LEXICON GENETICS INC/TX
LEASE AGREEMENT DATED MAY 23,2002
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>h99010exv10w1.txt
<DESCRIPTION>LEASE AGREEMENT DATED MAY 23,2002
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.1



                                 LEASE AGREEMENT


Landlord:   TOWNSEND PROPERTY TRUST LIMITED
            PARTNERSHIP, DOING BUSINESS IN NEW JERSEY AS
            TPT LIMITED PARTNERSHIP

Tenant:     LEXICON PHARMACEUTICALS (NEW JERSEY), INC.


Premises:   350 CARTER ROAD, PRINCETON, NEW JERSEY





<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                                Page
                                                                                                                ----
<S>      <C>                                                                                                    <C>
1.       PREMISES.................................................................................................1

2.       TERM.....................................................................................................4

3.       RENT; UTILITIES; OPERATING EXPENSES......................................................................6

4.       LANDLORD'S WORK; CONDITION OF PREMISES..................................................................16

5.       TENANT'S WORK...........................................................................................18

6.       USE.....................................................................................................21

7.       TENANT'S CARE OF THE PREMISES...........................................................................21

8.       LANDLORD'S MAINTENANCE OBLIGATIONS......................................................................23

9.       DESTRUCTION OR DAMAGE TO PREMISES.......................................................................24

10.      DEFAULT; REMEDIES.......................................................................................25

11.      ASSIGNMENT AND SUBLETTING...............................................................................30

12.      CONDEMNATION............................................................................................31

13.      RIGHT TO ENTER..........................................................................................31

14.      SUBORDINATION AND NON-DISTURBANCE.......................................................................32

15.      INDEMNIFICATION AND HOLD HARMLESS.......................................................................32

16.      INSURANCE...............................................................................................33

17.      ENTIRE AGREEMENT - NO WAIVER............................................................................36

18.      HOLDING OVER............................................................................................36

19.      HEADINGS................................................................................................36

20.      NOTICES.................................................................................................36

21.      HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES................................................................37

22.      ATTORNEYS' FEES.........................................................................................37

23.      LATE PAYMENTS...........................................................................................37
</TABLE>

                                       i
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<TABLE>
<S>      <C>                                                                                                    <C>
24.      ESTOPPEL CERTIFICATE....................................................................................37

25.      SEVERABILITY AND INTERPRETATION.........................................................................38

26.      MULTIPLE TENANTS........................................................................................38

27.      FORCE MAJEURE...........................................................................................38

28.      QUIET ENJOYMENT.........................................................................................38

29.      BROKERAGE COMMISSION; INDEMNITY.........................................................................39

30.      EXCULPATION OF LANDLORD.................................................................................39

31.      ORIGINAL INSTRUMENT.....................................................................................39

32.      NEW JERSEY LAW..........................................................................................39

33.      NO RECORDATION OF LEASE.................................................................................39

34.      HAZARDOUS WASTES/ENVIRONMENTAL COMPLIANCE...............................................................40

35.      LEASE BINDING UPON DELIVERY; NO OPTION..................................................................42

36.      SECURITY DEPOSIT........................................................................................43

37.      TRAFFIC MANAGEMENT PLAN.................................................................................44

38.      AUTHORITY...............................................................................................44

39.      PURCHASE OPTION.........................................................................................44

40.      RIGHT OF FIRST REFUSAL TO PURCHASE THE PREMISES.........................................................46

41.      SIGNAGE.................................................................................................47

42.      EXPANSION...............................................................................................48

43.      GOVERNMENTAL INCENTIVES.................................................................................49

44.      LANDLORD'S SUBORDINATION................................................................................50

45.      NO CONSEQUENTIAL DAMAGES................................................................................50

46.      SURVIVAL................................................................................................50

47.      CONFIDENTIALITY AGREEMENT...............................................................................50
</TABLE>


                                       ii
<PAGE>







EXHIBIT A   -   LEGAL DESCRIPTION OF CAMPUS
EXHIBIT B   -   PLAN SHOWING PREMISES AND EAST SIDE OF CAMPUS
EXHIBIT C   -   LANDLORD'S WORK
EXHIBIT D   -   ADJUSTED RENTAL RATES
EXHIBIT E   -   IRREVOCABLE LETTER OF CREDIT
EXHIBIT F   -   OPTION PURCHASE PRICE
EXHIBIT G   -   ENVIRONMENTAL INSURANCE SPECIMEN POLICY
EXHIBIT H   -   TRAFFIC MANAGEMENT PLAN
EXHIBIT I   -   SECURED AREAS
EXHIBIT J   -   FORM OF LEASE TERMINATION
EXHIBIT K   -   FORM OF OPTION TERMINATION


<PAGE>







                                 LEASE AGREEMENT

     THIS LEASE AGREEMENT (the "Lease"), made as of this 23rd day of May, 2002,
by and between TOWNSEND PROPERTY TRUST LIMITED PARTNERSHIP, a Maryland limited
partnership, doing business in New Jersey as TPT LIMITED PARTNERSHIP
("Landlord"), which has as its address for all purposes hereunder as follows:

                                    210 West Pennsylvania Avenue
                                    Suite 700
                                    Towson, Maryland  21204

and LEXICON PHARMACEUTICALS (NEW JERSEY), INC. ("Tenant"), a Delaware
corporation, which has as its address, prior to the Commencement Date (as
hereinafter defined):

                                    279 Princeton-Hightstown Road
                                    East Windsor, New Jersey 08520

and after the Commencement Date:

                                    350 Carter Road
                                    Princeton, New Jersey  08540.

                                   WITNESSETH:

     WHEREAS, Landlord is the owner of a parcel of land in Hopewell, New Jersey,
more particularly described in Exhibit A attached hereto, with the buildings and
other improvements thereon (the "Campus"); and

     WHEREAS, Landlord desires to lease to Tenant, and Tenant desires to lease
from Landlord, a portion of the land within the Campus with the building and
other improvements thereon, all as more particularly set forth below.

     NOW, THEREFORE, the parties hereto agree as follows:

         1. PREMISES

              (a) Landlord hereby rents and leases to Tenant, and Tenant hereby
rents and leases from Landlord, the Premises (as hereinafter defined). The
"Premises" consists of: (i) that portion of the Campus containing the
approximately 19 acre parcel of land shown as Lot 14.03 (the "Land") on the
Major Subdivision Map prepared by Schoor DePalma dated September 13, 2001 (last
revised February 12, 2002) (the "Subdivision Plan") a copy of which is attached
hereto as Exhibit B, (ii) the building containing 76,000 rentable square feet
("RSF") located thereon known as 350 Carter Road, Hopewell, New Jersey (the
"Building"), (iii) any utility facilities or lines located on the Land and
serving exclusively the Building, (iv) the driveways, walkways, parking areas
and related improvements now located on the Land, and (v) the right to use any
appurtenances, rights, privileges and easements, if any, benefiting the Land or
Building except to the extent limited by the terms of this Lease. Landlord and
Tenant hereby agree that the Building contains 76,000 RSF. The phrase "east side
of the Campus" as
<PAGE>

used herein shall refer to that portion of the Campus, consisting of
approximately 190.414 acres of land (being Block 40, Lot 14 of Hopewell
Township, Mercer County) and the improvements thereon, located on the east side
of Carter Road and shown on Exhibit B.

              (b) Landlord hereby specifically reserves the right to construct
additional improvements on any portion of the Campus, outside of the Premises.
No easement for light, air or view is granted or implied hereunder, and the
reduction or elimination of Tenant's light, air or view will not affect Tenant's
liability or obligations under this Lease.

              (c) (i) Tenant shall have the exclusive right to use the existing
parking lot located on the east side of the Campus in the location shown on
Exhibit B attached hereto (the "Parking Lot"), the use of which shall be
included in the Annual Base Rental hereunder. Tenant shall, at its sole cost and
expense, maintain the Parking Lot in good order and condition and in accordance
with Laws (as hereinafter defined), repaving and restriping the Parking Lot as
necessary. Tenant's use of the Parking Lot shall be in accordance with all Laws
and in accordance with the terms of this Lease.

                  (ii) Landlord reserves the right to increase the size of the
Parking Lot to add additional parking spaces, and, if Landlord elects, to
reconfigure the Parking Lot in connection therewith, provided that in the event
Landlord elects to increase the size of and/or reconfigure the Parking Lot, upon
completion of such expansion (and reconfiguration, if any), (A) Landlord, its
tenants and other occupants of the Campus may use such additional parking spaces
beyond the 230 parking spaces reserved to Tenant for parking, (B) Tenant's 230
parking spaces shall be delineated in a self-contained portion of the Parking
Lot and not be further away from the Premises than such spaces were prior to
such expansion (and reconfiguration, if any), and (C) Landlord shall assume the
operation, repair and maintenance of the Parking Lot and Tenant shall pay its
Parking Lot Proportionate Share of the Parking Lot Operating Expenses in
accordance with the terms of Paragraph 3(g) of this Lease.

                  (iii) Landlord retains the right to construct a parking lot
on the portion of the Land north of the Building which lot shall contain not
less than 230 spaces for the sole use of the Tenant (the "Replacement Lot").
Upon completion of the Replacement Lot, Tenant shall have no further right to
use the Parking Lot. Tenant shall, at Tenant's sole expense, operate, maintain
and repair the Replacement Lot, repaving and restriping the Replacement Lot as
necessary. Tenant's use of the Parking Lot shall be in accordance with all Laws
and in accordance with the terms of this Lease.

              (d) (i) Landlord specifically reserves the right to sell or ground
lease all or any portion of the Campus, including the Land, without the consent
of Tenant. Any sale or ground lease of the Premises shall be subject to the
terms and conditions of this Lease, and the provisions of this Lease shall bind
and inure to the benefit of such purchaser or ground lessee, and upon such sale
or ground lease, Landlord shall be released from all obligations hereunder
arising after the date of such sale or ground lease, provided, that, in
connection with any such sale or ground lease, Landlord shall provide that
necessary documentation reasonably acceptable to Tenant is executed by and
between Landlord and such grantee or ground lessee reflecting the terms of this
Section.



                                       2
<PAGE>


                  (ii) If, during the term of this Lease and before Final
Approval (as hereinafter defined) has been received for the subdivision of the
Land from the balance of the east side of the Campus in accordance with
Paragraph 1(e) of this Lease, the balance of the east side of the Campus (or
portions thereof containing the Parking Lot or Utility Facilities) are ground
leased separately from the Land, then (A) the ground lessee of the portion of
the east side of the Campus containing the Parking Lot shall be subject to and
benefited by the provisions of Paragraphs 1(c) and 3(g) of this Lease and Tenant
shall perform its obligations under said Paragraphs for the benefit of said
ground lessee; and (B) the ground lessee of any portion of the east side of the
Campus including any of the Utility Facilities shall be subject to and benefited
by the provisions of Paragraph 3(f) and Tenant shall perform its obligations
under said Paragraph for the benefit of said ground lessee, and Landlord shall
provide that necessary documentation, reasonably acceptable to Tenant, is
executed by and between Landlord and such ground lessee reflecting the terms of
(A) and (B) set forth above.

                  (iii) If, during the term of this Lease and after Final
Approval has been received for the subdivision of the Land from the balance of
the east side of the Campus in accordance with Paragraph 1(e) of this Lease, the
Premises or the balance of the east side of the Campus are sold or ground leased
separately from the other, then, upon the effectiveness of such sale or ground
lease, the parties shall execute and record an easement agreement reasonably
acceptable to the parties and Tenant providing for, inter alia, (A) access to
the Premises and the east side of the Campus from Carter Road, (B) to the extent
the Premises are not served by public utilities, the provision of utility
service to the Premises from the Utility Facilities, the operation, repair and
maintenance of the Utility Facilities, and the allocation of the costs
associated therewith, and (C) if the Parking Lot or the Replacement Lot is not
located on the Premises, the use of the Parking Lot, the maintenance and repair
of the Parking Lot and the costs associated therewith. The provisions of said
easement agreement shall (I) bind the Premises and the balance of the east side
of the Campus, (II) with respect to provisions relating to the Utility
Facilities (the "Utility Easement"), be consistent with this subsection (iii)
and Paragraph 3(f) of this Lease so that Tenant has the same rights and benefits
and obligations provided hereunder (and no additional obligations or expenses)
related thereto, and (III) with respect to provisions relating to the Parking
Lot (the "Parking Easement"), be consistent with the provisions of Paragraphs
1(c) and 3(g) of this Lease so that Tenant has the same rights and benefits and
obligations provided hereunder (and no additional obligations or expenses)
related thereto.

              (e) (i) Landlord agrees to proceed in good faith and using
commercially reasonable efforts to subdivide the Land from the balance of the
east side of the Campus in accordance with the Subdivision Plan. Tenant agrees
that Landlord may make minor adjustments to the size and configuration of the
Land without Tenant's consent in connection with obtaining such subdivision
approval, and the definition of "Land" and "Premises" hereunder shall be deemed
revised based on the version of the Subdivision Plan that receives Final
Approval (as hereinafter defined). Landlord may make any adjustments to other
lots on the subdivision and not affecting the Land without Tenant's consent.

                  (ii) If, as of the last day of the first Lease Year or
earlier if Landlord elects, the Subdivision Plan has not received Final
Approval, Tenant shall have the right, at any time prior to Final Approval and
prior to the commencement of the Third Lease Year, to file a separate
subdivision plan solely for the subdivision of the Land from the balance



                                       3
<PAGE>


of the east side of the Campus (unless otherwise mutually agreed by Landlord and
Tenant). If, after Tenant's subdivision plan is filed and prior to the receipt
of Final Approval of Tenant's subdivision plan Landlord receives Final Approval
of Landlord's Subdivision Plan, Tenant shall promptly withdraw Tenant's
subdivision plan from consideration by Hopewell Township. For the purposes of
this Paragraph, "Final Approval" shall mean that all required governmental
approvals of the Subdivision Plan have been granted and all appeal periods
associated therewith have expired without appeal being filed (or, if an appeal
is filed, upon the full and final determination of such appeal).

          2. TERM

              (a) The term of this Lease (the "Term") shall commence, subject to
Paragraph 4 hereof, on the date (the "Commencement Date") that is the earlier of
(i) the date Landlord's Work (as defined in Paragraph 4 hereof) is substantially
complete (in accordance with Paragraph 4 hereof), or (ii) the date Tenant
commences a Permitted Use from all or any portion of the Premises; and shall
expire at 11:59 P.M. on the last day of the tenth (10th) Lease Year (defined
below) subject to extension as provided in Paragraph 5(h) below (the "Expiration
Date") unless earlier terminated in accordance with the terms hereof. This Lease
and all of terms hereof shall be effective and enforceable between Landlord and
Tenant upon its execution and delivery. If the Term of this Lease is extended,
then the Expiration Date shall be the last day of the Term as extended and Term
shall mean the Term including such extension. Upon the request of either party,
the parties shall execute an agreement in form and substance reasonably
acceptable to the parties confirming the actual Commencement Date.

              (b) "Lease Year" shall mean (i) each and every consecutive twelve
(12) month period during the Term or (ii) in the event of Lease expiration or
termination, the period between the last complete Lease Year and said expiration
or termination. Notwithstanding the foregoing, the first (1st) Lease Year shall
commence on the Commencement Date and end on the last day of the calendar month
in which the first (1st) anniversary of the Commencement Date falls. Subsequent
Lease Years shall be the consecutive twelve (12) months periods following the
first (1st) Lease Year.

              (c) (i) Tenant shall have the option to extend this Lease for an
additional term of five (5) years (the "First Extension Term") by giving
Landlord written notice (the "First Option Notice") at least twelve (12)
calendar months prior to the Expiration Date. If Tenant fails to deliver to
Landlord the First Option Notice on or before the date that is twelve (12)
calendar months prior to the Expiration Date for the initial Term, time being of
the essence hereunder, the option to extend this Lease for the First Extension
Term shall terminate and be of no further force and effect and Tenant shall have
no further right to extend or renew this Lease. In addition, if there exists an
Event of Default by Tenant under this Lease at the time of Tenant's First Option
Notice or on the First Extension Term Commencement Date, then Landlord may, at
its sole option, void Tenant's exercise of its option to extend the Term as set
forth in this Subparagraph 2(c)(i) by sending written notice thereof to Tenant.
The First Extension Term shall be on all of the same terms and conditions as set
forth in this Lease, except that (A) the First Extension Term shall commence on
the day after the Expiration Date (the "First Extension Term Commencement Date")
and shall expire on the day prior to the fifth (5th) anniversary of the First
Extension Term Commencement Date (the "First Extension Term Expiration Date");
and (B) the Base Rental for


                                       4
<PAGE>

the First Extension Term shall be ninety-five percent (95%) of the Fair Market
Rent (defined below).

                  (ii) Provided that Tenant has exercised its option for the
First Extension Term, Tenant shall have the option to extend this Lease for an
additional term of five (5) years (the "Second Extension Term") by giving
Landlord written notice (the "Second Option Notice") at least twelve (12)
calendar months prior to the First Extension Term Expiration Date. If Tenant
fails to deliver to Landlord the Second Option Notice on or before the date that
is one twelve (12) calendar months prior to the First Extension Term Expiration
Date, time being of the essence hereunder, the option to extend this Lease for
the Second Extension Term shall terminate and be of no further force and effect
and Tenant shall have no further right to extend or renew this Lease. In
addition, if there exists an Event of Default by Tenant under this Lease at the
time of Tenant's Second Option Notice or on the Second Extension Term
Commencement Date, then Landlord may, at its sole option, void Tenant's exercise
of its option to extend the Term as set forth in this Subparagraph 2(c)(ii) by
sending written notice thereof to Tenant. The Second Extension Term shall be on
all of the same terms and conditions as set forth in this Lease, except that (A)
the Second Extension Term shall commence on the day after the First Extension
Term Expiration Date (the "Second Extension Term Commencement Date") and shall
expire on the day prior to the fifth (5th) anniversary of the Second Extension
Term Commencement Date (the "Second Extension Term Expiration Date"); and (B)
the Base Rental for the Second Extension Term shall be ninety-five percent (95%)
of the Fair Market Rent (defined below).

                  (iii) (A) "Fair Market Rent" shall be determined as follows:
Within thirty (30) days after Landlord receives Tenant's First or Second Option
Notice (as the case may be), Landlord shall furnish to Tenant a notice in
writing ("Landlord's Notice") stating what Landlord perceives to be Fair Market
Rent on a "triple net" basis for the First or Second Extension Term, as the case
may be, effective as of the First or Second Extension Term Commencement Date, as
the case may be. If the Tenant disagrees with the estimate of Fair Market Rent
submitted by Landlord with Landlord's Notice, then within fifteen (15) business
days after receipt of Landlord's Notice, Tenant shall have the right to submit
to Landlord an appraisal by a licensed commercial real estate appraiser (with an
MAI designation) of Fair Market Rent for the extension term in question
effective as of the commencement date of the extension term in question. If
Tenant fails to submit such appraisal within such fifteen (15) business day
period, then Landlord's estimate of Fair Market Rent contained in Landlord's
Notice shall be Fair Market Rent for the extension term in question. If Tenant
submits an appraisal to Landlord within such fifteen (15) business day period,
and Landlord disagrees with such appraisal, Landlord shall have the right to
submit to Tenant an appraisal by a licensed commercial real estate appraiser
(with an MAI designation) of Fair Market Rent for the extension term in question
effective as of the commencement date of the extension term in question. If
Landlord fails to submit such an appraisal within such fifteen (15) business day
period, then the appraisal submitted by Tenant to Landlord shall be deemed to be
Fair Market Rent for the extension term in question. If both Landlord and Tenant
submit differing appraisals, and if the higher estimate is equal to or less than
105% of the lower estimate, the Fair Market Rent shall be established as the
average of the two appraisals. If not, the two appraisers acting on behalf of
Landlord and Tenant shall, within fifteen (15) days after Tenant's appraisal has
been submitted, jointly appoint a third licensed commercial real estate
appraiser (with an MAI designation) (the "Referee"). If the two appraisers are
unable to agree upon the selection of a



                                       5
<PAGE>

Referee, then the Referee shall be selected within ten (10) days thereafter by
an arbitrator pursuant to the rules of the American Arbitration Association.

                        (B) The Referee shall, within fifteen (15) business
days after appointment, render his decision which decision shall be strictly
limited to choosing one of the two determinations made by the two appraisers
chosen by Landlord and Tenant with respect to Fair Market Rent. The decision of
the Referee shall be binding upon Landlord and Tenant. Landlord and Tenant shall
each pay for their own appraisal, and the cost of the Referee shall be shared
equally by Landlord and Tenant. In determining Fair Market Rent, the appraisers
shall each take into account the following: (I) the amount of space and length
of term taken by the Tenant; (II) the credit worthiness and quality of Tenant;
(III) the amenities offered at the Premises; (IV) any special or unusual
features of the Premises as it relates to Tenant's business; and (V) rent in
comparable buildings in the Building's market area. In determining Fair Market
Rent, the appraisers shall exclude from consideration alterations performed by
Tenant, at its expense, subsequent to the Commencement Date.

                  (iv) Time is of the essence with respect to all aspects of
this Paragraph 2(c).

