30.2.    If Lessee delivers to Lessor a Termination Notice,
then this Lease will terminate unless, within 15 days following receipt of the
Termination Notice, (1) Lender delivers written approval of this Lease and a
signed nondisturbance agreement reasonably acceptable to Lessee and (2) Lessor
delivers to Lessee a written waiver of Lessor's right to deliver a Termination
Notice.

                  30.3.    If Lessor delivers to Lessee a Termination Notice,
then this Lease will terminate unless, within 15 days following receipt of the
Termination Notice, (1) Lender delivers written approval of this Lease and (2)
Lessee delivers to Lessor a written waiver of Lessee's right to deliver a
Termination Notice.

         31.      ATTORNEYS' FEES. Lessor shall further be entitled to recover
reasonable attorney's, fees, incurred in connection with any hearing or motion
for assumption or rejection of the Lease under Title 11 of the United States
Code.

         42.      RESERVATIONS. Lessor shall not exercise the rights reserved in
section 42 of the Lease in a manner which materially and adversely affects
Lessee's use of or access to the Premises.

         50.      EQUIPMENT. As part of the Premises,/Lessor is leasing to
Lessee the lab benches, fume hoods and other scientific equipment depicted in
Exhibit 3 attached hereto ("'the Equipment"). Lessor's warranty under Section
2.2 of the Lease! applies to such equipment; provided, however, (1) Lessee must
deliver to Lessor notice of any breach of such warranty pertaining to the
Equipment on or before December 31, 2000, and (2) Lessee shall repair and
maintain the Equipment from and after January 1, 2001.*

* NOTWITHSTANDING THE DEPICTIONS SET FORTH IN SAID EXHIBIT 3, LESSEE SHALL NOT
BE RESPONSIBLE FOR MAINTENANCE OF CEILING LIGHT FIXTURES, CEILING TILES,
FLOORING, PLUMBING, SHELVING, RODI SYSTEMS, AND ELEMENTS OF THE HVAC SYSTEM
SERVING THE PREMISES.

         51.      LESSOR'S WORK. On or before December 1, 2000, Lessor shall, at
Lessor's cost, (1) paint the office area of the Premises as reasonably needed to
deliver such area in good and clean condition and (2) clean and/or- replace
carpet in the office area of the Premises as reasonably needed to deliver such
area in good and clean condition.

         52.      JURY TRIAL WAIVER. Landlord and Tenant hereby waive their
respective right to trial by jury of any cause of action, claim, counter-claim
or cross-complaint in any action, proceeding and/or hearing brought by either
Landlord against Tenant or 'Tenant against Landlord on any matter whatsoever
arising out of, or in any way connected with, this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises or any claim of
injury or damage or the enforcement of any remedy under law, statute or
regulation,, emergency or otherwise, now or hereafter in effect.

         53.      INTERPRETATION. Except as the context may otherwise require,
references to "the Lease" or "this Lease" shall, mean collectively (1) the
Standard Industrial/Commercial Single Tenant Lease - Gross dated November 3,
2000, by and between Lessee and Lessor, (2) this Addendum and (3) all exhibits
attached hereto.

                                       2.
<PAGE>

         54.      SUPERSEDURE. This Lease supersedes in its entirety that
certain Standard Multi-Tenant Office Lease - Gross ("the Prior Lease") dated
October 23, 2000, by Lessor and Lessee pertaining to a portion of the Premises.
Concurrently with the execution by Lessor and Lessee of this Lease, the Prior
Lease shall terminate and be of no further force or effect.