        3. RENT; UTILITIES; OPERATING EXPENSES

              (a) Tenant shall pay to Landlord at the address of Landlord
indicated herein, or at such other place as Landlord may designate in writing,
without demand, deduction or setoff, annual base rental ("Base Rental") as set
forth below in monthly installments ("Monthly Base Rental") as set forth below:

<TABLE>
<CAPTION>

Lease Month               Annual Base Rent         Rent P.S.F.          Monthly Base Rent         Sq. Ft. Rent Paid
-----------               ----------------         -----------          -----------------         -----------------
<S>                    <C>                          <C>                <C>                             <C>
1                          $     -                    $  -                $      -                     51,032
2                          $1,097,188.00              $21.50              $  91,432.33                 51,032
3-7                        $1,155,242.55              $22.64              $  96,270.21                 51,032
7-12                       $1,720,458.41              $22.64               $143,371.53                 76,000
13-36                      $1,720,458.41              $22.64               $143,371.53                 76,000
37-72                      $1,834,458.41              $24.14               $152,871.53                 76,000
73-108                     $1,956,058.41              $25.74               $163,004.87                 76,000
109-120                    $2,085,258.41              $27.44               $173,771.53                 76,000
</TABLE>


Tenant shall pay upon execution of this Lease the Monthly Base Rental for the
second full calendar month of the first Lease year. If the Commencement Date is
other than the first day of the month, Tenant shall pay on the Commencement Date
the pro rated Base Rental for such partial month. Thereafter, Base Rental shall
be payable monthly in the Monthly Base Rental amounts in advance commencing on
the first day of the third full calendar month of the first Lease Year and
continuing on the first (1st) day of each calendar month thereafter during the
Term. The term "Rent", as used herein, shall mean Base Rental, and any
additional amounts or charges payable by Tenant hereunder ("Additional Rent").

                                       6
<PAGE>

              (b) Should the Commencement Date occur other than on the first
(1st) day or terminate at any time other than the last day of a calendar month,
the amount of Base Rental and Additional Rent due from Tenant shall be
proportionately adjusted based on the remaining portion of the month.

              (c) This is a "net" lease. Tenant's rent payments shall be
completely net to Landlord so that this Lease yields to Landlord the net annual
Base Rental and Tenant shall pay all Base Rental, Additional Rent and costs of
every kind relating to the Premises without setoff, deduction, counterclaim or
abatement, except for an abatement of Rent pursuant the applicable provisions of
this Lease.

              (d) Tenant shall pay directly to the party entitled to such
payment as Additional Rent all costs and expenses of every kind and nature in
operating, equipping, lighting, heating, cooling, cleaning, maintaining,
repairing and replacing the Premises to the full extent of Tenant's obligations
specifically set forth hereunder, and all premiums for insurance (including,
without limitation, casualty and general liability coverages) relating to the
Premises as provided herein.

              (e) Tenant shall pay to Landlord, as Additional Rent hereunder,
the premiums for the fire and casualty insurance maintained by Landlord as
provided herein with respect to the Premises, within thirty (30) days of receipt
of an invoice therefor from Landlord.

              (f) (i) Tenant shall contract with and pay directly to the
appropriate utility supplier for the utilities serving the Premises.
Notwithstanding the foregoing to the contrary, Landlord currently supplies the
Premises with electricity, well water and septic sewerage from facilities
currently owned by Landlord located within the Campus and consisting of a waste
treatment plant, two (2) domestic drinking wells (currently, Landlord is
producing well water from two (2) wells denoted as Well 1 and Well 3 on Figure
3-3, "Monitoring Well Locations", prepared by Langan Engineering and
Environmental Services, Inc., dated March 28, 2001), a primary electrical
substation and a secondary electrical substation and, with respect to each such
facility, the related equipment, pipes, lines and structural supports
(collectively, the "Utility Facilities"). Tenant may, at Tenant's sole cost and
expense, obtain electricity, water and sewer service for the Premises directly
from public or private utility providers, provided, however, Landlord shall be
responsible for Tenant's reasonable, out-of-pocket cost and expense of obtaining
public electric, water and sewer service (to the extent such public service is
actually obtained by Tenant) if the provision of such services using the Utility
Facilities is subject to disruption or interference that materially affects
Tenant's use of the Premises (as reasonably determined by a third party mutually
agreed upon by Landlord and Tenant). In the event Landlord is required by
applicable Law to extend public water and/or sewer to the east side of the
Campus, Landlord shall, at Landlord's expense, bring a water and/or sewer line
to the east side of the Campus along Carter Road and Tenant, at Tenant's sole
cost and expense, shall tie-in to such line.

                  (ii) Until such time as such utilities are provided directly
to Tenant by the local utility or municipality or a private utility company,
Landlord agrees to operate, maintain, repair and replace the Utility Facilities
in compliance with applicable Laws and to provide to the Building (in compliance
with all applicable Laws):

                                       7
<PAGE>

                        (A) well water for drinking, bathroom, laboratory, HVAC
and fire suppression system use,

                        (B) electrical service of not less than 19.0 watts per
square foot, and

                        (C) septic sewer capacity in accordance with the
permits for the waste treatment plant.

                  (iii) Landlord (or the then-current owner of the facilities)
may charge Tenant for such utilities as follows:

                        (A) with respect to septic sewerage, Tenant's
proportionate share of the reasonable out-of-pocket cost (without mark-up) of
maintaining the Utility Facilities related to septic sewerage serving the
Premises, including but not limited to the waste treatment plant and related
equipment, pipes, lines and structural supports, and the fee of the manager of
the waste treatment plant, calculated based on the RSF of the Building (76,000
RSF) compared to the total RSF of buildings served by the sewage treatment
facilities (currently 315,500 RSF, accordingly, the Tenant's initial
proportionate share for maintenance of the sewage treatment facilities is
24.09%). Notwithstanding the foregoing, at any time during the Term of this
Lease that 85% or more of the RSF of the buildings on the Campus served by the
sewage treatment facilities are occupied, Landlord may elect to require Tenant
to pay for Tenant's proportionate share of the cost outlined above regarding
septic sewage usage based on Tenant's usage (determined by a water submeter)
compared to usage of all other occupants served by the sewage treatment
facilities;

                        (B) with respect to well water, Tenant shall pay
Tenant's proportionate share of the reasonable out-of-pocket cost (without
mark-up) of maintaining the Utility Facilities related to well water serving the
Premises, including, but not limited to, the domestic drinking wells, and
related equipment, pipes, pumps, lines and structural supports, calculated based
on the RSF of the Building (76,000 RSF) compared to the total RSF of buildings
served by the domestic drinking wells (currently 315,500 RSF, accordingly, the
Tenant's initial proportionate share for maintenance of the domestic drinking
wells is 24.09%); and

                        (C) with respect to electricity, Tenant shall pay for
the electricity consumed by Tenant as determined by a submeter to be installed
by Landlord at the same rates as paid by Landlord for such electricity (which
amount shall be paid monthly in arrears); plus Tenant's proportionate share of
the reasonable out-of-pocket cost (without mark-up) of maintaining the Utility
Facilities related to electricity serving the Premises, including, but not
limited to: (I) the primary substation and related equipment, pipes, lines and
structural supports, calculated based on the RSF of the Building (76,000 RSF)
compared to the total RSF of buildings served by the primary substation
(currently 315,500 RSF, accordingly, the Tenant's initial proportionate share
for maintenance of the primary substation is 24.09%); and (II) the secondary
substation and related equipment, pipes, lines and structural supports, based on
the RSF of the Building (76,000 RSF) compared to the total RSF of buildings on
the east side of the Campus served by the secondary substation (at this time,
only the Building is served by the



                                       8
<PAGE>

secondary substation; accordingly, the Tenant's initial proportionate share of
the cost of maintaining the secondary substation is 100%).

                  (iv) The Additional Rent with respect to Tenant's
proportionate share of maintaining the Utility Facilities payable under
Subparagraph 3(f)(iii) shall be paid by Tenant to Landlord within thirty (30)
days after receipt by Tenant from Landlord of a statement thereof itemized in
reasonable detail. Tenant's share of annual costs of operating and maintaining
the Utility Facilities for each expense year (which shall mean the partial
calendar year commencing on the Commencement Date and ending on December 31 of
such year, each full calendar year during the Term thereafter, and the partial
calendar year (if any) in which the Term hereof expires) and Tenant shall pay
such estimated monthly amount on the first day of each month during such expense
year concurrently with the monthly Base Rental payment. If Landlord elects to
require Tenant to make monthly estimated payments, within ninety (90) days after
the end of each expense year, Landlord will render an annual statement itemized
in reasonable detail, setting forth the actual cost of operating and maintaining
the Utility Facilities for such expense year. Landlord shall refund any
overcharge to Tenant at the time such statement is delivered to Tenant, provided
that Tenant has not received notice of an event of default hereunder (provided
that upon curing such event of default within the applicable grace period,
Tenant shall be entitled to such refund within thirty (30) days of such cure).
Any such amount due from Tenant to Landlord shall be paid by Tenant to Landlord
within thirty (30) days after receipt by Tenant of Landlord's statement. The
obligations of Landlord and Tenant with respect to any Additional Rent shall
survive the expiration or any sooner termination of the Term relating to the
actual costs incurred by Landlord up to such expiration or sooner termination of
the Term. Landlord agrees to maintain complete records of all costs reimbursable
by Tenant under the terms of this Lease. All such records shall be maintained in
accordance with generally accepted accounting practices consistently applied and
shall be retained for a period of one (1) year following the date Tenant
receives Landlord's statement. Tenant and Tenant's agents shall have the right,
subject to the terms of this Paragraph, to audit Landlord's records relating to
the costs of maintaining the Utility Facilities covered by Landlord's statement,
provided that such right shall not postpone or delay Tenant's obligations to pay
any amounts due to Landlord as set forth in Landlord's statement nor any ongoing
payments of Rent, and further provided that any such audit must be made within
one (1) year of the date Tenant receives Landlord's statement. Within forty-five
(45) days after conducting its audit, Tenant shall submit a written report to
Landlord describing the results of its audit. If Tenant's audit report concludes
that Landlord undercharged Tenant for its proportionate share of the costs of
maintaining the Utility Facilities, Tenant shall pay any amounts owed to
Landlord, with interest thereon at the rate of one percent (1%) per month from
the date such underpayment was due, to Landlord. If Tenant's audit report
concludes Landlord overcharged Tenant for Tenant's proportionate share of the
costs of maintaining the Utility Facilities, Landlord shall, within ten (10)
business days of receipt of Tenant's report, either (A) pay the amount owed with
interest thereon at the rate of one percent (1%) per month from the date such
overpayment was made, plus the reasonable, out-of-pocket cost of Tenant's audit
if the overcharge exceeds five percent (5%) of the amount actually due, or (B)
elect to submit the matter to binding determination. In the event Landlord
elects to submit the matter to binding determination, Landlord and Tenant shall
jointly select a third party who shall review Tenant's audit report and
Landlord's records to which Tenant's audit report relates. The third party shall
render a decision within thirty (30) days of being appointed, which decision
shall be limited to selecting either Tenant's audit report or Landlord's
determination. The



                                       9
<PAGE>

decision of the third party shall be binding upon the parties. The losing party
shall pay the expenses of the third party. Landlord shall be responsible to pay
all of the reasonable out-of-pocket costs of Tenant's audit in the event that
the audit or the selected third party, as applicable, concludes the amount of
any overcharge to Tenant is five percent (5%) or greater of the amount actually
due. Tenant shall be responsible for all other costs and expenses of the audit
incurred by Tenant.

              (g) (i) If Landlord assumes the operating and maintenance
responsibilities for the Parking Lot as set forth in Subparagraph 1(c)(ii)
above, then Tenant shall pay to Landlord, as Additional Rent, Tenant's Parking
Lot Proportionate Share (as defined below) of the Parking Lot Operating Expenses
(defined below) for each Expense Year (as defined below).

                  (ii) Landlord shall advise Tenant in writing of Tenant's
estimated Parking Lot Proportionate Share of the total Parking Lot Operating
Expenses for the upcoming Expense Year, along with the estimated monthly amount
based on the number of months in such Expense Year. Tenant shall pay such
estimated monthly amount on the first day of each month during such Expense Year
concurrently with the Monthly Base Rental payment. Within ninety (90) days after
the close of each Expense Year, Landlord shall deliver to Tenant an itemized
statement ("Landlord's Parking Lot Statement") showing in reasonable detail the
(A) actual Parking Lot Operating Expenses for such Expense Year broken down by
component expenses; (B) Tenant's Parking Lot Proportionate Share of such Parking
Lot Operating Expenses; (C) the amount paid by Tenant during the Expense Year
towards the Parking Lot Operating Expenses; and (D) the amount Tenant owes to
Landlord, or the amount of the refund Landlord owes to Tenant. Any amount due
from Landlord to Tenant under this Paragraph 3(g) shall be refunded by Landlord
to Tenant at the time such Landlord's Parking Lot Statement is delivered to
Tenant, provided that Tenant has not received notice of an event of default
hereunder (provided that upon curing such event of default within the applicable
grace period, Tenant shall be entitled to such refund within thirty (30) days of
such cure). Any such amount due from Tenant to Landlord shall be paid by Tenant
to Landlord within thirty (30) days after receipt by Tenant of Landlord's
Parking Lot Statement. The obligations of Landlord and Tenant with respect to
any Additional Rent shall survive the expiration or any sooner termination of
the Term relating to the actual costs incurred by Landlord up to such expiration
or sooner termination of the Term. Landlord agrees to maintain complete records
of all costs reimbursable by Tenant under the terms of this Lease. All such
records shall be maintained in accordance with generally accepted accounting
practices consistently applied and shall be retained for a period of one (1)
year following the date Tenant receives Landlord's Parking Lot Statement. Tenant
and Tenant's agents shall have the right, subject to the terms of this
Paragraph, to audit Landlord's records relating to the Parking Lot Operating
Expenses covered by a Landlord's Parking Lot Statement, provided that such right
shall not postpone or delay Tenant's obligations to pay any amounts due to
Landlord as set forth in Landlord's Parking Lot Statement nor any ongoing
payments of Rent, and further provided that any such audit must be made within
one (1) year of the date Tenant receives Landlord's Parking Lot Statement.
Within forty-five (45) days after conducting its audit, Tenant shall submit a
written report to Landlord describing the results of its audit. If Tenant's
audit report concludes that Landlord undercharged Tenant for its Parking Lot
Proportionate Share of Parking Lot Operating Expenses, Tenant shall pay any
amounts owed to Landlord, with interest thereon at the rate of one percent (1%)
per month from the date such underpayment was due, to Landlord. If Tenant's
audit report concludes Landlord overcharged


                                       10
<PAGE>

Tenant for Tenant's Parking Lot Proportionate Share of Parking Lot Operating
Expenses, Landlord shall, within ten (10) business days of receipt of Tenant's
report, either (I) pay the amount owed with interest thereon at the rate of one
percent (1%) per month from the date such overpayment was made, plus the
reasonable, out-of-pocket cost of Tenant's audit if the overcharge exceeds five
percent (5%) of the amount actually due, or (II) elect to submit the matter to
binding determination. In the event Landlord elects to submit the matter to
binding determination, Landlord and Tenant shall jointly select a third party
who shall review Tenant's audit report and Landlord's records to which Tenant's
audit report relates. The third party shall render a decision within thirty (30)
days of being appointed, which decision shall be limited to selecting either
Tenant's audit report or Landlord's determination. The decision of the third
party shall be binding upon the parties. The losing party shall pay the expenses
of the third party. Landlord shall be responsible to pay all of the reasonable
out-of-pocket costs of Tenant's audit in the event that the audit or the
selected third party, as applicable, concludes the amount of any overcharge to
Tenant is five percent (5%) or greater of the amount actually due. Tenant shall
be responsible for all other costs and expenses of the audit incurred by Tenant.

                  (iii) For purposes of this Paragraph, the following
definitions shall apply:

                        (A) "Landlord's Parking Lot Statement" shall mean a
statement furnished by Landlord to Tenant containing a computation or
information relating to Parking Lot Operating Expenses asserted by Landlord to
be due pursuant to the provisions of this Lease.

                        (B) "Tenant's Parking Lot Proportionate Share" shall be
a fraction, the numerator of which is 230 and the denominator of which is the
total number of parking spaces in the Parking Lot.

                        (C) "Parking Lot Operating Expenses" shall mean all
reasonable costs and expenses (including taxes and insurance thereon) paid by or
on behalf of Landlord in respect of the operation, cleaning, repair, safety,
management, security and maintenance (including resurfacing and restriping) of
the Parking Lot.

                        (D) "Expense Year" shall mean the partial calendar year
commencing on the Commencement Date and ending on December 31 of such year, each
full calendar year during the Term thereafter, and the partial calendar year (if
any) in which the Term hereof expires.

              (h) (i) Until such time as the Premises are subdivided from the
balance of the east side of the Campus and the real estate taxes are separately
assessed for the Land and Building, Tenant shall pay to Landlord as Additional
Rent Tenant's Tax Share for each Tax Year (defined below).

                  (ii) Landlord shall advise Tenant in writing of Tenant's
estimated Tax Share for the upcoming Tax Year, along with the estimated monthly
amount based on the number of months in such Tax Year. Tenant shall pay such
estimated monthly amount on the first day of each month during such Tax Year
concurrently with the Monthly Base Rental



                                       11
<PAGE>

payment. Within ninety (90) days after the close of each Tax Year, Landlord
shall deliver to Tenant an itemized statement ("Landlord's Tax Statement")
showing in reasonable detail the (A) actual Taxes due for such Tax Year; (B)
Tenant's Tax Share; (C) the amount paid by Tenant during the Tax Year towards
Taxes; and (D) the amount Tenant owes to Landlord, or the amount of the refund
Landlord owes to Tenant. Any amount due from Landlord to Tenant under this
Paragraph 3(h)(ii) shall be refunded by Landlord to Tenant at the time such
Landlord's Tax Statement is delivered to Tenant, provided that Tenant has not
received notice of an event of default hereunder (provided that upon curing such
event of default within the applicable grace period, Tenant shall be entitled to
such refund within thirty (30) days of such cure). Any such amount due from
Tenant to Landlord shall be paid by Tenant to Landlord within thirty (30) days
after receipt of Landlord's Tax Statement. The obligations of Landlord and
Tenant with respect to any Additional Rent shall survive the expiration or any
sooner termination of the Term relating to the actual costs incurred by Landlord
up to such expiration or sooner termination of the Term. Landlord agrees to
maintain complete records of all costs reimbursable by Tenant under the terms of
this Lease. All such records shall be maintained in accordance with generally
accepted accounting practices consistently applied and shall be retained for a
period of one (1) year following the date Tenant receives Landlord's Tax
Statement. Tenant and Tenant's agents shall have the right, subject to the terms
of this Paragraph, to audit Landlord's records relating to Taxes covered by a
Landlord's Tax Statement, provided that such right shall not postpone or delay
Tenant's obligations to pay any amounts due to Landlord as set forth in
Landlord's Tax Statement nor any ongoing payments of Rent, and further provided
that any such audit must be made within one (1) year of the date Tenant receives
Landlord's Tax Statement. Within forty-five (45) days after conducting its
audit, Tenant shall submit a written report to Landlord describing the results
of its audit. If Tenant's audit report concludes that Landlord undercharged
Tenant for its Tax Share, Tenant shall pay any amounts owed to Landlord, with
interest thereon at the rate of one percent (1%) per month from the date such
underpayment was due, to Landlord. If Tenant's audit report concludes Landlord
overcharged Tenant for Tenant's Tax Share, Landlord shall, within ten (10)
business days of receipt of Tenant's report, either (I) pay the amount owed with
interest thereon at the rate of one percent (1%) per month from the date such
overpayment was made plus the reasonable, out-of-pocket cost of Tenant's audit
if the overcharge exceeds five percent (5%) of the amount actually due, or (II)
elect to submit the matter to binding determination. In the event Landlord
elects to submit the matter to binding determination, Landlord and Tenant shall
jointly select a neutral third party who shall review Tenant's audit report and
Landlord's records to which Tenant's audit report relates. The third party shall
render a decision within thirty (30) days of being appointed, which decision
shall be limited to selecting either Tenant's audit report or Landlord's
determination. The decision of the third party shall be binding upon the
parties. The losing party shall pay the expenses of the third party. Landlord
shall be responsible to pay all of the reasonable out-of-pocket costs of
Tenant's audit in the event that the audit or the selected third party, as
applicable, concludes the amount of any overcharge to Tenant is five percent
(5%) or greater of the amount actually due. Tenant shall be responsible for all
other costs and expenses of the audit incurred by Tenant.

                  (iii) For purposes of this Paragraph, the following
definitions shall apply:

                        (A) "Tax Year" shall mean the partial calendar year
commencing on the Commencement Date and ending on December 31 of such year, each
full




                                       12
<PAGE>

calendar year during the Term thereafter, and the partial calendar year (if
any) in which the Term hereof expires.

                        (B) "Landlord's Tax Statement" shall mean a statement
furnished by Landlord to Tenant containing a computation or information relating
to Land Taxes and Improvement Taxes asserted by Landlord to be due pursuant to
the provisions of this Lease.

                        (C) "Tenant's Tax Share" shall equal, for the period of
time in question, Tenant's Land Tax Proportionate Share (as hereinafter defined)
of Land Taxes (as hereinafter defined) plus Tenant's Improvement Tax
Proportionate Share (as hereinafter defined) of Improvement Taxes (as
hereinafter defined).

                        (D) "Tenant's Land Tax Proportionate Share" shall be
9.98%, based on 19.0 acres of land in the Land compared to 190.414 acres of land
on the east side of the Campus, such figure to be adjusted upon receipt of Final
Approval for the subdivision of the Land if the size of the Land has been
changed in connection with obtaining such Final Approval.

                        (E) "Tenant's Improvement Tax Proportionate Share"
shall initially be 24.09%, based on the RSF of the Building (76,000 RSF)
compared to the total RSF of existing buildings on the east side of the Campus
(currently 315,500 RSF). Tenant's Improvement Tax Proportionate Share shall be
recalculated as new buildings are added to the east side of the Campus. If,
during the Term of this Lease, tax bills delivered by the applicable
governmental entity separately allocate taxes to the Building, Tenant's
Improvement Tax Proportionate Share shall be deemed to be such Building
allocation contained in such tax bill. If the tax bill does not separately
allocate taxes to the Building but such allocation is made in the property tax
records of Hopewell Township, then Tenant's Improvement Tax Proportionate Share
shall be deemed to be the allocation made in the property tax records of
Hopewell Township.

                        (F) "Improvement Taxes" shall

                            (1) include (I) all real estate taxes, assessments
(special or otherwise) relating to the improvements on the east side of the
Campus; and (II) any reasonable and appropriate expenses incurred in good faith
by Landlord in contesting any of the foregoing or the assessed valuation of the
Improvements on the east side of the Campus; and

                            (2) not include any of the following: (I) penalties;
(II) interest paid by Landlord on account of Improvement Taxes; (III)
Improvement Taxes reimbursed directly to Landlord by Tenant or other tenants on
the east side of the Campus; (IV) any real estate tax or assessment attributable
to any period occurring prior to the Commencement Date or subsequent to the
Expiration Date or sooner termination of this Lease; (V) any transfer, excise,
estate, succession or inheritance taxes, nor any tax in the nature of a
"rollback" or similar type tax; (VI) special assessments arising from the
development of the Campus (unless benefiting the Premises); or (VII) increases
in existing assessments due to the rehabilitation, refitting, refurbishing,
expansion or improvement of existing buildings (excluding



                                       13
<PAGE>

the Building) within the Campus but only if it can be determined from the tax
assessor's official public records that the increased assessment relates to a
particular building within the Campus.

                        (G) "Land Taxes" shall

                            (1) include (I) all real estate taxes, assessments
(special or otherwise), sewer and water rents, rates and charges, and any other
governmental levies, impositions and charges of a similar nature, which may be
levied, assessed or imposed on or in respect of all or any part of the land on
the east side of the Campus; and (II) any reasonable and appropriate expenses
incurred in good faith by Landlord in contesting any of the foregoing or the
assessed valuation of the land within the ease side of the Campus; and

                            (2) not include any of the following: (I) penalties;
(II) interest paid by Landlord on account of Land Taxes; (III) Land Taxes
reimbursed to Landlord by Tenant or other tenants at the Campus; (IV) any real
estate tax or assessment attributable to any period occurring prior to the
Commencement Date or subsequent to the Expiration Date or sooner termination of
this Lease; (V) any transfer, excise, estate, succession or inheritance taxes,
nor any tax in the nature of a "rollback" or similar type tax or (VI) special
assessments arising from the development of the Campus (unless benefiting the
Premises).

                  (iv) If at any time during the Term the methods of taxation
prevailing at the date hereof shall be altered so that in lieu of or as a
substitute for the whole or any part of the impositions now levied, assessed or
imposed on all or any part of the Campus, there shall be levied, assessed or
imposed an imposition based on the income or rents received therefrom whether or
not wholly or partially as a capital levy or otherwise, or an imposition
measured by or based in whole or in part upon all or any part of the Campus and
imposed on Landlord, then all such impositions shall be deemed to be Improvement
Taxes.

                  (v) Until such time as the Premises are subdivided from the
balance of the east side of the Campus and the Premises becomes a separate tax
parcel, Landlord reserves the exclusive right to bring proceedings for
contesting the validity or amount of Improvements Taxes or Land Taxes, or to
recover payments therefore, provided that Tenant, by written notice to Landlord,
received by Landlord not less than thirty (30) days prior to the last day on
which such contest can be filed (time being of the essence), may require
Landlord to bring such proceedings, if Landlord had not already commenced said
proceedings, provided that if Tenant requires Landlord to bring such
proceedings, Tenant shall save Landlord harmless from all costs, expenses and
liabilities in connection therewith. Upon written request of Tenant, Landlord
shall provide Tenant with an update of the current status of said proceedings.

              (i) (i) At such time as the Premises are subdivided from the
balance of the east side of the Campus and real estate taxes are separately
assessed for the Land and Building, Tenant shall pay one hundred percent (100%)
of the real estate taxes, assessments, sewer and water rents, rates and charges
and other governmental levies, impositions and charges of a similar nature which
may be levied, assessed or imposed on or in respect of the Premises and any
reasonable and appropriate expenses incurred in good faith by Landlord in
contesting any of the foregoing or the assessed value of the Premises (but only
if Landlord obtained Tenant's prior approval for bringing such contest), but not
including any of the following: (A)



                                       14
<PAGE>

penalties; (B) interest paid by Landlord on account of such taxes; (C) transfer,
excise, estate succession or inheritance taxes, or any tax in the nature of a
"rollback" or similar type tax; or (D) any real estate tax or assessment
attributable to any period prior to the Commencement Date or subsequent to the
Expiration Date or the sooner termination of this Lease.

                  (ii) Landlord shall advise Tenant in writing of the estimated
real estate taxes for the upcoming Tax Year, along with the estimated monthly
amount based on the number of months in such Tax Year and a statement of the
basis for such estimate. Tenant shall pay such estimated monthly amount on the
first day of each month during such Tax Year concurrently with the Monthly Base
Rental payment. Within ninety (90) days after the close of each Tax Year,
Landlord shall deliver to Tenant an itemized statement showing in reasonable
detail the (A) actual real estate taxes for such Tax Year; (B) the amount paid
by Tenant during the Tax Year towards real estate taxes; and (C) the amount
Tenant owes to Landlord, or the amount of the refund Landlord owes to Tenant.
Any amount due from Landlord to Tenant under this Paragraph shall be refunded by
Landlord to Tenant at the time such statement is delivered to Tenant, provided
that Tenant has not received a notice of an event of default (provided that upon
curing such event of default within the applicable grace period, Tenant shall be
entitled to such refund within thirty (30) days of such cure). Any such amount
due from Tenant to Landlord shall be paid by Tenant to Landlord within thirty
(30) days after receipt of Landlord's statement. The obligations of Landlord and
Tenant with respect to any Additional Rent shall survive the expiration or any
sooner termination of the Term. Landlord agrees to maintain complete records of
all costs reimbursable by Tenant under the terms of this Paragraph 3(i). All
such records shall be maintained in accordance with generally accepted
accounting practices consistently applied and shall be retained for a period of
one (1) year following the date Tenant receives Landlord's statement.

                  (iii) Tenant and Tenant's agents shall have the right, subject
to the terms of this Paragraph, to audit Landlord's records relating to Taxes
covered by a Landlord's statement, provided that such right shall not postpone
or delay Tenant's obligations to pay any amounts due to Landlord as set forth in
Landlord's statement nor any ongoing payments of Rent, and further provided that
any such audit must be made within one (1) year of the date Tenant receives
Landlord's statement. Within forty-five (45) days after conducting its audit,
Tenant shall submit a written report to Landlord describing the results of its
audit. If Tenant's audit report concludes that Landlord undercharged Tenant for
real estate taxes, Tenant shall pay any amounts owed to Landlord, with interest
thereon at the rate of one percent (1%) per month from the date such
underpayment was due, to Landlord. If Tenant's audit report concludes Landlord
overcharged Tenant for real estate taxes, Landlord shall, within ten (10)
business days of receipt of Tenant's report, either (A) pay the amount owed with
interest thereon at the rate of one percent (1%) per month from the date such
overpayment was made plus the reasonable, out-of-pocket cost of Tenant's audit
if the overcharge exceeds five percent (5%) of the amount actually due, or (B)
elect to submit the matter to binding determination. In the event Landlord
elects to submit the matter to binding determination, Landlord and Tenant shall
jointly select a neutral third party who shall review Tenant's audit report and
Landlord's records to which Tenant's audit report relates. The third party shall
render a decision within thirty (30) days of being appointed, which decision
shall be limited to selecting either Tenant's audit report or Landlord's
determination. The decision of the third party shall be binding upon the
parties. The losing party shall pay the expenses of the third party. Landlord
shall be responsible to pay all of


                                       15
<PAGE>

the reasonable out-of-pocket costs of Tenant's audit in the event that the audit
or the selected third party, as applicable, concludes the amount of any
overcharge to Tenant is five percent (5%) or greater of the amount actually due.
Tenant shall be responsible for all other costs and expenses of the audit
incurred by Tenant.

                  (iv) After such time as the Premises are subdivided from the
balance of the east side of the Campus and the Premises become a separate tax
parcel, Tenant may, without postponement of payment, bring proceedings for
contesting the validity or amount of any real estate taxes or assessment with
respect to the Premises, or to recover payments therefore, in its own, or in
Landlord's name, provided that (A) Tenant shall notify Landlord of Tenant's
intention to bring such proceedings not less than five (5) business days prior
to bringing such proceedings, (B) Tenant agrees to save the Landlord harmless
from all costs, expenses and liabilities in connection therewith, including, but
not limited to, Landlord's reasonable, out-of-pocket costs and expenses, (C)
Tenant shall pay all costs, fees and expenses, including, without limitation,
Landlord's reasonable, out-of-pocket costs, fees and expenses, in connection
with such proceedings, and (D) said proceedings shall suspend any possible tax
sale or forfeiture of the Premises. Landlord shall cooperate with Tenant with
respect to such proceedings but all of Landlord's reasonable, out-of-pocket
expenses incurred in connection with such cooperation shall be borne by Tenant.
If, as a result of any such proceeding, Tenant received a refund of any such
real estate taxes or assessments, Tenant shall be entitled to retain that
portion of such refund relating to any period of time within the Term (after
reimbursing Landlord for any reasonable out-of-pocket expenses incurred by
Landlord in connection with any such proceedings), and Tenant shall promptly pay
over to Landlord any portion of any refund relating to any period of time not
within the Term, provided, however, that Tenant shall not be responsible for
Landlord's out-of-pocket expenses relating to such portion of the refund. If
Tenant elects to not bring a proceeding to contest the validity of any real
estate tax or assessment affecting the Premises or to recover payments therefor,
or if Tenant has not brought such a proceeding within five (5) business days of
the deadline for such proceeding, Landlord may bring such proceedings in its own
name, provided Landlord shall notify Tenant in writing of Landlord's intent to
file such proceedings, and provided further that the portion of any refund
received by Landlord attributable to the Term hereof after deducting therefrom
Landlord's reasonable, out-of-pocket expenses of bringing such proceedings,
shall be promptly paid to Tenant. In connection with such a proceeding brought
by Landlord, Landlord shall save the Tenant harmless from all costs, expenses
and liabilities in connection therewith.

        4. LANDLORD'S WORK; CONDITION OF PREMISES

              (a) Landlord shall deliver the Premises to Tenant with Landlord's
Work (as defined below), substantially complete in broom clean condition and
structurally sound, with all mechanical systems and building systems in good
working order and the roof free of defects and leaks, and in compliance with
applicable Laws (as defined below). Landlord represents and warrants that, to
the best of Landlord's knowledge after reasonable investigation, as of the
Commencement Date, the Premises shall be in compliance with all applicable Laws.

              (b) Landlord agrees to perform the work described in Exhibit C
hereto ("Landlord's Work") at its expense in a good and workmanlike manner,
using new or first class materials, and in compliance with all Laws and Landlord
shall obtain all certificates, permits and



                                       16
<PAGE>

approvals required by Laws in connection with the performance of Landlord's
Work. Any such work performed by Landlord shall be lien-free. Landlord shall
promptly remove or bond-over any lien or claim for material or labor claimed
against the Premises, or Tenant's leasehold estate therein, by any contractor
claiming through or under Landlord, and Landlord hereby indemnifies and holds
harmless Tenant from and against any and all losses, costs, damages, expenses or
liabilities, including, but not limited, reasonable attorney's fees incurred by
Tenant as a result of such claims or liens. Landlord agrees to obtain a full
release of liens from each contractor engaged by Landlord upon completion of
such contractor's work as a condition for final payment to such contractor.

              (c) Landlord's Work shall be deemed to be "substantially complete"
when those items of Landlord's Work identified on Exhibit C as to be
substantially completed prior to the Commencement Date shall be complete but for
minor or insubstantial details of construction, mechanical adjustment or
touch-up of decoration remains to be performed, the non-completion of which will
not materially interfere with Tenant's Permitted Use of the Premises, and a
Temporary Certificate of Occupancy for the Building is issued by Hopewell
Township. Within five (5) business days of receiving Landlord's notice that
Landlord's Work is substantially complete, Landlord and Tenant shall inspect
Landlord's Work and cooperate in producing and signing a punchlist identifying
any portions of Landlord's Work which have not been completed in accordance with
Exhibit C attached hereto, and Landlord shall use diligent efforts to cause all
items on such agreed punchlist to be completed within thirty (30) days of the
execution of the punch list, but such items shall not cause a postponement in
the Commencement Date.

              (d) If Landlord is delayed in causing Landlord's Work to be
substantially complete as set forth in Paragraph 4(c) hereof, and such delays
are caused by:

                  (i) material changes in Landlord's Work which are requested by
Tenant and approved by Landlord; or

                  (ii) any material act or omission of Tenant or any of its
employees, agents, or contractors; or

                  (iii) delays in Landlord's Work due to requests by Tenant that
Landlord's contractors sequence their work with work being performed on or on
behalf of Tenant, then Landlord's Work shall be deemed substantially complete on
the date when it would have been ready but for such delay, as certified by
Landlord's architect or Landlord's contractor.

              (e) It shall be conclusively presumed that the Premises is in
satisfactory condition as of the date Landlord substantially completes
Landlord's Work except for (i) punchlist items in connection with Landlord's
Work, (ii) deficiencies in Landlord's Work identified by Tenant to Landlord in
writing within sixty (60) days after substantial completion of Landlord's Work,
and (iii) latent defects in Landlord's Work identified by Tenant to Landlord in
writing within one (1) year after substantial completion of Landlord's Work;
which deficiencies and defects Landlord shall promptly correct at Landlord's
cost and expense. To the extent possible using commercially reasonable efforts,
Landlord will assign to Tenant (or have re-issued in Tenant's name) any
warranties that benefit Landlord for portions of the Building and equipment
therein that Tenant is obligated to maintain hereunder. To the extent any
warranties


                                       17
<PAGE>

have not been issued to Landlord, Landlord will use commercially reasonable
efforts to have such warranties re-issued for the benefit of Tenant. In the
event that any warranties are issued to Landlord after the Commencement Date for
portions of the Building and equipment therein that Tenant is obligated to
maintain hereunder, Landlord will assign such warranties to Tenant.

              (f) Landlord shall use good faith efforts to substantially
complete Landlord's Work by June 15, 2002. If Landlord's Work is not
substantially complete by June 15, 2002 (subject to Tenant delays), Tenant shall
receive one (1) day of Base Rental free for each day thereafter until the
Landlord's Work is substantially complete.

              (g) Landlord agrees to deliver to Tenant a valid Certificate of
Occupancy for the Building on or before June 15, 2002, provided Tenant shall not
"open" any permit from Hopewell Township (including, but not limited to,
building, construction, land development or use permits) that may interfere with
Landlord obtaining such Certificate of Occupancy until after Landlord has
delivered such valid Certificate of Occupancy to Tenant. In the event Landlord
fails to deliver such Certificate of Occupancy on or before June 15, 2002,
provided Tenant has not "opened" any permit from Hopewell Township (including,
but not limited to, building, construction, land development or use permits)
that may interfere with Landlord obtaining such Certificate of Occupancy, Base
Rental shall abate from June 16, 2002 until such date as Landlord delivers a
valid Certificate of Occupancy to Tenant, and such Base Rental abatement shall
be Tenant's sole remedy for Landlord's failure to deliver such valid Certificate
of Occupancy by June 15, 2002.

              (h) Landlord represents and warrants to Tenant that as of the
signing of this Lease that there are no leases, subleases, tenancies or
agreements, and to the best of Landlord's knowledge, no encumbrances or
restrictions, which would prohibit or impair the use of the Premises as
contemplated by this Lease.

        5. TENANT'S WORK

              (a) Except for Major Alterations (as hereinafter defined), and
subject to the provisions of this Lease (including, but not limited to,
Paragraph 7 hereof), Tenant may perform alterations, repairs or improvements to
the Premises without the prior consent of Landlord. Notwithstanding the
foregoing, with respect to any such alteration, repair or improvement that does
not require Landlord's consent and costs in excess of $25,000, Tenant shall
deliver written notice to Landlord of such alteration, repair or improvement
that Tenant intends to perform at least fifteen (15) days prior to commencing
such work. Tenant may make Major Alterations only upon obtaining Landlord's
prior written consent, which consent Landlord agrees not to unreasonably
withhold, condition or delay, provided further that if Landlord consents to a
Major Alteration, such Major Alteration shall be performed in accordance with
the terms of this Paragraph 5. "Major Alterations" shall mean (i) alterations
that materially affect either the structure of the Building or the mechanical,
electrical, HVAC, plumbing or fire safety systems of the Building, (ii)
alterations in excess of $150,000, or (iii) the construction of improvements in
the portion of the Building consisting of approximately 24,968 square feet of
unimproved space. All alterations, repairs or improvements of a permanent nature
that would be considered a fixture of the real property made or installed by
Tenant in the Premises shall become the property of Landlord at the expiration
or earlier termination of this Lease. Landlord




                                       18
<PAGE>

shall have the right to require Tenant to remove any improvements or additions
made to the Premises by or on behalf of Tenant provided Landlord notifies Tenant
in writing of such requirement at the time Landlord approves such improvement
(if such improvement requires Landlord's approval) or within fifteen (15) days
of receipt by Landlord of notice from Tenant of an improvement not requiring
Landlord's consent. All improvement, repair, alteration and other work performed
by or on behalf of Tenant, whether or not such work requires Landlord's consent,
shall be performed diligently, in a good and workmanlike manner, and in
compliance with all applicable Laws, with valid building permits and using new
or first-class materials. Any such work performed by Tenant shall be lien-free.
Tenant shall promptly remove any lien or claim, or lien for material or labor
claimed against the Premises or Campus by any contractor claiming through or
under Tenant, and hereby indemnifies and holds harmless Landlord from and
against any and all losses, costs, damages, expenses or liabilities, including,
but not limited to, reasonable attorney's fees incurred by Landlord as a result
of or in any way related to such claims or liens. Tenant shall obtain a full
release of liens from each contractor upon completion of such contractor's work
as a condition for all payments to such contractor. Notwithstanding the
foregoing, Tenant may not construct on the Premises any improvement that would
expand the Building or create additional building square footage on the Land
without the prior written consent of Landlord, which consent Landlord may
withhold, grant and/or condition in its sole and unfettered discretion. The
immediately preceding sentence shall not apply to the construction of not more
than two concrete pads not to exceed 5,000 square feet of area in the aggregate
on the Land adjacent to the Building (but in no event may such pad(s) be located
on the north side of the Building).

              (b) Major Alterations may not proceed without (i) Landlord's
approval of plans and specifications (containing such detail as Landlord shall
reasonably require) for such work prepared by an architect and/or engineer
licensed and in good standing in the State of New Jersey (if Landlord does not
respond within fifteen (15) business days after the date Landlord receives
Tenant's plans and specifications for review, Landlord shall be deemed to have
approved such plans and specifications), (ii) Landlord's prior written approval
of Tenant's contractor and subcontractors, which approval shall not be
unreasonably withheld, conditioned or delayed; and (iii) evidence that Tenant's
contractor and subcontractors have statutory worker's compensation insurance,
public liability insurance with a combined single limit of $2,000,000
($1,000,000 per occurrence and $2,000,000 in the aggregate), excess liability
insurance with limitation of liability of not less than $5,000,000, and
builder's risk insurance with limits of liability of not less than $3,000,000,
all from insurers having an A.M. Best rating of A-/IX or higher. All such
insurance (except worker's compensation) shall be endorsed to reflect Landlord,
Landlord's mortgagee and Townsend Capital, LLC as additional insureds.

              (c) In performing any work in the Premises, Tenant and Tenant's
contractor shall abide by all applicable Laws. Entry by Tenant's contractors and
subcontractors shall be deemed to be under all of the terms, covenants,
provisions and conditions of this Lease.

              (d) Subject to the terms of Article 13 of this Lease governing
Landlord's entry onto the Premises, Landlord may make periodic inspections of
the Premises during construction of any improvements, repairs or alterations and
at completion, and shall advise Tenant of any objection to such work. In
connection with the performance of any such work,



                                       19
<PAGE>


Tenant shall use all reasonable efforts to, and shall cause its contractors to,
minimize any interference with the use of the balance of the Campus by Landlord
and other occupants.

              (e) Intentionally Deleted.

              (f) Tenant's contractors shall not post any advertising signs on
any part of the Building or Premises.

              (g) Within sixty (60) days of the date of this Lease, Landlord
shall fund to Tenant a tenant improvement allowance of $500,000 ("Tenant
Improvement Allowance") which shall be used by Tenant solely for hard and soft
costs associated with permanent improvements to the Building, including, but not
limited to, fixtures, wiring and cabling and related improvements, and shall not
be used for equipment, trade fixtures or personal property. Notwithstanding the
foregoing, Landlord shall have no obligation to fund the TI Allowance until
Tenant has delivered the Letter of Credit (as hereinafter defined) to Landlord
in accordance with the terms of Paragraph 36 hereof.