Campson Corporation,                     ANADYS PHARMACEUTICALS, INC.,
a Delaware corporation                   a Delaware corporation

By: ___________________________________  By: ___________________________________
    Lee M. Chesnut, President            Print Name: ___________________________
                                         Title: ________________________________

                                       3.
<PAGE>

                              SCHEDULE OF EXHIBITS

Exhibit 1-    -        Legal Description

Exhibit 2     -        Subordination, Non-Disturbance and Attornment Agreement

Exhibit 3     -        Description of Equipment

                                       1.
<PAGE>

PARCEL 1:

LOT 4 OF MIRAMAR POINT INDUSTRIAL PARK UNIT NO. 2, IN THE CITY OF SAN DIEGO,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 10055,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, ON APRIL 8,
1981:

PARCEL 2:

AN EASEMENT FOR THE JOINT PURPOSES OF INGRESS AND EGRESS OVER AND ACROSS THE
EASTERLY 75 FEET OF THE SOUTHERLY 20 FEET OF LOT 3 OF MIRAMAR POINT INDUSTRIAL
PARK UNIT NO. 2, AS FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, ON APRIL 8, 1981.

SAID EASEMENT IS APPURTENANT TO AND FOR THE BENEFIT OF LOT 4 OF MIRAMAR POINT
INDUSTRIAL PARK UNIT NO. 2, ON SAID MAP 10055.

                                       1.
<PAGE>

RECORDING REQUESTED BY:

WHEN RECORDED MAIL TO:

             SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

THIS AGREEMENT (this "AGREEMENT") is made and entered into this___________ day
of_________,_________, by and among (1) ("TENANT"), (2)_________("LENDER") and
(3)__________ ("LANDLORD")

                                    RECITALS:

         WHEREAS, Landlord executed a Lease ("the Lease") dated as of
________________,_____________, in favor of Tenant, covering a certain demised
premises therein described which are (1) commonly known as ____________________
California__________ ("the Demised Premises") and (2) a portion of certain real
property legally described as:

(said parcel of real estate being referred to herein as the "Property"); and

         WHEREAS, Landlord has executed a Deed of Trust (the "Mortgage") dated
_______________, in the amount of $_____________ and recorded on ______________
as Document No._________________ of the County Records of San Diego County,
State of California, in favor of Lender, payable upon the terms and conditions
described therein; and

         WHEREAS, it is a condition to said loan that said Mortgage shall
unconditionally be and remain at all times a lien or charge upon the Property,
prior and superior to the Lease and to the leasehold estate created thereby; and

         WHEREAS, the parties hereto desire to assure Tenant's possession and
control of the Demised Premises under the Lease upon the terms and conditions
therein contained;

         NOW, THEREFORE, for and in consideration of the mutual covenants and
premises herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed by the parties hereto,
the parties hereto do hereby agree as follows:

                                   AGREEMENT:

         2.       Should Lender become the owner of the Property, or should the
Property be sold by reason of foreclosure, or other proceedings brought to
enforce the Mortgage which encumbers the Property, or should the Property be
transferred by deed in lieu of foreclosure, or should any portion of the
Property be sold under a trustee's sale, the Lease shall continue in full force
and effect as a direct lease between the then owner of' the Property covered by
the Mortgage and Tenant, upon, and subject to, all of the terms, covenants and
conditions of the Lease for\ the balance of the term thereof remaining,
including any extensions therein provided. Tenant does hereby agree to attorn to
Lender or to any such owner as its landlord after Tenant's receipt of written
notice from Lender, and Lender hereby agrees that it will accept such
attornment.

         3.       Notwithstanding any other provision of this Agreement, Lender
shall not be (a) liable for any default of any landlord under the Lease
(including Landlord), except that Lender agrees to cure any default of Landlord
that is continuing as of the date Lender forecloses the Property, which shall be
the earliest to occur of (1) delivery of a trustee's deed following a
non-judicial foreclosure, (2) delivery of a marshal's deed' upon sale of the
property following entry of judgment in a judicial foreclosure and/'or (3)
delivery of a deed in lieu of foreclosure, within thirty (30) days from the date
Tenant delivers written notice to Lender of such continuing default, unless such
default is of such a nature to reasonably require more than thirty (30) days to
cure and then Lender shall be permitted such additional time as is reasonably
necessary to effect such cure, provided Lender commences such cure within such
30 day period and, thereafter, diligently and continuously proceeds to cure such
default; (b) subject to any offsets or defenses which have accrued prior to the
date of foreclosure as defined above, unless Tenant shall have delivered to
Lender written notice of the default which gave rise to such offset or defense
and permitted Lender the same right to cure such default as permitted Landlord
under the Lease; (c) bound by any rent that Tenant may have paid under the Lease
more than one month in advance; (d) bound by any amendment or modification of
the Lease hereafter made without Lender's prior written consent which shall be
Landlord's obligation to request and obtain; (e) responsible for the return of
any security deposit delivered to Landlord under the Lease and not subsequently
received by Lender.