              (h) Provided no Event of Default exists, Tenant shall have the
one-time right, by written notice received by Landlord not earlier than the
first day of the second Lease Year and not later than the last day of the second
Lease Year, time being of the essence, to receive an additional tenant
improvement allowance of $2,000,000 (the "Additional T.I. Allowance") from
Landlord, which sum shall be funded by Landlord to Tenant within thirty (30)
days of receipt of said notice from Tenant. Further, if Tenant has not made all
of Tenant's Initial Building Investment (hereinafter defined) at the time
Landlord receives Tenant's notice of election to receive the Additional T.I.
Allowance, Tenant's receipt of the Additional T.I. Allowance shall be
conditioned upon Tenant delivering to Landlord a replacement Letter of Credit
(hereinafter defined) in the amount of $1,680,114.59 as set forth in Paragraph
36(a) of this Lease. If Tenant fails to timely notify Landlord of such election,
such right of Tenant shall terminate. Notwithstanding the foregoing, in the
event Tenant has received a notice of default from Landlord prior to Landlord's
receipt of Tenant's exercise notice under this Paragraph, Tenant shall not be
entitled to receive the Additional T.I. Allowance until the date that is ten
(10) days from the date such default, and any additional defaults of which
Tenant has received notice prior to the cure of said default, is or are cured by
Tenant; and in the event such default(s) is or are not cured before the
expiration of the time periods provided in this Lease or by the date that is the
forty-fifth (45th) day of the third Lease Year, then Tenant's right to receive
the Additional T.I. Allowance under this Paragraph 5(h) shall be terminated.
Effective upon receipt of the Additional T.I. Allowance, the Annual Base Rental
and Monthly Base Rental amounts for the balance of the initial Term of this
Lease shall be as reflected on Exhibit D hereto and the Expiration Date for the
initial Term shall be extended to the date that is the tenth (10th) anniversary
of the date Landlord funds the Additional T.I. Allowance. The Additional T.I.
Allowance shall be used solely to pay the hard and soft costs associated with
permanent improvements to the Building, including, but not limited to, fixtures,
wiring and cabling, and shall not be used to purchase equipment, trade fixtures
or personal property.

                                       20
<PAGE>

        6. USE

              (a) Tenant shall have the right to use and occupy the Premises for
general laboratory/vivarium, research and development, light manufacturing,
office and ancillary uses in full compliance with Laws and with all permits for
the Utility Facilities, and for no other uses ("Permitted Use").

              (b) Notwithstanding anything to the contrary provided in Paragraph
6(a), Tenant shall not use or occupy the Premises or any portion thereof, permit
or suffer the same to be used or occupied and/or do, or permit or suffer
anything to be done, in or on the Premises or any part thereof, that would, in
any manner or respect:

                  (i) violate any certificate of occupancy or Laws in force
relating to the Premises;

                  (ii) make void or voidable any insurance then in force with
respect to the Premises, or render it impossible to obtain fire or other
insurance thereon required to be furnished by Landlord or Tenant under this
Lease;

                  (iii) cause structural or other injury to the Premises, or
constitute a private or public nuisance or waste;

                  (iv) render the Premises incapable of being used or occupied
after the expiration or sooner termination of the term of this Lease for the
purposes for which the same were permitted to be used and occupied on the
Commencement Date, except for ordinary wear and tear and damage by fire or other
casualty and repairs for which Tenant is not responsible under this Lease;

                  (v) penetrate or puncture, or otherwise damage the roof of the
Building (provided that Tenant may penetrate the roof in connection with
permitted alterations by Tenant provided such penetrations do not violate the
roof warranty in effect for the roof of the Building or are performed (and
restored or sealed) in accordance with the roof warranty). Any damage to the
roof caused by Tenant, or Tenant's agents, employees or contractors, shall be
repaired at Tenant's sole cost and expense; and/or

                  (vi) violate the provisions of Paragraph 34 hereof.

        7. TENANT'S CARE OF THE PREMISES

              (a) Except for Landlord's maintenance and repair obligations under
the terms of this Lease, Tenant shall be responsible for all maintenance, repair
and replacement of the Premises. Without limiting the generality of the
immediately preceding sentence, Tenant shall maintain the Premises in a neat,
clean, sanitary condition and in good order and repair (making replacements as
necessary and excepting reasonable wear and tear, items that are the
responsibility of Landlord under this Lease, damage by casualty required to be
insured by Landlord hereunder, and condemnation excepted), including the
exterior and interior of the Building including, without limitation, the roof
cover, interior walls, ceilings, doors, windows; plumbing, electrical, sewage,
mechanical, air-conditioning, ventilation and heating equipment;



                                       21
<PAGE>

and all fixtures and equipment appurtenant to the Premises; replace broken glass
with the same quality glass, paint and refurbish the Premises and restore or
replace the floor covering at reasonable intervals, and at any event at such
times as may be reasonably required to keep the Premises attractive in
appearance; not overload, damage or deface the Premises; properly store and
dispose of trash using commercially reasonable services; and maintain the
driveways, sidewalks and parking areas on the Premises, resurfacing and
restriping as necessary. Tenant shall observe and not violate the terms of the
roof warranty in effect for the roof of the Building. Tenant shall obtain and
maintain throughout the Term hereof maintenance and service contracts with
respect to the Building HVAC systems, elevators systems (if any) and fire safety
systems, which service contracts shall (i) cover all repairs and part
replacements, (ii) be on commercially reasonable terms and with licensed and
reputable service providers and (iii) be at Tenant's sole expense.

              (b) Tenant shall make any improvements and repairs of whatever
nature required by applicable laws, ordinance, orders or regulations of any
public authority or of any insurer, board of fire underwriters or similar
insurance rating bureau have jurisdiction over the Premises (hereinafter
collectively "Laws") to the extent related to Tenant's specific use of the
Premises.

              (c) Tenant shall keep the roof, sidewalks, entrances, exits and
passageways on the Premises reasonably clean and free of dirt, debris, snow and
ice, and shall not obstruct any of the foregoing.

              (d) No later than the Expiration Date or the date that this Lease
is earlier terminated as provided herein, Tenant will remove all Tenant's
equipment, furnishings, furniture, including removable partitions and
workstations, and other personal property and repair all injury done by or in
connection with installation or removal of said property and surrender the
Premises (together with all keys, access cards or entrance passes to the
Building) in the condition that existed on the Commencement Date, reasonable
wear and tear, items that are the responsibility of Landlord under this Lease,
damage by casualty required to be insured by Landlord hereunder, condemnation
and permitted tenant improvements and alterations not required to be removed
excepted. All property of Tenant remaining in the Premises ten (10) business
days after expiration or earlier termination of the Term shall be deemed
conclusively abandoned and may be removed by Landlord, and Tenant shall
reimburse Landlord for the reasonable cost of removing the same, subject
however, to Landlord's right to require Tenant to remove any improvements or
additions made to the Premises by Tenant. The Building systems shall be in
proper working order and condition with all required repairs and replacements
having been made.

              (e) Tenant shall promptly remove any lien or claim of lien for
material or labor claimed against the Premises, by contractors or workmen
engaged by Tenant if such claim should arise, and hereby indemnifies and holds
Landlord harmless from and against any and all losses, costs, damages, expenses
or liabilities including, but not limited to, reasonable attorney's fees,
incurred by Landlord, as a result of or in any way related to such claims or
such liens of contractors or workmen engaged by Tenant. All work shall be
performed in accordance with applicable Laws.

                                       22
<PAGE>

              (f) Tenant, at its expense, shall comply with all applicable Laws
which pertain to Tenant's, its agents', employees', and contractors' specific
use of the Premises, including, but not limited to the Americans with
Disabilities Act, and all Laws affecting the maintenance and repair obligations
of Tenant or the particular manner in which Tenant uses the Premises and all
applicable Laws pertaining to Tenant's, its agents', employees', and
contractors' use, storage or disposal of any hazardous substance, pollutant or
other contaminant, waste disposal, air emissions and other environmental
matters.

        8. LANDLORD'S MAINTENANCE OBLIGATIONS

              (a) Landlord's obligations with respect to the Premises under this
Lease shall be to maintain, repair and replace the foundations, roof deck and
supports, structural columns and beams, exterior walls and other structural
elements of the Building not added by Tenant in good repair, reasonable wear and
tear excepted; provided that Tenant shall be responsible for maintaining
structural elements it adds to the Building and for damage to structural
elements arising from its use of the Building (unless such damage is covered by
Landlord's insurance required to be maintained by Landlord hereunder).

              (b) The Landlord shall have no obligation or liability with
respect to or in any way connected with the Premises, or service to the
Premises, except as expressly set forth in this Lease. Landlord shall not be
deemed to have committed a breach of any repair obligations unless it makes
repairs negligently or fails to commence repairs in a reasonable time after
Landlord receives notice from Tenant.

              (c) Landlord, at its expense, shall make any improvements and
repairs of whatever nature to the Premises required by Laws to the extent not
required to be made by Tenant pursuant to Paragraphs 7(b) and (f) hereof.

              (d) Landlord shall not be liable for indirect or consequential
damages for any reason, or for any inconvenience, interruption or consequences
resulting from the failure of utilities or any service, making repairs,
improvements or resulting from leaks from steam, gas, electricity, water or any
other substance from pipes, wires or other conduits, or from the bursting or
stoppage thereof; or from leaks of water, snow or rain from the plumbing or
roof, or for wetness or dampness for any reason.

              (e) Landlord, at its expense, shall comply with all applicable
Laws which pertain to Landlord's, its agents', employees', contractors' and
other invitees' actions in carrying out and fulfilling Landlord's obligations
under this Lease, including, but not limited to all Laws affecting the
maintenance, repair and replacement obligations of Landlord.

              (f) In the event of an interruption of services or utilities
provided by Landlord to the Premises, Landlord shall not be liable for, and
Tenant hereby expressly relieves Landlord from, any and all indirect, direct or
consequential damages, and for any inconvenience, interruption or consequences
resulting from interruption of services or utilities provided by Landlord;
provided that, in the event such interruption causes a material interference
with the operation of Tenant's business on the Premises and such interruption
continues for four (4) business days after Landlord has received notice (by
phone call or fax) of such interruption of




                                       23
<PAGE>

services, the Base Rental and Additional Rent payable hereunder shall abate in
proportion to such portion of the Premises rendered unfit for use for Tenant's
business as a result of such interruption of services. The nature and extent of
interference with Tenant's ability to conduct business in the Premises shall be
considered in determining the amount of such abatement, and the abatement shall
commence and continue from the date the utilities or service was interrupted
until such utility or service is restored. The foregoing right to abatement of
Base Rental and Additional Rent shall be Tenant's sole remedy hereunder with
respect to the interruption of utilities or services provided by Landlord to the
Premises except as otherwise expressly set forth herein. With respect to any
utilities for services obtained by Tenant directly from public utility companies
or from the municipality, Landlord shall not be liable for, and Tenant hereby
expressly relieves Landlord from, any and all damages, including direct,
indirect or consequential damages, for any interruption of services by any cause
beyond the reasonable control of the Landlord.

        9. DESTRUCTION OR DAMAGE TO PREMISES

              (a) Tenant shall promptly notify Landlord of any damage to the
Premises occasioned by fire, the elements, casualty or any other cause. If the
Premises are substantially damaged by storm, fire, earthquake or other casualty
or any other cause and shall take more than nine (9) months from the date of
damage to restore (including obtaining insurance proceeds and obtaining all
necessary permits and approvals for the required restoration (including the
expiration of any applicable appeal period with no appeal being filed or if an
appeal is filed, upon the full and final determination of such appeal)), in the
reasonable determination of an architect mutually selected by the parties,
Tenant shall have the option to cancel this Lease as of the date of the
occurrence of the storm, earthquake, fire or other casualty or any other cause
by giving written notice to Landlord within thirty (30) days from the date of
receipt of the architect's determination of such damage or destruction, which
shall be made within thirty (30) days after the casualty.

              (b) If during the Term of this Lease, the Premises is so damaged
by fire or other casualty or any other cause such that (i) in the reasonable
determination of an architect mutually selected by the parties it will take more
than twelve (12) months from the date of damage to restore the Premises
(including obtaining insurance proceeds and obtaining all necessary permits and
approvals for the required restoration (including the expiration of any
applicable appeal period with no appeal being filed or if an appeal is filed,
upon the full and final determination of such appeal)); or (ii) the holder of
any mortgage or deed to secure debt encumbering the Premises shall not allow
adequate insurance proceeds to be made available for repair and restoration or
shall not consent to the repair or restoration; or (iii) the damage is not
covered by the insurance Landlord is required to maintain hereunder; or (iv) the
Lease is in the last twelve (12) months of its Term, then Landlord may cancel
this Lease by giving written notice thereof within thirty (30) days after
Landlord knows of the damage to the Premises. Any such cancellation notice must
specify the cancellation date, which shall be at least thirty (30) but no more
than sixty (60) days after the date notice of cancellation is given.

              (c) Unless this Lease is terminated pursuant to Paragraphs 9(a) or
(b) above, Landlord shall, subject to the rights of Landlord's mortgagee, and
zoning laws and building codes then in existence, commence and thereafter pursue
diligently and as expeditiously



                                       24
<PAGE>

as practicable, the repair and restoration of damage to the Premises so that the
Premises is in substantially similar condition as the Premises existed on the
Commencement Date, but in no event shall Landlord be required to expend in such
repair and restoration any amount in excess of the net insurance proceeds
received by Landlord with respect to such damage. "Net insurance proceeds" shall
mean the amount of the insurance proceeds less all reasonable costs and
expenses, including adjusters' and attorneys' fees, of obtaining same.

              (d) Rent shall abate in proportion to that part of the Premises
rendered unfit for use in Tenant's business as a result of such damage or
casualty. The nature and extent of interference to Tenant's ability to conduct
business in the Premises shall be considered in determining the amount of said
abatement, and the abatement shall commence and continue from the date the
damage occurred until fifteen (15) days after the date Landlord substantially
completes the repair and restoration of the Premises and gives notice to Tenant
that said repairs and restoration are substantially completed, or until Tenant
again uses the Premises or the portions thereof rendered unusable for the
regular conduct of its business, whichever occurs first. Notwithstanding the
foregoing, if the damage to the Premises is caused by the negligence or willful
misconduct of Tenant, its permitted assignees or subtenants, employees or
agents, then the abatement shall only be to the extent Landlord receives rent
interruption insurance proceeds relating to the loss of Tenant's Rent hereunder.

              (e) Landlord shall not be responsible for repair, restoration or
replacement of trade fixtures, equipment, furniture, furnishings or personal
property on the Premises or other items required to be insured by Tenant
hereunder unless such damage was caused by the act, omission, fault, negligence
or misconduct of Landlord and not covered by the insurance required to be
maintained by Tenant hereunder.

              (f) If, as permitted under this Paragraph 9, either party cancels
this Lease, then this Lease shall end on the date specified in the cancellation
notice. The Rent, including any Additional Rent, and other charges shall be
payable up to the cancellation date, after taking into account any applicable
abatement. Landlord shall promptly refund to Tenant any prepaid, unaccrued Rent
and Additional Rent (after taking into account any applicable abatement), less
any sums then owing by Tenant to Landlord.

        10. DEFAULT; REMEDIES

              (a) The occurrence of any of the following shall constitute an
"Event of Default" hereunder by Tenant:

                  (i) Tenant fails to pay the Rent or any other sum of money
when due and such failure continues for (A) five (5) days after written notice
to Tenant and Guarantor (if any) with respect to the first notice given with
respect to the Term of this Lease and (B) two (2) business days after written
notice to Guarantor (if any) with respect to all subsequent payment defaults
thereafter;

                  (ii) Any petition is filed by or against Tenant under any
section or chapter of the National or Federal Bankruptcy Act or any other
applicable Federal or State bankruptcy, insolvency or other similar law, and, in
the case of a petition filed against Tenant,



                                       25
<PAGE>

such petition is not dismissed within forty-five (45) days after the date of
such filing; if Tenant shall become insolvent or transfer property to defraud
creditors; if Tenant shall make an assignment for the benefit of creditors; or
if a receiver is appointed for any of Tenant's assets;

                  (iii) Tenant fails to bond off or otherwise remove any lien
filed against the Premises by reason of Tenant's actions, within thirty (30)
days after Tenant has notice of the filing of such lien;

                  (iv) Tenant fails to observe, perform and keep the covenants,
agreements, provisions, stipulations and conditions herein contained to be
observed, performed and kept by Tenant and persists in such failure after thirty
(30) days written notice by Landlord requiring that Tenant remedy, correct,
desist or comply (or if any such failure to comply on the part of Tenant would
reasonably require more than thirty (30) days to rectify, unless Tenant
commences rectification within the thirty (30) day period and thereafter
promptly, effectively and continuously proceeds with the rectification of the
failure to comply on the part of Tenant);

                  (v) If all or any part of this Lease shall be assigned, or if
all or any part of the Premises shall be sublet, either voluntarily or by
operation of law, except in accordance with the requirements of Paragraph 11
hereof;

                  (vi) Tenant or any guarantor of Tenant's obligations
("Guarantor") (if either is a corporation) is liquidated or dissolved or its
charter expires or is revoked, or Tenant or Guarantor (if either is a
partnership or business association) is dissolved or partitioned, or Tenant or
Guarantor (if either is a trust) is terminated or expires, or if Tenant or
Guarantor (if either is an individual) dies; or

                  (vii) Tenant fails to deliver to Landlord the Letter of Credit
in accordance with Paragraph 36 hereof within 45 days of the date of this Lease.

              (b) Upon the occurrence of an Event of Default, Landlord shall
have the option to do and perform any one or more of the following:

                  (i) declare due and payable and sue for and recover, all
unpaid Base Rental, Additional Rent and any other sums due under this Lease for
the unexpired period of the Term (including all Additional Rent as the amount(s)
of the same can be determined or reasonably estimated) as if by the terms of
this Lease the same were payable in advance, and/or

                  (ii) terminate the Term by giving written notice thereof to
Tenant and, upon the giving of such notice, the Term and the estate hereby
granted shall expire and terminate with the same force and effect as though the
date of such notice was the date hereinbefore fixed for the expiration of the
Term, and all rights of Tenant hereunder shall expire and terminate, but Tenant
shall remain liable as hereinafter provided, and/or

                  (iii) exercise any other rights and remedies available to
Landlord at law or in equity.

              (c) If any Event of Default shall have occurred, Landlord may,
whether or not the Term has been terminated as herein provided, re-enter and
repossess the Premises or any



                                       26
<PAGE>

part thereof in compliance with Laws by summary proceedings, ejectment or
otherwise and Landlord shall have the right to remove all persons and property
therefrom. Landlord shall be under no liability for or by reason of any such
entry, repossession or removal, and no such re-entry or taking of possession of
the Premises by Landlord shall be construed as an election on Landlord's part to
terminate the Term unless a written notice of such intention be given to Tenant
pursuant to Paragraph 10(b)(ii) or unless the termination of this Lease be
decreed by a court of competent jurisdiction.

              (d) At any time or from time to time after the repossession of the
Premises or any part thereof pursuant to Paragraph 10(c), whether or not the
Term shall have been terminated pursuant to Paragraph 10(c), Landlord shall use
its commercially reasonable efforts to relet all or any part of the Premises for
the account of Tenant for such term or terms (which may be greater or less than
the period which would otherwise have constituted the balance of the Term) and
on such conditions (which may include concessions or free rent) and for such
uses as Landlord, in its absolute discretion, may determine, and Landlord may
collect and receive any rents payable by reason of such reletting. Landlord
shall have no liability for the failure to relet the Premises, or for the
failure to collect any Rent due from such reletting. Landlord shall not be
required to accept any tenant offered by Tenant or observe any instruction given
by Tenant about such reletting, or do any act or exercise any care or diligence
with respect to such reletting or to the mitigation of damages, other than
exercising commercially reasonable efforts to mitigate damages. For the purpose
of such reletting, Landlord may decorate or make repairs, changes, alterations
or additions in or to the Premises or any part thereof to the extent deemed by
Landlord desirable or convenient, and the reasonable cost of such decoration,
repairs, changes, alterations or additions shall be charged to and be payable by
Tenant as additional rent hereunder, as well as any reasonable brokerage
commissions and reasonable legal fees expended by Landlord. No such re-entry or
taking of possession by Landlord shall be construed as an election by Landlord
to terminate the Term unless a written notice of such intention be given to
Tenant pursuant to Paragraph 10(b)(ii) or unless the termination of this Lease
be decreed by a court of competent jurisdiction.

              (e) No expiration or termination of the Term pursuant to Paragraph
10(b)(ii) hereof, by operation of law or otherwise, and no repossession of the
Premises or any part thereof pursuant to Paragraph 10(b)(ii) hereof, or
otherwise, and no reletting of the Premises or any part thereof pursuant to
Paragraph 10(d) hereof shall relieve Tenant of its liabilities and obligations
hereunder, all of which shall survive such expiration, termination, repossession
or reletting.

              (f) In the event of any expiration or termination of this Lease or
repossession of the Premises or any part thereof by reason of the occurrence of
an Event of Default, and Landlord has not elected to accelerate Base Rental,
Additional Rent and other sums pursuant to Paragraph 10(c), Tenant shall pay to
Landlord the Base Rental, Additional Rent and other sums required to be paid by
Tenant to and including the date of such expiration, termination or
repossession; and, thereafter, Tenant shall, until the end of what would have
been the expiration of the Term in the absence of such expiration, termination
or repossession, and whether or not the Premises or any part thereof shall have
been relet, be liable to Landlord for, and shall pay to Landlord, as liquidated
and agreed current damages, the Base Rental, Additional Rent and other sums
which would be payable under this Lease by Tenant in the absence of such


                                       27
<PAGE>

expiration, termination or repossession, less the net proceeds, if any, of any
reletting effected for the account of Tenant pursuant to Paragraph 10(d) hereof,
after deducting from such proceeds all of Landlord's reasonable expenses in
connection with such reletting (including all related repossession costs,
brokerage commissions, legal expenses, employees' expenses, alteration costs and
expenses of preparation for such reletting). Tenant shall pay such current
damages on the days on which the Base Rental would have been payable under this
Lease in the absence of such expiration, termination or repossession, and
Landlord shall be entitled to recover the same from Tenant on each such day. If
any applicable statute or rule of law shall validly limit the amount of such
liquidated final damages to less that the amount agreed upon the this Paragraph
10(f), Landlord shall be entitled to the maximum amount allowable under such
statute or rule of law.

              (g) At any time after such expiration or termination of this Lease
or repossession of the Premises or any part thereof by reason of the occurrence
of an Event of Default, whether or not Landlord shall have collected any current
damages pursuant to Paragraph 10(f), Landlord shall be entitled to recover from
Tenant, and Tenant shall pay to Landlord on demand, unless Tenant has paid the
whole of accelerated Base Rental, Additional Rent and other sums pursuant to
Paragraph 10(b)(i), as and for liquidated and agreed final damages for Tenant's
default and in lieu of all current damages beyond the date of such demand (it
being agreed that it would be impracticable or extremely difficult to fix the
actual damages), an amount equal to the excess, if any, of (i) Base Rental,
Additional Rent and other sums which would be payable under this Lease for the
remainder of the Term from the date of such demand (or, if it be earlier, the
date to which Tenant shall have satisfied in full its obligations under
Paragraph 10(f) to pay current damages) for what would have been the then
unexpired Term in the absence of such expiration, termination or repossession,
discounted to present value at the rate of six percent (6%) per annum, over (ii)
the then fair rental value of the Premises for the same period, discounted to
present value at a like rate and reduced by an appropriate period of vacancy and
reasonable costs and expenses associated with any reletting including
commissions, concessions (including free rent periods) tenant fit-up allowances,
attorneys' fees and other professional fees, and advertising. If any applicable
statute or rule of law shall validly limit the amount of such liquidated final
damages to less than the amount above agreed upon in this Paragraph 10(g),
Landlord shall be entitled to the maximum amount allowable under such statute or
rule of law.

              (h) No right or remedy herein conferred upon or reserved to
Landlord is intended to be exclusive of any other right or remedy herein by law
provided, but each shall be cumulative and in addition to every right or remedy
given herein or now or hereafter existing at law or in equity or by statute.

              (i) No waiver by Landlord of any breach by Tenant of any of
Tenant's obligations, agreements or covenants herein shall be a waiver of any
subsequent breach or of any obligation, agreement or covenant, nor shall any
forbearance by Landlord to seek a remedy for any breach by Tenant be a waiver by
Landlord of any rights and remedies with respect to such or any subsequent
breach.

              (j) In the event of a breach or threatened breach by Tenant of any
of the covenants or provisions hereof, Landlord shall have the right of
injunction and right to invoke




                                       28
<PAGE>

any remedy allowed at law or in equity as if re-entry summary proceedings and
other remedies were not herein provided for.

              (k) Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Landlord
obtaining possession of the Premises by reason of the violation by Tenant of any
of the covenants and conditions of this Lease, or otherwise.

              (l) Tenant shall pay upon demand all of Landlord's reasonable
costs, charges and expenses, including the reasonable fees and out-of-pocket
expenses of legal counsel, agents and others retained by Landlord incurred in
enforcing Tenant's obligations hereunder or incurred by Landlord in any
litigation, negotiation or transaction in which Tenant causes Landlord, without
Landlord's fault, to become involved or concerned, together with Interest from
the date incurred by Landlord to the date of payment by Tenant.

              (m) Default by Bankruptcy.

                  (i) Upon occurrence of an event described in Paragraph 10(a)
(iii) and (v), Landlord shall have all rights and remedies available to Landlord
pursuant to this Paragraph; provided, that while a case in which Tenant is the
subject debtor under the Bankruptcy Code is pending and only for so long as
Tenant or its trustee in bankruptcy (hereinafter referred to as "Trustee") is in
compliance with the provisions of Paragraph 10(d), Landlord shall not exercise
its rights and remedies pursuant to this Paragraph.

                  (ii) In the event Tenant becomes the subject debtor in a case
pending under the Bankruptcy Code, Landlord's right to terminate this Lease
pursuant to Paragraph 10(a) shall be subject to the rights of Trustee to assume
or assign this Lease; provided, Trustee shall not have the right to assume or
assign this Lease unless Trustee promptly (A) cures all defaults under this
Lease, (B) compensates Landlord for monetary damages incurred as a result of
such defaults, and (C) provides adequate assurance of future performance on the
part of Tenant as debtor in possession or on the part of the assignee tenant,
which adequate assurance shall include, without limitation, the deposit of cash
security in an amount equal to the Base Rental and Additional Rent for the
lesser of the remaining Term or twelve (12) months, which deposit shall be held
by Landlord as security for the full performance of all of Tenant's obligations
under this Lease. If Tenant or Trustee is unable to meet the criteria and
obligations stated above, Tenant agrees in advance for itself and Trustee that
the burden to provide adequate assurance of future performance has not been met
and this Lease may be terminated by Landlord.

                  If Landlord fails to perform or comply with any of the terms,
covenants, conditions or provisions to be performed or complied with by Landlord
pursuant to this Lease, and any such failure shall remain uncured for a period
of thirty (30) days after written notice from Tenant to Landlord and Mortgagee
pursuant to Section 14(b) detailing the said alleged default (except that if
such default cannot be cured within such thirty period, it shall not be
considered an event of default of Landlord if Landlord commences to cure the
default within the thirty (30) day period and proceeds diligently thereafter to
seek to effect such cure), then Tenant shall have all of the rights and remedies
available at law or in equity, including the right



                                       29
<PAGE>

to seek injunctive relief, and the right of self-help with the right to bring
suit against Landlord for the reasonable out-of-pocket costs incurred by Tenant
in exercising such self-help; provided, however, in no event shall Tenant have
any right to set off against Rent. Tenant's reasonable out-of-pocket costs shall
include all of Tenant's reasonable costs, charges and expenses, including the
reasonable fees and out-of-pocket expenses of legal counsel, agents and others
retained by Tenant incurred in enforcing Landlord's obligations hereunder or
incurred by Tenant in any litigation, negotiation or transaction in which
Landlord causes Tenant, without Tenant's fault, to become involved or concerned,
together with Interest from the date incurred by Tenant to the date of payment
by Landlord.

        11. ASSIGNMENT AND SUBLETTING

              (a) Tenant shall not sublet any part of the Premises, nor assign,
pledge or encumber this Lease or any interest herein, without the prior written
consent of Landlord, which shall not be unreasonably withheld, conditioned or
delayed. Consent by Landlord to one assignment or sublease shall not destroy or
waive this provision, and all later assignments and subleases shall likewise be
made only upon prior written consent of Landlord. Notwithstanding anything to
the contrary contained in this Lease, it shall be reasonable for Landlord to
withhold consent to an assignment or sublease if: (i) the tangible net worth (as
established to Landlord's reasonable satisfaction) of the proposed assignee or
subtenant is less than the tangible net worth of Tenant as of the date of this
Lease, (ii) the proposed use of the Premises by the proposed assignee or
subtenant is not a Permitted Use, or is otherwise in violation of the terms and
conditions of this Lease, or any applicable Laws, (iii) the proposed use of the
Premises by the proposed assignee or subtenant involves the generation, use,
storage, treatment or disposal of Hazardous Substances in violation of any
Environmental law, (iv) an Event of Default of Tenant under this Lease exists
(provided that if, at the time Tenant assigns this Lease or sublets the
Premises, a default exists and Landlord has given Tenant the notice required
hereunder, such assignee or subtenant and its interest in the Premises shall be
subject to such default), or (v) the proposed assignee or subtenant will cause
the existing parking facilities at the Campus to be in violation of code
requirements. In the event a sublease or assignment is consented to by Landlord,
any sublessees or assignees shall become liable directly to Landlord for all
obligations of Tenant hereunder without relieving or in any way modifying
Tenant's or any Guarantor's liability hereunder. In the event Landlord gives its
consent to any such assignment or sublease, fifty percent (50%) of any rent or
other cost to the assignee or subtenant for all or any portion of the Premises
less reasonable out-of-pocket costs actually incurred by Tenant in connection
with such assignment or sublease, over and above the Rent payable by Tenant for
such space shall be due and payable, and shall be paid, to Landlord. In the
event a sublease or assignment is made as herein provided, Tenant shall pay
Landlord a charge equal to the actual reasonable out-of-pocket costs incurred by
Landlord for all of the necessary legal and accounting services required to
accomplish such assignment or subletting, as the case may be, not to exceed
$5,000. Any transfer, assignment or sublease of all or any portion of the
Premises or Tenant's interest under this Lease made without Landlord's consent
shall be void and of no force or effect.

              (b) Notwithstanding anything to the contrary contained herein,
Tenant shall have the right, without obtaining Landlord's consent, to (i) assign
its interest in this Lease to an Affiliated Entity (hereinafter defined) or to a
Permitted Transferee (hereinafter defined), provided that prior to or
simultaneously with such assignment, such Affiliated Entity or



                                       30
<PAGE>

Permitted Transferee executes and delivers to Landlord an Assumption Agreement
(hereinafter defined); and (ii) to sublease all or a portion of the Premises to
an Affiliated Entity. For the purposes hereof "Permitted Transferee" shall be
defined as an entity (x) acquiring all or substantially all of Tenant's assets,
(y) acquiring control of a majority of Tenant's voting stock (if a corporation)
or partnership interest (if a partnership), or (z) created by a merger between
Tenant and another entity. For the purposes hereof, an "Affiliated Entity" shall
be defined as an entity which is controlled by, is under common control with, or
which controls, Tenant. For the purposes hereof, "control" shall mean the direct
or indirect ownership of more than 50% of the beneficial interest in the entity
in question. For the purposes hereof, an "Assumption Agreement" shall be an
agreement in form and substance reasonably satisfactory to Landlord and Tenant
whereby the assignee agrees to be independently bound by and upon all of the
covenants, agreements, terms, provisions and conditions set forth in this Lease
on the part of Tenant to be performed, and whereby the assignee expressly shall
agree that the provisions of this Paragraph shall, notwithstanding such
assignment, continue to be binding upon said assignee with respect to all future
assignments, subleases and transfers. In no event shall Tenant or Guarantor be
relieved of its obligations under this Lease notwithstanding any such
assignment, unless expressly agreed to in writing by Landlord.

        12. CONDEMNATION

              (a) If all of the Premises or Parking Lot or Replacement Lot, or a
part of the Premises or Parking Lot or Replacement Lot such that the loss of the
portion taken has a material impact on Tenant's Permitted Use, as reasonably
determined by a third party mutually selected by the parties, are taken by
virtue of eminent domain or other similar proceeding or are conveyed in lieu of
such taking, then this Lease shall expire on the date when title or right of
possession shall vest, and any Rent paid for any period beyond said date shall
be repaid to Tenant. In the event of a partial taking where this Lease is not
terminated, the Rent shall be adjusted in proportion to the RSF of Premises
taken, as certified by an architect mutually selected by the parties. In either
event, Landlord shall be entitled to, and Tenant shall not have any right to
claim, any award made in any condemnation proceeding, action or ruling relating
to the Premises; provided however, Tenant shall be entitled to make a claim in
any condemnation proceeding, action or ruling relating to the Premises for
Tenant's moving expenses, loss of goodwill and the unamortized value of
leasehold improvements in the Premises actually paid for by Tenant, to the
extent such claim does not in any manner impact upon or reduce Landlord's claim
or award in such condemnation proceeding, action or ruling.

              (b) Intentionally Deleted.

              (c) Landlord's right to any award made in any condemnation
proceeding, action or ruling relating to the Building or the Campus shall be
subject to the right of the holder of any mortgage or deed of trust encumbering
any portion of the Campus, to apply such award towards the reduction of any
indebtedness secured by the Campus or any portion thereof.

        13. RIGHT TO ENTER

                  Landlord, its agents, contractors, employees or invitees, may
enter the Premises at all reasonable times during normal business hours and with
reasonable prior notice



                                       31
<PAGE>

(except such notice shall not be required in the event of an emergency, however,
Landlord shall attempt (if practical to do so) to give reasonable notice under
the circumstances) to: (a) exhibit the Premises to prospective purchasers or
tenants of the Premises (such entry for prospective tenants shall be limited to
the last twelve (12) months of the Term); (b) inspect the Premises to see that
Tenant is complying with its obligations hereunder; (c) make repairs,
alterations, improvements and additions required of Landlord under the terms
hereof, or that are advisable in Landlord's determination to preserve the
integrity, safety and good order of all or any part of the Premises, including
any systems serving the Building, or which may be necessary to comply with Laws;
and (d) remove any alterations, additions or improvements made by Tenant in
violation of Paragraph 7 hereof. Notwithstanding the foregoing, access to the
portions of the building identified on Exhibit I attached hereto as "Secured
Areas" (such Secured Areas may be amended by Tenant with written notice to
Landlord describing the revised Secured Areas) shall require two (2) business
days advance notice (except such notice shall not be required in the event of an
emergency, however Landlord shall attempt (if practical to do so) to give
reasonable notice under the circumstances). Each and every entry by Landlord
into the Premises under the above provisions shall be done to the extent
reasonably possible with minimal interference with Tenant's business operations.
A representative of Tenant may accompany Landlord or its contractors, employees,
agents or invitees, during any entry onto the Premises, provided that the
unavailability of a representative of Tenant to accompany Landlord shall not
serve to prohibit Landlord from accessing the Premises when it has the right to
do so.

        14. SUBORDINATION AND NON-DISTURBANCE

              (a) Tenant has confirmed that this Lease is subordinate to the
mortgage on the Premises held by CDC Mortgage Capital, Inc. ("CDC") pursuant to
the terms of that certain Subordination, Attornment and Non-Disturbance
Agreement of even date herewith between Tenant, Landlord and CDC.

              (b) This Lease shall be subject and subordinate to any underlying
land leases or mortgages which may hereafter affect the Premises and also to all
renewals, modifications, extensions, consolidations and replacements of such
underlying land leases and mortgages, provided that Landlord shall obtain a
standard subordination, non-disturbance and attornment agreement from any ground
or underlying lessor or future mortgagee of the Premises which will recognize
this Lease and all of Tenant's rights hereunder and shall be in form and
substance acceptable to Tenant; provided, however, Tenant shall act in a
commercially reasonable and timely manner in requesting any modifications to
such standard subordination, non-disturbance and attornment agreement and Tenant
further agrees that Tenant shall not materially interfere with Landlord's
ability to obtain financing for the Premises.

        15. INDEMNIFICATION AND HOLD HARMLESS

              (a) Except for matters involving Hazardous Substances (as
hereinafter defined) and Environmental Laws (as hereinafter defined), which are
exclusively addressed in Article 34 hereof, Tenant agrees to save Landlord
harmless, and will exonerate and indemnify Landlord, from and against any and
all claims, liabilities or penalties on account of or based upon any injury to
person, or loss of or damage to property sustained on or emanating from the
Campus (including, without limitation, Premises, Parking Lot or Replacement Lot)
owned by


                                       32
<PAGE>

Landlord from time to time on account of, based upon, or arising out of, the use
or occupancy of the Premises or Parking Lot or Replacement Lot by Tenant,
including, without limitation, the act, omission, fault, negligence or
misconduct of Tenant, its agents, employees, licensees, subtenants, contractors
or invitees and from and against all reasonable costs, expenses (including
reasonable attorneys' fees), and liabilities incurred in connection with any
such claim, or any action or proceeding; and in case any action or proceeding is
brought against Landlord by reason of such claim, Tenant upon notice from
Landlord shall, at Tenant's expense, resist or defend such action or proceeding
employing counsel reasonably satisfactory to Landlord and Tenant.

              (b) Intentionally deleted.

              (c) Tenant agrees to report in writing to Landlord any material
defective condition in or about the Premises known to Tenant, and further agrees
to attempt to contact Landlord by telephone immediately in such instance.

              (d) Except for matters involving Hazardous Substances and
Environmental Laws, which are exclusively addressed in Article 34 of this Lease,
Landlord agrees to save Tenant harmless, and will exonerate and indemnify
Tenant, from and against any and all claims, liabilities or penalties on account
of or based upon or arising out of any injury to person, or loss of or damage to
property sustained on or emanating from the portions of the Campus (including
without limitation the Premises, Parking Lot and Replacement Lot) owned from
time to time by Landlord on account of, based upon, or arising out of (i) the
act, omission, fault, negligence or misconduct of Landlord, its agents,
employees, licensees, contractors or invitees and (ii) the TCPI Lien and all
other liens not created by or on account of Tenant which relate to leasehold
improvements existing as of the date of this Lease, and from and against all
costs, expenses (including reasonable attorneys' fees), and liabilities incurred
in connection with any such claim, or any action or proceeding; and in case any
action or proceeding is brought against Tenant by reason of such claim, Landlord
upon notice from Tenant shall, at Landlord's expense, resist or defend such
action or proceeding employing counsel reasonably satisfactory to Landlord and
Tenant.

              (e) Other indemnification obligations of the parties are included
in Paragraphs 4(b), 5(a) and 7(e), Articles 29 and 34, and Paragraphs 33(a),
39(d) and 40(d).

        16. INSURANCE

              (a) Tenant shall carry (at its sole expense from and after the
date hereof and during the Term) the following insurance:

                  (i) all-risk insurance, or its equivalent, insuring Tenant's
interest in the Premises and any and all trade fixtures, furniture, equipment,
supplies, contents and other property owned, leased, held or possessed by it and
contained therein, and any permanent improvements made to the Premises by Tenant
(unless required to be insured by Landlord hereunder), such insurance coverage
to be in an amount equal to the full insurable value of such improvements and
property, as such may increase from time to time;

                  (ii) worker's compensation insurance as required by applicable
law;

                                       33
<PAGE>

                  (iii) commercial general liability insurance containing
coverages reasonably acceptable to Landlord, insuring Tenant, Landlord, Townsend
Capital, LLC, Landlord's mortgagee (if designated in writing by Landlord) and
Landlord's property manager (if designated in writing by Landlord) against any
and all liability for injury to or death of a person or persons and for damage
to property occasioned by or arising out of any construction work being done on
the Premises, or arising out of the use or occupancy of the Premises by Tenant,
its employees, licensees, invitees, agents, representatives or contractors, such
policy to have a combined single limit of not less than Two Million and No/100
Dollars ($2,000,000) ($1,000,000 per occurrence and $2,000,000 in the
aggregate), for any bodily injury or property damage occurring as a result of or
in conjunction with the above, and excess liability insurance of not less than
$5,000,000 following form of the commercial general liability, business auto
liability and employer's liability insurance maintained by Tenant, which
liability insurance shall (A) be primary insurance as to all claims thereunder
and provide that any insurance carried by Landlord is not excess and is
non-contributing with any insurance requirement of Tenant; (B) contain
cross-liability endorsements or a severability of interest clause acceptable to
Landlord; (C) specifically cover the indemnification obligations of Tenant under
this Lease; (D) be written on an "occurrence" basis; and (E) include fire legal
liability coverage with limits of not less than $100,000; and

                  (iv) insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air-conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in the Premises (without exclusion
for explosions), in an amount at least equal to $2,000,000.

The insurance required in subparagraphs (iii) and (iv) above shall name
Landlord, Townsend Capital, LLC, Landlord's mortgagee (if designated in writing
by Landlord) and Landlord's property manager (if designated in writing by
Landlord) as additional insureds. All said insurance policies maintained by
Tenant shall be carried with companies licensed to do business in the State of
New Jersey and having an A.M. Best rating of A-/IX or higher and shall be
noncancellable except after thirty (30) days' written notice to Landlord.
Evidence of such insurance in Acord Form 27 format and signed by a reputable
insurance agent shall be delivered to Landlord on or prior to the Commencement
Date and at least twenty (20) days prior to the expiration of each respective
policy term. Upon request, Tenant shall promptly deliver to Landlord a certified
copy of any insurance policy required to be maintained by Tenant hereunder. Each
insurance policy will contain a provision requiring thirty (30) days' prior
written notice to Landlord and any named or additional insured if the policy is
materially modified, canceled or not renewed.

              (b) Landlord shall maintain during the Term, with solvent and
responsible companies licensed to do business in the State of New Jersey,
commercial property insurance with standard "special causes of loss" coverage
for the Building in an amount equal to one hundred percent (100%) of the full
replacement cost of the Building. Landlord shall, on an annual basis, evaluate
the full replacement cost of the building and adjust coverage amounts
accordingly. In the event that Tenant performs or causes to be performed
improvement to the Premises that constitute fixtures or are of a permanent
nature (and not trade fixtures) and notifies Landlord as to such improvements,
Landlord will promptly attempt (using commercially



                                       34
<PAGE>


reasonable efforts) to cause such improvements to be insured under Landlord's
commercial property insurance policy, provided that such improvements shall be
at Tenant's risk unless and until covered by Landlord's insurance. Evidence of
such insurance in ACORD 27 format shall be delivered to Tenant on or prior to
the Commencement Date and prior to the expiration of each respective policy
term. Landlord shall also keep in force during the entire Term a policy of
commercial general liability insurance covering the Campus from a responsible
carrier licensed to do business in the State of New Jersey with a combined
single limit of not less than Two Million Dollars ($2,000,000.00) ($1,000,000
per occurrence and $2,000,000 in the aggregate) for any bodily injury or
property damage and excess liability insurance of not less than $5,000,000
following form of the commercial general liability, business auto liability and
employer's liability insurance maintained by Landlord. Landlord's commercial
general liability policy shall include a contractual liability endorsement and
cover Landlord's indemnity obligations under this Lease. Upon Tenant's written
request, Landlord shall deliver to Tenant an insurance certificate evidencing
such insurance. Landlord shall also maintain insurance covering loss of rents
for not less than twelve (12) months in connection with a loss covered under its
commercial property insurance.