         4.       If Lender sends written notice to Tenant to direct its rent
payments under the Lease to Lender instead of Landlord, then Tenant agrees to
follow the instructions set forth in such written instructions and deliver rent
payments to Lender; however, Landlord and Lender agree that Tenant shall be
credited under the Lease for any rent payments sent to Lender pursuant to such
written notice.

         5.       All notices which may or are required to be sent under this
Agreement shall be in writing and shall be sent by Federal Express (or similar
overnight delivery service) or first-class, certified U.S. mail, postage
prepaid, return receipt requested, and sent to the party at the address
appearing below or such other address as any party shall hereafter inform the
other party by written notice given as set forth above:

                           TENANT:       __________________________
                                         __________________________
                                         __________________________
                                         Attn: ____________________

                           LANDLORD:     __________________________
                                         __________________________

                                       2.
<PAGE>

                           LENDER:       __________________________
                                         __________________________
                                         __________________________
                                         Attn:_____________________

         6.       Said Mortgage shall not cover or encumber and shall not be
construed as subjecting in any manner to the lien thereof any of Tenant's
improvements or trade fixtures, furniture, equipment or other personal property
at any time placed or installed in the Premises. In the event the Property or
any part thereof shall be taken for public purposes by condemnation or transfer
in lieu thereof or the same are damaged or destroyed, the rights of the parties
to any condemnation award or insurance proceeds shall be determined and
controlled by the applicable provisions of the Lease.

         7.       This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their successors in interest, heirs and assigns and any
subsequent owner of the Property secured by the Mortgage.

         IN WITNESS WHEREOF, the parties hereto have caused this NonDisturbance
Agreement to be executed as of the day and year first above written.

LENDER:                                                      TENANT:
______________________________________   ______________________________________

By: ___________________________________  By: ___________________________________

    Print Name ________________________  Print Name ____________________________
    Title: ____________________________  Title: ________________________________

                                         LANDLORD:
                                         _______________________________________

                                         By: ___________________________________

                                         Print Name ____________________________
                                         Title: ________________________________

State of California )
                    ) ss.
County of _________ )

         On__________, 2000, before me,_________________________, personally
appeared ____________________personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s) or the entity upon
behalf of which the person(s) acted, executed the instrument.

         WITNESS my hand and official seal.

                                       3.

<PAGE>

State of California )
                    ) ss.
County of _________ )

         On__________, 2000, before me,_________________________, personally
appeared ____________________personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s) or the entity upon
behalf of which the person(s) acted, executed the instrument.

         WITNESS my hand and official seal.

                                            ____________________________________
                                               Notary Public in and for said
                                                     County and State

State of California )
                    ) ss.
County of _________ )

         On__________, 2000, before me,_________________________, personally
appeared ____________________personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s) or the entity upon
behalf of which the person(s) acted, executed the instrument.

         WITNESS my hand and official seal.

                                            ____________________________________
                                               Notary Public in and for said
                                                     County and State

                                       4.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 1, 10/17/00]

                                       5.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 2, 10/17/00]

                                       6.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 3, 10/17/00]

                                       7.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 4A, 10/17/00]

                                       8.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 4B, 10/17/00]

                                       9.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 5A, 10/17/00]

                                      10.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 6, 10/17/00]

                                      11.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 7A, 10/17/00]

                                      12.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, LAB 7B, 10/17/00]

                                      13.
<PAGE>

[GRAPHIC DEPICTION OF 9050 CAMINO SANTA FE, STORAGE AREA, 10/17/00]

                                      14.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}]]