              (c) Landlord and Tenant shall each have included in all policies
of property insurance respectively obtained by them with respect to the Premises
a waiver by the insurer of all right of subrogation against the other in
connection with any loss or damage to real and personal property thereby insured
against. To the full extent permitted by law, Landlord and Tenant each waive all
right of recovery against the other for, and agree to release the other from
liability for, loss or damage to the extent such loss or damage is required to
be covered under this Lease at the time of such loss or damage; provided,
however, that the foregoing release by each party is conditioned upon the other
party's carrying insurance with the above described waiver of subrogation, and
if such coverage is not obtained or maintained by either party, then the other
party's foregoing release shall be deemed to be rescinded until such waiver is
either obtained or reinstated.

              (d) Throughout the making of any alterations or improvements
(other than mere decorations) by Tenant, its agents, contractors or employees,
Tenant or Tenant's contractor(s), at its expense, shall carry or cause to be
carried (i) workmen's compensation insurance in statutory limits, covering all
persons employed in connection with such improvements, (ii) property insurance,
completed value form, covering all physical loss (including any loss of or
damage to supplies, machinery and equipment) in connection with the making of
such alterations or improvements, and (iii) comprehensive liability insurance,
with completed operations endorsement, covering any occurrence in or about the
Premises in connection with such improvements, which comprehensive liability
insurance policy shall have a combined single limit of not less than Two Million
and No/100 dollars ($2,000,000). For such improvements costing over $50,000 or
which materially affect or impact the structure of the Building, Tenant shall
furnish Landlord with satisfactory evidence that such insurance is in effect
before the commencement of its improvements and, on request, at reasonable
intervals thereafter. Evidence of such insurance in Acord Form 27 format and
signed by a reputable insurance agent shall be delivered to Landlord prior to
the commencement of any such alterations or improvements. For such improvements
costing over $50,000 or which materially affect or impact the structure of the
Building, each policy shall name Landlord, Townsend Capital, LLC, Landlord's
mortgagee (if specified in writing by Landlord) and Landlord's property manager
(if


                                       35
<PAGE>


specified in writing by Landlord) as an additional insured and shall contain
a provision requiring thirty (30) days' prior written notice to Landlord and any
named insured if the policy is canceled or not renewed.

        17. ENTIRE AGREEMENT - NO WAIVER

              This Lease contains the entire agreement of the parties hereto and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force and effect. The
failure of either party to insist in any instance on strict performance of any
covenant or condition hereof, or to exercise any option herein contained, shall
not be construed as a waiver of such covenant, condition or option in any other
instance. This Lease cannot be changed or terminated orally, and can be modified
only in writing, executed by each party hereto.

        18. HOLDING OVER

              If Tenant remains in possession of any part of the Premises after
expiration of the Term for those Premises, or after any permitted termination of
the Lease by Landlord, with Landlord's acquiescence and without any written
agreement between the parties, Tenant shall be a tenant at sufferance and such
tenancy shall be subject to all the provisions hereof and the Monthly Base
Rental for said holdover period shall be one hundred fifty percent (150%) of the
amount of Monthly Base Rental and other charges due in the last full month of
the Term. There shall be no renewal of this Lease by operation of law. Nothing
in this Paragraph shall be construed as a consent by Landlord to the possession
of the Premises by Tenant after the expiration or earlier termination of the
Term.

        19. HEADINGS

              The headings in this Lease are included for convenience only and
shall not be taken into consideration in any construction or interpretation of
any part of this Lease.

        20. NOTICES

              Any notice by either party to the other shall be valid only if in
writing and shall be deemed to be duly given only if delivered personally or
sent by certified mail, or reliable nationally recognized overnight courier
service, addressed (a) if to Tenant, at the address set forth in the
introductory paragraph of this Lease with a required copy to Steven M. Cohen,
Esquire, Morgan, Lewis & Bockius, LLP, 1701 Market Street, Philadelphia, PA
19103 and to General Counsel, Lexicon Genetics Incorporated, 8800 Technology
Forest Place, The Woodlands, TX 77393-2167, (b) if to Landlord, at the address
set forth in the introductory paragraph of this Lease with a required copy to
Bart I. Mellits, Esquire, Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market
Street, 51st Floor, Philadelphia, PA 19103-7599, and (c) if to Guarantor, to
Lexicon Genetics Incorporated, 8800 Technology Forest Place, The Woodlands, TX
77393-2167, Attention: General Counsel and Chief Financial Officer, or at such
other address for either party as that party may designate by notice to the
other. Notice shall be deemed effective and given upon the date of receipt or
refusal of delivery to the address required by this Paragraph 20. Either party
may change such party's notice address by written notice to the other party
given in accordance with the terms hereof.

                                       36
<PAGE>

        21. HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES

              (a) The provisions of this Lease shall bind and inure to the
benefit of Landlord and Tenant, and their respective permitted successors,
heirs, legal representatives and assigns, it being understood that the term
"Landlord" as used in this Lease means only the owner or prime lessee (or the
ground lessee) for the time being of the Premises, so that in the event of any
sale or sales of said Premises or assignment of any prime lease (or of any
ground lease thereof), Landlord named herein shall be and hereby is entirely
released of all covenants accruing after the assignment, and obligations of
Landlord hereunder accruing thereafter, provided that the purchaser, assignee,
or the ground lessee, as the case may be, has assumed and agreed in writing to
carry out any and all covenants and obligations of Landlord hereunder. Subject
to such purchaser, assignee, or the ground lessee, as the case may be, assuming
and agreeing in writing to carry out any and all covenants and obligations of
Landlord hereunder, Tenant shall be bound to any such succeeding party for
performance by Tenant of all the terms, covenants, and conditions of this Lease
and agrees to execute any attornment agreement not in conflict with the terms
and provisions of this Lease at the request of any such party.

              (b) The parties "Landlord" and "Tenant" and pronouns relating
thereto, as used herein, shall include male, female, singular and plural,
corporation, partnership or individual, as may fit the particular parties.

        22. ATTORNEYS' FEES

              In the event of any law suit or court action between Landlord and
Tenant arising out of or under this Lease or the terms and conditions stated
herein, the prevailing party in such law suit or court action shall be entitled
to and shall collect from the non-prevailing party the reasonable attorneys'
fees and court costs actually incurred by the prevailing party with respect to
said lawsuit or court action.

        23. LATE PAYMENTS

              Any payment due of Tenant hereunder not received by Landlord
within five (5) days following the date when due shall be assessed a $5,000
charge for Landlord's administrative and other costs in processing and pursuing
the payment of such late payment, and shall be assessed an additional five
percent (5%) charge for the aforesaid costs of Landlord, assessed from the date
when such payment was due, for each month thereafter until paid in full.
Acceptance by Landlord of a payment, and the cashing of a check, in an amount
less than that which is currently due shall in no way affect Landlord's rights
under this Lease and in no way be an accord and satisfaction. This provision
does not prevent Landlord from declaring the non-payment of Rent when due (and
after any required notice and grace period) an Event of Default hereunder.

        24. ESTOPPEL CERTIFICATE

              At any time during the period beginning on the full execution and
delivery of this Lease and ending with the expiration or earlier termination of
this Lease, Landlord or Tenant shall, within ten (10) days of the written
request of the other, execute, acknowledge and deliver to the requesting party,
any mortgagee of Landlord, prospective mortgagee of Landlord,




                                       37
<PAGE>

ground lessee or prospective ground lessee of the Premises, or any prospective
purchaser of the Premises (or in the case of Tenant, all or substantially all of
the ownership interests in, or assets of, Tenant) an estoppel certificate in
recordable form evidencing whether or not (a) this Lease is in full force and
effect; (b) this Lease has been amended in any way; (c) there are any existing
defaults on the part of Landlord or Tenant hereunder or defenses or offsets
against the enforcement of this Lease to the knowledge of the party giving such
estoppel (specifying the nature of such defaults, defenses or offsets, if any);
(d) the date to which Rent and other amounts due hereunder, if any, have been
paid; and (e) any such other factual information related to this Lease as may be
reasonably requested. Each certificate delivered pursuant to this Paragraph may
be relied on by the recipient, any prospective purchaser or transferee or ground
lessor of Landlord's interest in the Premises, any prospective purchaser of the
interests in, or assets of Tenant, or any mortgagee or prospective mortgagee, or
any ground lessee.

        25. SEVERABILITY AND INTERPRETATION

              (a) If any provision of this Lease shall be deemed illegal,
invalid or unenforceable under present or future laws effective during the Term,
the remainder of the Lease shall not be affected by such illegality, invalidity
or unenforceability and in lieu of each provision of this Lease that is illegal,
invalid or unenforceable, there shall be added as a part of this Lease a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

              (b) Should any provisions of this Lease require judicial
interpretation, it is agreed that the court interpreting or construing the same
shall not apply a presumption that the terms of any such provision shall be more
strictly construed against one party or the other by reason of the rule of
construction that a document is to be construed most strictly against the party
who itself or through its agent prepared the same, it being agreed that the
agents of all parties hereto have participated in the preparation of this Lease.

        26. MULTIPLE TENANTS

              If more than one entity comprises and constitutes Tenant, then all
entities comprising Tenant are and shall be jointly and severally liable for the
due and proper performance of Tenant's duties and obligations arising under or
in connection with this Lease.

        27. FORCE MAJEURE

              The parties shall be excused for the period of any delay and shall
not be deemed in default with respect to the performance of any of the terms,
covenants, and conditions of this Lease (except for the payment of Rent by
Tenant) when prevented from so doing by causes beyond their respective control,
which shall include, but not be limited to, all labor disputes, governmental
regulations or controls, fire or other casualty, inability to obtain any
material or services, or acts of God.

        28. QUIET ENJOYMENT

              So long as Tenant is in full compliance with terms and conditions
of this Lease, Landlord shall warrant and defend Tenant in the quiet enjoyment
and possession of the



                                       38
<PAGE>


Premises during the Term against any and all claims made by, through or under
Landlord, subject to the terms of this Lease.

        29. BROKERAGE COMMISSION; INDEMNITY

              McDevitt Real Estate Services, Inc. ("McDevitt") acted as agent
for Landlord in this transaction and CB Richard Ellis ("CB") acted as agent for
Tenant in this transaction. McDevitt and CB shall be paid a commission by
Landlord pursuant to separate written agreements. Landlord and Tenant each
represents and warrants to the other that it has not had any contact with any
other brokers other than McDevitt and CB and that there are no other claims for
broker's commissions or finder's fees in connection with its execution of this
Lease. Landlord and Tenant each hereby indemnifies the other and holds the other
harmless from and against all loss, cost, damage or expense, including, but not
limited to, reasonable attorneys' fees and court costs, incurred by such other
party as a result of or in conjunction with a claim of any real estate agent or
broker, if made by, through or under the indemnifying party, other than that of
McDevitt and CB pursuant to the agreements referenced above.

        30. EXCULPATION OF LANDLORD

              Landlord's liability to Tenant with respect to this Lease shall be
limited solely to Landlord's interest in the east side of the Campus until the
Premises has been subdivided therefrom, and thereafter to Landlord's interest in
the Premises. Notwithstanding anything to the contrary contained herein, neither
Landlord's nor Tenant's respective partners, officers, directors, members, or
shareholders shall have any personal liability whatsoever with respect to this
Lease.

        31. ORIGINAL INSTRUMENT

              Any number of counterparts of this Lease may be executed, and each
such counterpart shall be deemed to be an original instrument.

        32. NEW JERSEY LAW

              This Lease has been made under and shall be construed and
interpreted under and in accordance with the laws of the State of New Jersey.

        33. NO RECORDATION OF LEASE

              (a) Landlord and Tenant shall execute, contemporaneously with this
Lease, a notice of this Lease ("Notice of Lease") in the form required by New
Jersey law, which may be recorded by Tenant at Tenant's expense in the real
estate records of the county in which the Premises is located. Tenant agrees,
after termination of this Lease, within five (5) business days of Tenant's
receipt of Landlord's written request, to execute an instrument in recordable
the form attached hereto as Exhibit J ("Lease Termination") stating that the
Lease (including, but not limited to, the Purchase Option, Right of First
Refusal and Expansion Right) has been terminated and terminating the Notice of
Lease. Notwithstanding the foregoing, in the event Tenant purchases the Premises
pursuant to the Purchase Option or the Right of First Refusal, the Notice of
Lease shall continue to be effective with respect to (i) the Expansion Right (to
the extent it



                                       39
<PAGE>

remains in effect at the time Tenant purchases the Premises), (ii) the Utility
Easement (to the extent the Premises are still served by the Utility
Facilities), and (iii) the Parking Easement (to the extent that the Parking Lot
(or the Replacement Lot, as the case may be) is located off of the Land), and
the Lease Termination shall so provide. Tenant agrees to indemnify Landlord for
any actual damages that Landlord may incur as a result of Tenant's refusal or
delay in executing the Lease Termination. Notwithstanding the foregoing, Tenant
hereby irrevocably appoints Landlord as Tenant's attorney-in-fact for the sole
purpose of signing the Lease Termination upon termination of this Lease (but
only if Tenant does not sign the Lease Termination within the five (5) business
day time period), and the Notice of Lease shall contain such appointment.

              (b) Tenant further agrees, after termination of the Purchase
Option (as set forth in Paragraph 39 of this Lease) or the termination of the
Right of First Refusal (as set forth in Paragraph 40 of this Lease) or the
termination of the Expansion Right (as set forth in Paragraph 42 of this Lease),
within five (5) business days of Tenant's receipt of Landlord's written request,
to execute an instrument in the form attached hereto as Exhibit K (the "Option
Termination") stating that the Purchase Option or Right of First Refusal or
Expansion Right, as the case may be, is terminated, and terminating such rights,
pursuant to the terms of Paragraphs 39, 40 or 42, respectively, of this Lease.

        34. HAZARDOUS WASTES/ENVIRONMENTAL COMPLIANCE


              (a) For purposes of Paragraph 34, the following definitions shall
apply:

                  (i) "Environmental Law" shall mean any and all currently
existing or subsequently enacted or effective federal, state and local laws,
statutes, codes, rules, regulations, ordinances, orders, standards, permits,
licenses and requirements and any amendments, implementing regulations and
reauthorizations thereto in effect during the Term regulating, dealing with,
pertaining to or imposing liability or standards of conduct concerning the use,
exposure, generation, manufacture, transportation, import, export, treatment,
storage, disposal, emission, release, discharge, remediation or abatement of
Hazardous Substances, or the preservation, conservation or regulation of the
environment, including without limitation the following laws and any regulations
adopted pursuant thereto: Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C.ss.9601 et. seq., as amended, the Resource
Conservation and Recovery Act, 42 U.S.C. ss.6901 et. seq., as amended, the Clean
Air Act, 42 U.S.C. ss.7401 et. seq., as amended, the Hazardous Materials
Transportation Act, 49 U.S.C. ss.1801 et. seq., as amended, the Toxic Substances
Control Act ("TSCA"), 15 U.S.C. ss. 2601 et. seq., the Clean Water Act, 33
U.S.C. ss.1801 et. seq., as amended, the New Jersey Solid Waste Management Act,
N.J.S.A. 13:1-E-1 et. seq., as amended, the New Jersey Water Pollution Control
Act, N.J.S.A. 58:10A-1 et. seq., as amended, the New Jersey Air Pollution
Control Act, N.J.S.A. 26:2 C-1 et. seq., as amended, The New Jersey Spill
Compensation and Control Act ("Spill Act"), N.J.S.A. 58:23-10 et. seq., as
amended, and the Industrial Site Recovery Act ("ISRA"), N.J.S.A. 13:1K-6 et.
seq., as amended.


                  (ii) "Hazardous Substances" shall mean and include any
substance or material containing one or more of any of the following: "hazardous
material," "hazardous waste," "hazardous substance," "contaminant," "regulated
substance," "toxic


                                       40
<PAGE>


substance," "oil," "petroleum," "petroleum product," "pollution," and
"pollutant" as such terms are defined under Environmental Law.

                  (iii) "Release" or "Threatened Release" shall have the same
meaning such terms have under CERCLA.

                  (iv) "Discharge" shall have the same meaning the term has
under the Spill Act.

              (b) Tenant covenants and agrees that Tenant will not store, use,
or otherwise handle any Hazardous Substances except in quantities reasonably
necessary for Tenant's use and then only in compliance with Environmental Law.
Notwithstanding the foregoing, Tenant is prohibited from disposing any Hazardous
Substances at the Building or on the Premises except in compliance with
Environmental Law. Tenant agrees to notify Landlord prior to allowing any
explosives or radiation materials on the Premises. Tenant further agrees to
indemnify and hold Landlord harmless from and against all claims, costs,
liabilities, damages, judgments, fines, penalties or losses (including but not
limited to sums paid in settlement of claims, attorneys' fees and costs of
litigation) (collectively, "Damages") arising from (i) any requirement imposed
upon Landlord or Tenant by order of any federal, state, or local governmental
authority to pay for the cleanup or removal of any Hazardous Substances from the
Building or Premises, or Releases or Threatened Releases of Hazardous Substances
at or from the Building or Premises (A) or balance of the east side of the
Campus caused by the acts or omissions of Tenant, its employees, agents,
contractors or invitees provided that after Final Approval, the indemnity under
this Clause (A) shall be limited to the Premises and Parking Lot (but with
respect to the Parking Lot, only at such times as Tenant has exclusive use
thereof); or (B) occurring during the Term of this Lease not caused by Landlord,
its agents, employees or contractors (except for Hazardous Substances migrating
to the Premises and not released by Tenant, its agents, employees, invitees or
contractors or Hazardous Substances existing on the Premises or in the Building
prior to the Commencement Date); or (ii) Tenant's violation of any Environmental
Law; or (iii) Tenant's breach of any of its obligations contained in this
Paragraph.

              (c) Landlord agrees to indemnify and to hold Tenant harmless from
and against all Damages, including attorney fees and costs of litigation,
arising from (i) any requirement imposed upon Landlord or Tenant by order of any
federal, state, or local governmental authority to pay for the cleanup or
removal of any Hazardous Substances from the Building, Premises or the east side
of the Campus, or Releases or Threatened Releases of Hazardous Substances at or
from the Building, Premises or east side of the Campus, in each case to the
extent caused by the acts or omissions of Landlord, its employees, agents,
contractors or invitees; or (ii) Landlord's violation of any Environmental Law.
Any obligation Landlord may have to indemnify Tenant pursuant to this Paragraph
34(c) shall be secondary to the insurance coverage provided by the Environmental
Insurance (as hereinafter defined).

              (d) Landlord agrees to indemnify and to hold Tenant harmless from
and against all Damages, including attorney fees and costs of litigation,
arising from any requirement imposed upon Landlord or Tenant by order of any
federal, state, or local governmental authority to pay for the cleanup or
removal of any Hazardous Substances from the Building, Premises or the east side
of the Campus, or Releases or Threatened Releases of Hazardous Substances at or



                                       41
<PAGE>


from the Building, Premises or east side of the Campus: (i) existing on or at
the Premises on or before Tenant's execution of this Lease; or (ii) existing on
or at a portion of the east side of the Campus other than the Premises on or
before Tenant's execution of the Lease; or (iii) occurring on or at a portion of
the east side of the Campus other than the Premises during the Term of this
Lease and not caused by Tenant; or (iv) occurring after the expiration or
earlier termination of this Lease and not caused by Tenant; provided that after
Final Approval, any obligation Landlord may have to indemnify Tenant pursuant to
this paragraph 34(d)(ii), (iii) and (iv) shall be limited to the portions of the
east side of the Campus that Landlord owns at the time such Damages are imposed.
Any obligation Landlord may have to indemnify Tenant pursuant to this Paragraph
34(d) shall be secondary to the insurance coverage provided by the Environmental
Insurance.

              (e) The respective obligations of the parties under this Paragraph
34 shall survive the termination or earlier expiration of this Lease.

              (f) If ISRA is not applicable, Tenant will obtain a Letter of
Nonapplicability from the New Jersey Department of Environmental Protection
prior to its termination of any activities in the Premises or the term of this
Lease, whichever is earlier. If in connection with a sale, transfer, or mortgage
of any portion of the Campus by Landlord or other transaction by the Landlord
where Landlord is required to comply with ISRA, Tenant will cooperate with
Landlord and provide any information reasonably requested by Landlord to comply
with ISRA or to obtain a Letter of Nonapplicability.

              (g) The parties shall purchase a pollution legal liability
insurance policy naming Tenant as insured ("Environmental Insurance") providing
coverage for certain claims associated with environmental contamination existing
on, in or under the Campus as of the Commencement Date ("Environmental
Contamination"). The Environmental Insurance, which shall be in a form
substantially similar to that attached to this Lease as Exhibit G, shall provide
coverage for clean-up costs associated with the Environmental Contamination, as
well as third party claims for property damage and bodily injury. The term of
the Environmental Insurance shall be 10 years, with a policy limit of $5,000,000
in the aggregate and a per loss limit of $5,000,000, with a $10,000 deductible
per loss. The premium and any applicable fees for the Environmental Insurance up
to $76,000.00 shall be paid (or the amount of such premium up to $76,000.00
shall be forwarded to Tenant) by Landlord on the date that Landlord executes
this Lease, and Tenant shall pay any amount by which the premium and any
applicable fees exceed $76,000.00. The terms of this Lease shall be subject to
and shall not be effective or binding on either party unless and until such
payment by Landlord is made or forwarded to Tenant. Any obligation Landlord may
have to indemnify Tenant pursuant to Article 34 of this Lease shall be secondary
to the insurance coverage provided by the Environmental Insurance.

        35. LEASE BINDING UPON DELIVERY; NO OPTION

              Submission of this Lease for examination and negotiation does not
constitute an option to lease or reservation of space for the Premises. This
Lease shall be effective only when executed and delivered by both parties. If
this Lease has been submitted to Tenant in form already signed by Landlord, it
evidences only Landlord's offer to enter into this Lease on the exact terms
provided as delivered, which offer may be revoked at any time and



                                       42
<PAGE>


which may additionally expire at any certain time established by Landlord in
writing unless executed by Tenant and an original delivered to Landlord prior to
written revocation of Landlord's offer or on or before the date established by
Landlord in writing.

        36. SECURITY DEPOSIT

              (a) As additional security for the payment of Rent and its
faithful performance of all covenants, terms and conditions of this Lease,
within 45 days of the date of this Lease, Tenant shall deliver to Landlord a
Four Hundred Thirty Thousand One Hundred Fourteen and 59/100 Dollars
($430,114.59) irrevocable, unconditional Letter of Credit, substantially in the
form of Exhibit E attached hereto, with only such modifications as are
acceptable to Landlord and Tenant in form and substance, or in such other form
reasonably acceptable to Landlord and Tenant, issued or confirmed by a
nationally chartered bank acceptable to Landlord, naming Landlord as beneficiary
(the "Letter of Credit"). In the event Tenant has not invested at least
$1,250,000 in the Building in the form of permanent improvements (not including
trade fixtures, equipment or personal property) ("Tenant's Initial Building
Investment") on or before the last day of the first Lease Year, then Tenant
shall, within five (5) business days of the last day of the first Lease Year,
deliver to Landlord a replacement Letter of Credit in the amount of Six Hundred
Eighty Thousand One Hundred Fourteen and 59/100 Dollars ($680,114.59), and all
future replacement Letters of Credit required hereunder shall be in that amount.
In the event Tenants elects to receive the Additional T.I. Allowance as
described in Paragraph 5(h) of this Lease, and at the time of such election
Tenant has not made all of Tenant's Initial Building Investment, Tenant's
receipt of the Additional T.I. Allowance shall be conditioned on Tenant
delivering to Landlord a replacement letter of credit in the amount of One
Million Six Hundred Eighty Thousand One Hundred Fourteen and 59/100 Dollars
($1,680,114.59), and all future replacement letters of credit required hereunder
shall be in that amount. Tenant shall cause the Letter of Credit to be renewed
and replaced yearly, and Tenant shall cause to be delivered each replacement
Letter of Credit on or before the date that is 30 days prior to the expiration
date of the Letter of Credit In the event Tenant fails to cause to be delivered
any such replacement Letter of Credit to Landlord by the date that is 30 days
prior to the expiration date of the Letter of Credit, or fails to cause to be
extended the Letter of Credit, Landlord may draw upon the then-current Letter of
Credit to its full amount, and shall deposit the proceeds in an interest-bearing
account in a bank, the accounts of which are federally insured, as security for
the payment of Rent and Tenant's faithful performance of all covenants, terms
and conditions of this Lease; upon delivery of such replacement or extended
Letter of Credit to Landlord, the proceeds so deposited, less any amounts
retained by Landlord on account of any Event of Default of Tenant and any
incidental costs related to such deposits, shall be paid to Tenant.

              (b) If at the end of the Term of this Lease or the sooner
termination hereof Tenant has failed to pay Rent or other sums due hereunder
after any required notice and beyond any applicable grace periods, then Landlord
may, at its option, draw on the Letter of Credit for the payment of any such
overdue Rent, or other sum. In the event of the failure of Tenant to keep and
perform any of its other obligations under this Lease after any required notice
and beyond any applicable grace periods, then Landlord, at its option, may draw
on the Letter of Credit only to the extent necessary to make Landlord whole and
to compensate Landlord for any loss or damage sustained or suffered by Landlord
due to an Event of Default on the part of



                                       43
<PAGE>

Tenant. If at any time Landlord should draw on the Letter of Credit, Tenant
shall, within thirty (30) days after written demand by Landlord, cause the
Letter of Credit to be restored to its full required amount, or supply to
Landlord additional security in the form of cash in an amount which, when
aggregated with the undrawn balance of the Letter of Credit, equals the full
required amount.

        37. TRAFFIC MANAGEMENT PLAN

              In connection with its use of the driveways and parking areas
serving the Premises and the Campus, Tenant shall comply with the terms of the
Traffic Management Plan attached hereto as Exhibit H, and with amendments
thereto that do not materially adversely affect Tenant's rights and obligations
hereunder.

        38. AUTHORITY

              The parties represent to each other that each has the full right
and authority to enter into, execute and perform this Lease.

        39. PURCHASE OPTION

              Provided that no Event of Default by Tenant exists and provided
further that the Land has been subdivided from the balance of the east side of
the Campus at the time Landlord receives Tenant's Option Notice (defined below),
Tenant shall have an option to purchase the Premises (the "Option to Purchase")
on the following terms and conditions:

              (a) Tenant shall exercise the Option to Purchase by written notice
("Tenant's Option Notice") to Landlord given no earlier than the Commencement
Date and not later than the last day of the Third Lease Year of the initial Term
(the "Purchase Option Expiration Date"), provided that if Tenant is entitled to,
and does, elect to file a subdivision plan to subdivide the Land from the
balance of the east side of the Campus as set forth in Subparagraph 1(e)(ii) of
this Lease, then the Purchase Option Expiration Date shall be extended to the
date which is one hundred twenty (120) days after the last day of the third
(3rd) Lease Year. Closing shall take place at a mutually agreeable location
thirty (30) days following Landlord's receipt of Tenant's Option Notice. Tenant
shall pay the purchase price for the Premises at closing in cash or by wire
transfer of immediately available funds. The purchase price shall be as set
forth in Exhibit F. Landlord shall make no representations or warranties
whatsoever regarding the physical condition of the Premises, including, without
limitation, the Land, Building or other improvements thereon, it being the
intent of the parties that the conveyance of the Premises to Tenant shall be on
an AS-IS, WHERE-IS basis. Tenant shall comply with ISRA in connection with the
sale of the Premises to Tenant and, if required by Law or to ensure Tenant's
good and marketable title to the Premises, Landlord shall be responsible, at its
sole cost, to use its diligent, commercially reasonable efforts to obtain a
Certificate of Limited Conveyance with respect to the Premises under ISRA Case
No. E95-517 and any other ISRA case affecting the east side of the Campus at the
time of the sale not resulting from Tenant's activities. Landlord shall convey
to Tenant good and marketable title to the Premises (insurable by a national
title company at its regular rates) by standard bargain and sale deed with
covenants against grantor's acts subject only to (i) encumbrances, easements,
covenants, restrictions and


                                       44
<PAGE>

other matters of record affecting the Premises on the date of this Lease (but
excluding mortgages, judgment liens and other monetary liens), (ii) all matters
of record or otherwise affecting the Premises created by or on behalf of Tenant
or those claiming through, by or under Tenant; (iii) covenants, restrictions,
easements and other encumbrances affecting the Premises after the date hereof
(1) required by governmental authorities in connection with the Subdivision
Plan, or (2) deemed necessary or appropriate by Landlord (in Landlord's
commercially reasonable judgment) in connection with the Subdivision Plan and/or
the development of the balance of the east side of the Campus; (iv) the Utility
Easement and the Parking Easement if granted pursuant to Subparagraph 1(d)(iii);
(v) such facts as an accurate survey will disclose, and (vi) real estate taxes
assessed but not yet due and payable. Real estate taxes will be adjusted as of
the date of closing and Landlord shall pay all transfer taxes.

              (b) The Option to Purchase shall expire and be of no further force
or effect if it is not exercised by Tenant on or before the Purchase Option
Expiration Date, time being of the essence hereunder. The Option to Purchase
shall also terminate upon the termination of this Lease.

              (c) If Landlord sells the Premises, or the Larger Parcel (as
defined below), as the case may be, Landlord agrees to obtain from such
transferee for the benefit of Tenant a written acknowledgement by such
transferee of both the Option to Purchase and Tenant's right to elect to file a
subdivision plan as set forth above.

              (d) Tenant, after the termination of the Option to Purchase and
within five (5) business days after receipt of Landlord's request, shall execute
and deliver to Landlord the Option Termination in the form attached hereto as
Exhibit K confirming the termination of the Option to Purchase. Tenant's failure
to so execute and deliver the Option Termination within the five (5) day period
shall entitle Landlord to execute and record the Option Termination in the
appropriate land records which shall be binding upon the parties and may be
relied upon by third parties, and Tenant hereby irrevocably appoints Landlord as
its attorney-in-fact for the sole purpose of execution and recording the Option
Termination if Tenant fails to execute and deliver the Option Termination within
the five (5) day period. The Notice of Lease shall contain such appointment by
Tenant of Landlord as attorney-in-fact. Notwithstanding Landlord's rights as set
forth in the foregoing sentence, and without limiting the generality of Tenant's
indemnification as set forth above, Tenant shall be liable for any and all
actual damages that Landlord may incur as a result of Tenant's wrongful refusal
or delay in executing the Option Termination or Tenant's execution of an
affidavit or other documents stating that their rights under this Option to
Purchase have not terminated if the affidavit or other document shall prove to
be false.

              (e) The Option to Purchase is personal to Lexicon Pharmaceuticals
(New Jersey), Inc. and not assignable and shall terminate and be void in the
event Lexicon Pharmaceuticals (New Jersey), Inc. attempts to assign, mortgage,
pledge, encumber or otherwise transfer the Option to Purchase. Notwithstanding
the foregoing, (A) in the event Lexicon Pharmaceuticals (New Jersey), Inc.
assigns the Lease to an Affiliated Entity or Permitted Transferee, the Option to
Purchase shall survive such assignment (provided the Option to Purchase shall
not survive the further assignment of this Lease except to other Affiliated
Entities or Permitted Transferees, and (B) Lexicon Pharmaceuticals (New Jersey),
Inc. may assign the Option to Purchase to an Affiliated Entity of Lexicon
Pharmaceuticals (New Jersey), Inc.




                                       45
<PAGE>

separate and apart from the Lease provided that such Affiliated Entity may
exercise the Option to Purchase only if Lexicon Pharmaceuticals (New Jersey),
Inc. remains the Tenant hereunder and provided there is no Event of Default
hereunder.

        40. RIGHT OF FIRST REFUSAL TO PURCHASE THE PREMISES

              Provided that there is no uncured Event of Default on the part of
Tenant under this Lease at the time Landlord provides Tenant with Landlord's
Sale Notice (defined below), Tenant shall have a right of first refusal ("Right
of First Refusal") to purchase the Premises or the Larger Parcel (defined
below), as the case may be, on the following terms and conditions:

              (a) If, during the fourth through tenth Lease Years, Landlord
intends to accept a third party offer for the purchase of the Premises, or of
property including the Premises (the "Larger Parcel"), Landlord shall notify
Tenant in writing of such third party offer, accompanied by a copy of such third
party offer ("Landlord's Sale Notice") and Tenant shall have the right to
purchase the Premises or the Larger Parcel, as the case may be, on the same
economic terms and conditions as contained in Landlord's Sale Notice. Tenant's
rights hereunder shall not apply with respect to a sale in connection with, or a
deed in lieu of, a foreclosure, or a sale by operation of law, and in general
shall specifically be subordinate to the rights of all mortgagees pursuant to
the applicable terms of this Lease.

              (b) Tenant shall have ten (10) business days from the date of
Landlord's Sale Notice to notify Landlord in writing ("Tenant's Election
Notice") of its election to purchase the Premises, or the Larger Parcel, as the
case may be, on the terms and conditions contained in Landlord's Sale Notice
including, without limitation, the purchase price, any requirements for
deposits, the manner of payment, and the closing date (the "Closing Date"). If
Tenant delivers Tenant's Election Notice and thereafter fails to close on the
purchase of the Premises, or the Larger Parcel, as the case may be, on the
Closing Date, the Right of First Refusal shall terminate and be void and of no
further force or effect; provided, however, that in the event the property in
question is the Larger Parcel, the Right of First Refusal with respect to the
Premises shall survive the sale of the Larger Parcel and be binding on the
purchaser of the Larger Parcel, and Landlord agrees to obtain from such
transferee for the benefit of Tenant a written acknowledgement by such
transferee of the Right of First Refusal.

              (c) If Tenant does not deliver Tenant's Election Notice to
Landlord within such ten (10) business day period (time being of the essence),
Landlord may then proceed to sell the Premises, or the Larger Parcel, as the
case may be, to the proposed purchaser set forth in Landlord's Sale Notice
substantially in accordance with the terms and conditions set forth in
Landlord's Sale Notice. If the purchase price ultimately paid by the proposed
purchaser is more than, or is not more than five percent (5%) less than, the
proposed purchase price set forth in Landlord's Sale Notice, such purchase price
shall be considered to be substantially in accordance with the terms and
conditions as set forth in Landlord's Sale Notice. If Landlord desires to sell
the Premises or Larger Parcel, as the case may be, not in substantial accordance
with the terms and conditions set forth in Landlord's Sale Notice, or to a new
purchaser which is not an Affiliated Entity of the original proposed purchaser,
then Landlord shall be required to re-offer the Premises, or the Larger Parcel,
as the case may be, to Tenant under such revised terms



                                       46
<PAGE>


pursuant to the procedure set forth in this Paragraph 40. If Tenant does not
deliver Tenant's Election Notice to Landlord on or before the expiration of such
ten (10) business day period (time being of the essence) and Landlord sells the
Premises, or the Larger Parcel, as the case may be, in substantial accordance
with the terms and conditions set forth in Landlord's Sale Notice, then the
Right of First Refusal shall terminate and shall be null and void, and Landlord
shall have no further obligation to sell the Premises, or the Larger Parcel, as
the case may be, to Tenant; provided, however, that in the event the property in
questions is the Larger Parcel, the Right of First Refusal with respect to the
Premises shall survive the sale of the Larger Parcel and be binding on the
purchaser of the Larger Parcel, and Landlord agrees to obtain from such
transferee for the benefit of Tenant a written acknowledgement by such
transferee of the Right of First Refusal.

              (d) Tenant, after the termination of the Right of First Refusal
and within five (5) business days after receipt of Landlord's request, shall
execute and deliver to Landlord the Option Termination in the form attached
hereto as Exhibit K confirming the termination of the Right of First Refusal.
Tenant's failure to so execute and deliver the Option Termination within the
five (5) day period shall entitle Landlord to execute and record the Option
Termination in the appropriate land records which shall be binding upon the
parties and may be relied upon by third parties, and Tenant hereby irrevocably
appoints Landlord as its attorney-in-fact for the sole purpose of execution and
recording the Option Termination if Tenant fails to execute and deliver the
Option Termination within the five (5) day period. The Notice of Lease shall
contain such appointment by Tenant of Landlord as attorney-in-fact.
Notwithstanding Landlord's rights as set forth in the foregoing sentence, and
without limiting the generality of Tenant's indemnification as set forth above,
Tenant shall be liable for any and all actual damages that Landlord may incur as
a result of Tenant's wrongful refusal or delay in executing the Option
Termination or Tenant's execution of an affidavit or other documents stating
that their rights under this Right of First Refusal have not terminated if the
affidavit or other document shall prove to be false.

              (e) The Right of First Refusal is personal to Lexicon
Pharmaceuticals (New Jersey), Inc. and not assignable and shall terminate and be
void in the event Lexicon Pharmaceuticals (New Jersey), Inc. attempts to assign,
mortgage, pledge, encumber or otherwise transfer the Right of First Refusal.
Notwithstanding the foregoing, (A) in the event Lexicon Pharmaceuticals (New
Jersey), Inc. assigns the Lease to an Affiliated Entity or a Permitted
Transferee, the Right of First Refusal shall survive such assignment (provided
the Right of First Refusal shall not survive the further assignment of this
Lease except to other Affiliated Entities of Lexicon Pharmaceuticals (New
Jersey), Inc. or Permitted Transferees), and (B) Lexicon Pharmaceuticals (New
Jersey), Inc. may assign the Right of First Refusal to an Affiliated Entity of
Lexicon Pharmaceuticals (New Jersey), Inc. separate and apart from the Lease
provided that such Affiliated Entity may exercise the Right of First Refusal
only if Lexicon Pharmaceuticals (New Jersey) Inc. remains the Tenant hereunder
and provided there is no Event of Default hereunder.

        41. SIGNAGE

              Tenant shall have the right to install exterior or interior
signage as permitted by, and in accordance with, applicable Laws.

                                       47
<PAGE>

        42. EXPANSION

              Landlord agrees that so long as no Event of Default on the part of
Tenant under this Lease exists, Tenant shall have the following rights (the
"Expansion Right"):

              (a) During the Lease Years 1 through 5 of the Term, Landlord will,
if requested in writing by Tenant, negotiate in good faith the terms and
conditions of the development, and leasing by Tenant, of one or more additional
building(s) (the "Expansion Building(s)") to be constructed on the portion of
the east side of the Campus shown on the Subdivision Plan as Lot 14.04 (the
"Expansion Parcel"). Tenant shall also negotiate in good faith. Landlord's
obligation to negotiate the development of such Expansion Building(s) during
Lease Years 1, 2 and 3 shall be limited to a maximum aggregate 150,000 RSF for
such Expansion Building(s) and Landlord agrees to reserve sufficient Floor Area
Ratio (as such term is used in the Township of Hopewell's Land Use and
Development ordinances) ("FAR") pursuant to its development approvals through
the end of Lease Year 3 in order to develop up to 150,000 RSF of space.
Landlord's obligation to negotiate the development of such Expansion Building(s)
during Lease Years 4 and 5 shall be limited to a maximum aggregate RSF 100,000
RSF for such Expansion Building(s) and Landlord agrees to reserve sufficient FAR
pursuant to its development approvals through the end of Lease Year 5 in order
to develop up to 100,000 RSF of space. If (i) Landlord and Tenant conduct a
negotiation with respect to the development of Expansion Building(s) during
Lease Years 1 through 5 and, notwithstanding the good faith attempts of the
parties to reach agreement, (1) no agreement is reached and negotiations are
terminated by either party (the date of the termination being referred to herein
as the "Negotiation Termination Date"), or (2) no agreement is reached by the
last day of the fifth Lease Year; or (ii) Tenant does not request in writing to
Landlord to negotiate with respect to the development, and leasing by Tenant, of
an Expansion Building prior to the end of the last day of the fifth Lease Year,
then, effective upon the earlier of the Negotiation Termination Date or the last
day of the fifth Lease Year, Tenant shall have no further right to require
Landlord to negotiate for the development, and leasing by Tenant, of an
Expansion Building; provided, however, that for the balance of the Term of this
Lease, Landlord shall notify Tenant prior to developing the last available
100,000 RSF of FAR for the Expansion Parcel and Tenant shall have the right,
within ten (10) business days of receiving said notice, to notify Landlord in
writing ("Tenant's Negotiation Notice") that Tenant desires to negotiate in good
faith with Landlord for the development, and lease by Tenant, of an Expansion
Building not to exceed 100,000 RSF, and if Tenant so notifies Landlord, Landlord
and Tenant shall promptly commence good faith negotiations regarding the terms
of such development and leasing; and if, notwithstanding the good faith efforts
of Landlord and Tenant, (A) no such agreement is reached and negotiations are
terminated by either party, or (B) no such agreement is reached on or before the
date which is forty five (45) days from the date Landlord receives Tenant's
Negotiation Notice, then Tenant's Expansion Right shall expire and be null and
void and Tenant shall have no further rights under this Paragraph 42. To the
extent the Expansion Right survives the termination of this Lease, after the
termination of this Lease all references to the term "Lease Year" made within
this Paragraph 42 shall mean the same period of time that a particular Lease
Year would have covered had the Lease not been terminated.

              (b) Time is of the essence with respect to this Article 42.

                                       48
<PAGE>

              (c) Provided this Lease is still in force and effect and the terms
and conditions of this Article remain applicable at the time of the relevant
sale: (i) this Article shall bind any purchaser or ground lessee of the
Expansion Parcel, and Landlord agrees to obtain from such purchaser or ground
lessee a written acknowledgement by such party of the Expansion Right; and (ii)
if Tenant purchases the Premises pursuant to the Purchase Option or Right of
First Refusal, the Expansion Right pursuant to the terms of this Article 42
shall survive such purchase and continue to bind the Expansion Parcel and Tenant
and if Landlord is the owner of the Expansion Parcel at such time, Landlord
shall acknowledge the Expansion Right in favor of Tenant in writing

              (d) Tenant, after the termination of the Expansion Right and
within five (5) business days after receipt of Landlord's request, shall execute
and deliver to Landlord the Option Termination in the form attached hereto as
Exhibit K confirming the termination of the Expansion Right. Tenant's failure to
so execute and deliver the Option Termination within the five (5) day period
shall entitle Landlord to execute and record the Option Termination in the
appropriate land records which shall be binding upon the parties and may be
relied upon by third parties, and Tenant hereby irrevocably appoints Landlord as
its attorney-in-fact for the sole purpose of execution and recording the Option
Termination if Tenant fails to execute and deliver the Option Termination within
the five (5) day period. The Notice of Lease shall contain such appointment by
Tenant of Landlord as attorney-in-fact. Notwithstanding Landlord's rights as set
forth in the foregoing sentence, and without limiting the generality of Tenant's
indemnification as set forth above, Tenant shall be liable for any and all
actual damages that Landlord may incur as a result of Tenant's wrongful refusal
or delay in executing the Option Termination or Tenant's execution of an
affidavit or other documents stating that their rights under this Expansion
Right have not terminated if the affidavit or other document shall prove to be
false.

              (e) The Expansion Right is personal to Lexicon Pharmaceuticals
(New Jersey), Inc. and not assignable and shall terminate and be void in the
event Lexicon Pharmaceuticals (New Jersey), Inc. attempts to assign, mortgage,
pledge, encumber or otherwise transfer the Expansion Right. Notwithstanding the
foregoing, (A) in the event Lexicon Pharmaceuticals (New Jersey), Inc. assigns
the Lease to an Affiliated Entity or a Permitted Transferee, the Expansion Right
shall survive such assignment (provided the Expansion Right shall not survive
the further assignment of this Lease except to other Affiliated Entities of
Lexicon Pharmaceuticals (New Jersey), Inc. or Permitted Transferees), and (B)
Lexicon Pharmaceuticals (New Jersey), Inc. may assign the Expansion Right to an
Affiliated Entity of Lexicon Pharmaceuticals (New Jersey), Inc. separate and
apart from the Lease provided that such Affiliated Entity may exercise the
Expansion Right only if Lexicon Pharmaceuticals (New Jersey) Inc. remains the
Tenant hereunder and provided there is no Event of Default hereunder.

        43. GOVERNMENTAL INCENTIVES

              Notwithstanding anything to the contrary contained herein, this
Lease, and all of Tenant's obligations hereunder, are conditional upon Tenant's
receipt of Business Employment Incentive Program Benefits from the New Jersey
Economic Development Authority in an amount not less than $500,000 (the
"Governmental Incentives"). If an approval letter for the Governmental
Incentives is not received by Tenant, Tenant may, by written notice to Landlord
on or before May 23, 2002, terminate this Lease, whereupon all obligations and



                                       49
<PAGE>


liabilities of both Landlord and Tenant shall be extinguished, provided that
Tenant shall promptly reimburse Landlord for Landlord's actual costs (as
evidenced by copies of paid invoices or other reasonably satisfactory
documentation) incurred in connection with the application for building permits,
design approvals and other similar tasks undertaken by Landlord in connection
with Landlord's Work and reasonable legal fees in connection with the
negotiation of this Lease. In the event Tenant receives such approval letter for
the Governmental Incentives on or before May 23, 2002 (and notwithstanding
Tenant's attempted exercise of the contingency set forth in this Article 43),
then the contingency set forth in this Article 43 shall terminate and become
null and void. In the event Tenant fails to notify Landlord that it is
exercising this contingency on or before May 23, 2002, then the contingency set
forth in this Article 43 shall expire and be of no further force or effect.

        44. LANDLORD'S SUBORDINATION

              Landlord agrees to subordinate any lien or right to lien Landlord
may have with respect to Tenant's personal property, equipment and trade
fixtures to the security interest of Tenant's lender or equipment lessor
provided such lender or equipment lessor is not an Affiliated Entity of Tenant.
In connection with such subordination, Landlord shall act in a commercially
reasonable and timely manner in signing documentation reasonable requested by
Tenant or Tenant's lender and Landlord further agrees that Landlord shall not
materially interfere with Tenant's ability to obtain financing on Tenant's
personal property, equipment and trade fixtures.

        45. NO CONSEQUENTIAL DAMAGES

              Notwithstanding any provision in this Lease to the contrary, in no
event shall Landlord or Tenant be liable for any indirect or consequential
damages in connection with this Lease, the use of the Premises or for any other
reason whatsoever.

        46. SURVIVAL

              All representations, warranties, covenants, conditions and
agreements contained herein which either are expressed as surviving the
expiration or termination of this Lease, or, by their nature are to be performed
or observed, in whole or in part, after the termination or expiration of this
Lease, shall survive the termination or expiration of this Lease.

        47. CONFIDENTIALITY AGREEMENT

              Landlord and Tenant have entered into a Confidentiality Agreement
of even date herewith addressing matters involving confidential information of
Tenant on the Premises.



                                       50
<PAGE>


              IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to
be executed under seal, on the day and year first above written.

                                "TENANT":

                                LEXICON PHARMACEUTICALS (NEW JERSEY), INC.


                                By:
                                         -----------------------------------
                                         Name:
                                         Title:

                                Attest:
                                         -----------------------------------
                                         Authorized Signature

                                Its:
                                         -----------------------------------
                                         Type Name and Title of Signatory

                                "LANDLORD":

                                TOWNSEND PROPERTY TRUST LIMITED PARTNERSHIP,
                                doing business in new Jersey as
                                TPT LIMITED PARTNERSHIP

                                By:      DWT A II, LLC, its general partner


                                By:
                                         -----------------------------------
                                         Name:
                                         Title:



                                       51
<PAGE>

                                    GUARANTY

              FOR VALUE RECEIVED, and in consideration for, and as an inducement
to TOWNSEND PROPERTY TRUST LIMITED PARTNERSHIP, its successors and assigns, as
Landlord, to make the foregoing Lease with LEXICON PHARMACEUTICALS (NEW JERSEY),
INC., its successors and assigns, as Tenant, the undersigned, LEXICON GENETICS
INCORPORATED, a Delaware corporation, unconditionally guarantees the full
performance and observance of all the covenants, conditions and agreements
therein provided to be performed and observed by Tenant and Tenant's successors
and assigns, and expressly agrees that the validity of this Guaranty and the
obligations of the guarantor(s) hereunder shall not be terminated, affected or
impaired by reason of the granting by Landlord of any indulgences to Tenant or
by reason of the assertion by Landlord against Tenant of any of the rights or
remedies reserved to Landlord pursuant to the provisions of the Lease or by the
relief of Tenant from any of Tenant's obligations under said Lease by operation
of law or otherwise (including without implied limitation, the rejection or
assignment of the Lease in connection with proceedings under bankruptcy laws now
or hereafter enacted), irrespective of Landlord's consent or other action or
inaction with respect to such relief, the undersigned hereby waiving notice,
protest, demand of the acceptance of this Guaranty all suretyship defenses and
all defenses in the nature hereof.

              The undersigned further covenants and agrees that this Guaranty
shall continue in full force and effect as to any renewal, modification or
extension of the Lease, whether or not the undersigned shall have received any
notice of or consented to such renewal, modification or extension. The
undersigned further agrees that the undersigned's liability under this Guaranty
shall be primary, and that in any right of action which shall accrue to Landlord
under said Lease, Landlord may, at Landlord's option, proceed against the
undersigned and Tenant, jointly and severally, and may proceed against any or
all of the undersigned without having commenced any action against or having
obtained any judgment against Tenant. In addition to any other remedies Landlord
may have against the undersigned and the obligation of the undersigned to
Landlord, the undersigned shall reimburse Landlord for all reasonable costs
incurred by Landlord in connection with the enforcement of this Guaranty or the
Lease or a default under either including, without limitation, all costs of
collection and reasonable attorneys' fees. No party liable under this Guaranty
shall be entitled to rights of subrogation against any party or interest in the
Lease before the full performance and observance of all covenants, conditions
and agreements of the Lease.

              It is agreed that the failure of Landlord to insist in any one or
more instances upon a strict performance or observance of any of the terms,
provisions or covenants of the Lease or to exercise any right therein contained
shall not be construed or deemed to be a waiver or relinquishment for any
subsequent performance or observance of such term, provision, covenant or right,
but the same shall continue and remain in full force and effect. Receipt by
Landlord of rent with knowledge of the breach of any provision of the Lease
shall not be deemed a waiver of such breach.

              No subletting, assignment or other transfer of the Lease, or any
interest therein, shall operate to extinguish or diminish the liability of the
undersigned guarantor(s) under this Guaranty. Wherever reference is made to the
liability of Tenant named in the Lease, such reference shall be deemed likewise
to refer to the undersigned guarantor(s).

                                       52
<PAGE>

              Notwithstanding the foregoing, the obligations of the undersigned
shall not become effective until (i) an Event of Default has occurred under the
foregoing Lease and (ii) with respect to an Event of Default involving the
non-payment of Rent (as defined in the foregoing Lease) or any other sum of
money due by the Tenant under the foregoing Lease, the undersigned has been
given notice of said non-payment and has failed to cure said non-payment within
the grace period therefor set forth in Subparagraph 10(a)(i) of the foregoing
Lease.

              It is further agreed that all of the terms and provisions hereof
shall inure to the benefit of the respective successors and assigns of the
Landlord, and shall be binding upon the respective successors and assigns of the
undersigned.

              IN WITNESS WHEREOF, the undersigned has executed this Guaranty as
of May 23, 2002.

                                LEXICON GENETICS INCORPORATED


                                By:
                                         -----------------------------------
                                         Name:
                                         Title:
Attest:


--------------------------------
Secretary


                                       53
<PAGE>




                                    EXHIBIT A

                           LEGAL DESCRIPTION OF CAMPUS



                                   [ATTACHED]



<PAGE>




                                    EXHIBIT B

                  PLAN SHOWING PREMISES AND EAST SIDE OF CAMPUS



                                   [ATTACHED]



<PAGE>

                                    EXHIBIT C

                                 LANDLORD'S WORK

1.   Installation of the workstation for the Siemens HVAC DDC control system.

2.   Re-commissioning of all mechanical systems including air handlers,
     chillers, boilers, house vacuum, cooling tower and associated pumps.
     Operating manuals, commissioning reports and balancing reports are to be
     available at completion of this work to support the determination of
     completion. One set of all operating manuals; commissioning reports and
     balancing reports are to be provided to Tenant within a reasonable time
     after completion of this work.

3.   Renovation of the restroom in the mechanical room of the basement.

4.   ADA lift from 1st floor to cafeteria will be certified and operational.

5.   Completion of combustion air ducting including air duct pre-heat coil
     located in the basement.

6.   Freight elevator will be made compliant with NJ Department of Community
     Affairs requirements with reinspection certificate.

7.   All existing equipment in the building will be removed (excluding surplus
     supplies).

8.   Landlord will install any missing vinyl base identified by Tenant to
     Landlord prior moving into the building

9.   Landlord will touch-up any paint and interior finishes identified by Tenant
     prior to moving into the building.

10.  Landlord will repair any roof leaks and replace any stained ceiling tiles
     identified by Tenant prior to moving into the building.

     In addition, Landlord will complete the following items as noted below
(these items shall not affect the Commencement Date of the Lease):

1.   Landlord will install an ADA compliant handrail from the parking lot to the
     building. The work shall include any necessary retaining walls and a wooden
     guardrail between the ramp and the circle drive. Soil areas adjacent to the
     handrail will be seeded upon completion. This work will be completed within
     45 days of written request of Tenant. Tenant may also elect, at its option,
     to perform such work subject to the relevant terms and conditions of
     Paragraph 5 of this Lease and to be reimbursed by Landlord upon completion
     of such work for the actual, reasonable out-of-pocket costs of Tenant of
     performing such work.


                                      C-1
<PAGE>


2.   Landlord will complete the re-commissioning of the de-ionized water system
     within 15 days of written request by Tenant.

3.   Landlord will complete any roof drainage issues required by Hopewell
     Township to be addressed within a reasonable time after being informed
     thereof by Hopewell Township.


                                       2
<PAGE>



                                    EXHIBIT D

        ADJUSTED RENTAL RATES AFTER DISBURSEMENT OF $2,000,000 ADDITIONAL
                          TENANT IMPROVEMENT ALLOWANCE

<TABLE>
<CAPTION>

Lease Year                 Annual Base Rent        Rent P.S.F.         Monthly Base Rent         Sq. Ft. Rent Paid
----------                 ----------------        -----------         -----------------         -----------------
<S>                         <C>                       <C>                 <C>                          <C>
2-3                         $2,064,738.41             $27.17              $172,061.53                  76,000
4-6                         $2,178,738.41             $28.67              $181,561.53                  76,000
7-9                         $2,300,338.41             $30.27              $191,694.87                  76,000
10-Expiration               $2,429,538.41             $31.97              $202,461.53                  76,000
</TABLE>


               The Monthly Base Rental in Lease Year Two will increase in the
month that the $2,000,000 Additional T.I. Allowance is paid by Landlord to
Tenant.


                                      D-1
<PAGE>


                                    EXHIBIT E

                              [LETTERHEAD OF BANK]



                     IRREVOCABLE LETTER OF CREDIT NO. ______



                                                   ______________________, 200__



[LANDLORD]
[LANDLORD'S ADDRESS]



Dear Sirs:

                  1. At the request and for the account of [TENANT], a
corporation (the "Company"), we hereby establish in your favor our Irrevocable
Letter of Credit No. ______ (the "Letter of Credit") in the amount of $______
(as more fully described below), effective immediately and expiring at 5:00 p.m.
on ___________ 1, 2003 or, if such day is not a Business Day, on the next
succeeding Business Day (the "Stated Expiration Date"), unless, at our option,
we deliver to you a written amendment signed by an authorized signer
(specifically referring to [BANK NAME] Irrevocable Letter of Credit No. ______")
extending the Stated Expiration Date to the date set forth in such amendment, in
which case this Letter of Credit shall expire on such extended Stated Expiration
Date unless further extended, it being understood that we shall be under no
obligation herein to grant any such extension. This Letter of Credit is subject
to automatic termination as provided in paragraph 4 hereof.

                  2. We hereby irrevocably authorize you to draw on us in
accordance with the terms and conditions hereinafter set forth, by one or more
drafts on us, an aggregate amount not exceeding ______________________________
Dollars ($__________) (as reduced and reinstated from time to time in accordance
with the provisions hereof, the "Letter of Credit Amount"). Funds under this
Letter of Credit are available to you, at the time specified below, in one or
more drawings by one or more of your drafts, each dated the date of its
presentation and stating on its face: "Drawn under [BANK NAME] Irrevocable
Letter of Credit No. ______", accompanied by your certificate in the form of
Annex 1 attached hereto appropriately completed and executed (any such draft
accompanied by such certificate being herein called a "Draft"). Each such draft
and certificate shall be presented, at our office at [BANK NAME], [BANK STREET
ADDRESS], [CITY], [STATE] [ZIP], Attention: Letter of Credit Department, or such
other office of ours in [CITY], [STATE] that we hereafter designate by written
notice to you. If we receive your Draft at such office, in conformity with the
terms and conditions of this Letter of Credit, at or prior to 12:00 noon, on a
Business Day, we will honor the same in accordance with your payment
instructions by 12:00 noon on the Business


                                      E-1
<PAGE>


Day immediately following the Business Day on which you present to us your Draft
and certificate; and if we receive your Draft at such office, in conformity with
the terms and conditions of this Letter of Credit, after 12:00 noon, on a
Business Day, we will honor the same in accordance with your payment
instructions by 12:00 noon on the second Business Day immediately following the
Business Day on which you present to us your Draft and certificate. As used
herein the term "Business Day" means any day other than (i) a Saturday or Sunday
or (ii) a day on which commercial banking institutions in [STATE] are required
or authorized by law (including executive order) to close.

                  3. Each drawing honored by us hereunder shall reduce the
Letter of Credit Amount by the amount of such drawing. No drawing hereunder
honored by us shall exceed the Letter of Credit Amount at the time of such
drawing, as the Letter of Credit Amount has been reduced and reinstated in
accordance with the terms hereof. Following any drawing under this Letter of
Credit, the Letter of Credit Amount shall be reinstated with respect to such
drawing when and to the extent that we, at our option, upon the Company's
request, otherwise advise you in writing that such reinstatement shall occur, it
being understood that we shall have no obligation to grant any such
reinstatement.

                  4. This Letter of Credit shall automatically terminate upon
the first to occur of: (a) the Stated Expiration Date (as such date may have
been extended) or (b) the date on which the final drawing available hereunder is
honored. This Letter of Credit shall be promptly surrendered to us by you upon
such termination.

                  5. This Letter of Credit is transferable in its entirety (but
not in part) to any transferee who you certify to us has succeeded to your
interests under the Lease dated ________ __, 2002 between you and the Company
(or such Lease as may hereafter be amended from time to time, the "Lease"), and
may be successively transferred. Transfer of this Letter of Credit to such
transferee shall be effected by the presentation to us of this Letter of Credit
accompanied by a certificate substantially in the form of Annex 2 attached
hereto appropriately completed and executed.

                  6. Only you (or a transferee permitted by the terms of this
Letter of Credit) may make drawings under this Letter of Credit. Upon the
payment to you or your account of the amount specified in a Draft drawn
hereunder, we shall be fully discharged of our obligation under this Letter of
Credit with respect to such Draft, and we shall not thereafter be obligated to
make any further payments under this Letter of Credit with respect to such
Draft.

                  7. This Letter of Credit sets forth in full the terms of our
undertaking, and this undertaking shall not in any way be modified, amended,
amplified or limited by reference to any document, instrument or agreement
referred to herein or in which this Letter of Credit is referred to or to which
this Letter of Credit relates, except only the Drafts and certificates referred
to herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement, except such Drafts and
certificates.

                  8. This Letter of Credit is subject to the provisions of the
Uniform Customs and Practice for Documentary Credits, 1993 Revision,
International Chamber of Commerce Publication No. 500 (the "UCP") other than
Article 54(e) thereof. This Letter of Credit shall be


                                      E-2
<PAGE>


deemed issued under the laws of the State of [STATE] and shall, as to matters
not governed by the UCP, be governed and construed in accordance with the laws
of said state, without regard to principles of conflicts of law.

                                  Very truly yours,
                                  [BANK CAPS NAME]


                                  By:      _______________________________
                                  Title:   _______________________________

                                      E-3
<PAGE>


                              ANNEX 1 to BANK NAME
                        Irrevocable Letter of Credit No.



To:      BANK NAME
         BANK STREET ADDRESS
         [CITY], [STATE]  [ZIP]
         Attention: Letter of Credit Department

CERTIFICATE FOR DRAWING

                  The undersigned, a duly authorized agent of [LANDLORD], hereby
certifies, with reference to Irrevocable Letter of Credit No. ______ (the
"Letter of Credit") issued by [BANK NAME] (the "Bank") in favor of [LANDLORD]
(the capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Letter of Credit), that:

                      1. This Certificate accompanies a draft in the amount of
$__________ by which [LANDLORD] is making a drawing under the Letter of Credit
pursuant to Section 36 of the Lease.

                      2. The amount of the draft accompanying this Certificate
does not exceed the Letter of Credit Amount, as reduced and reinstated in
accordance with the terms of the Letter of Credit.

                  IN WITNESS WHEREOF, [LANDLORD] has executed and delivered
this Certificate as of the      day of              , 200_.

                                   [LANDLORD]



                                   By:      ______________________________
                                   Name:    ______________________________
                                   Title:   ______________________________




                                      E-4

<PAGE>


                           ANNEX 2 to BANK NAME
                        Irrevocable Letter of Credit No.

                                                          ______________, 200_



To:      BANK NAME
         BANK STREET ADDRESS
         [CITY], [STATE]  [ZIP]
         Attention: Letter of Credit Department

Re:      [BANK NAME]
         Irrevocable Letter of Credit
         No.

Gentlemen:

                  For value received, the undersigned beneficiary hereby
irrevocably transfers to:

                           (Name of Transferee)

                           (Address)

all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety. Said transferee has succeeded to the interests of the
undersigned under the Lease dated _______________ , 2002 between [LANDLORD] and
[TENANT].

                  By this transfer, all rights of the undersigned beneficiary in
such Letter of Credit are transferred to the transferee and the transferee shall
have the sole rights as beneficiary thereof, including sole rights relating to
any amendments whether increases or extensions or other amendments and whether
now existing or hereafter made. All amendments are to be advised direct to the
transferee without necessity of any consent of or notice to the undersigned
beneficiary.

                  The original of such Letter of Credit is returned herewith,
and in accordance therewith we ask you to transfer the Letter of Credit to the
transferee in the Letter of Credit Amount (as defined in the Letter of Credit).

                                    Very truly yours,

SIGNATURE AUTHENTICATED             [LANDLORD]


                                    By:     ________________________________

______________________________      Title:  ________________________________
(Authorized Signature)


                                      E-5
<PAGE>


                                    EXHIBIT F

                              OPTION PURCHASE PRICE

         During first Lease Year $13,050,000 plus unamortized amounts of the
Tenant Improvement Allowance and the Additional T.I. Allowance actually received
by Tenant.

         During second Lease Year $13,430,000 plus unamortized amounts of the
Tenant Improvement Allowance and the Additional T.I. Allowance actually received
by Tenant.

         During third Lease Year $13,750,000 plus unamortized amounts of the
Tenant Improvement Allowance and the Additional T.I. Allowance actually received
by Tenant.

         For purposes of this Exhibit F, unamortized amounts shall mean the
principal balance of the Improvement Allowance or the Additional T.I. Allowance,
as applicable, assuming that the same had been amortized at an interest rate of
12% per annum over an amortization term of ten years (from the date funded).

                                      F-1

<PAGE>




                                    EXHIBIT G

                     ENVIRONMENTAL INSURANCE SPECIMEN POLICY



                                   [ATTACHED]





<PAGE>




                                    EXHIBIT H

                             TRAFFIC MANAGEMENT PLAN



                                   [ATTACHED]





<PAGE>





                                    EXHIBIT I

                                  SECURED AREAS



                                   [ATTACHED]



<PAGE>


                                    EXHIBIT J

                            FORM OF LEASE TERMINATION



                  THIS TERMINATION OF LEASE ("Termination") is made as of this
______ day of ______________, 20___, by and between ______________ ("Landlord")
and _________________ ("Tenant").

                  WHEREAS, [Townsend Property Trust Limited Partnership]
[Landlord], as landlord, and [Lexicon Pharmaceuticals (New Jersey), Inc.]
[Tenant], as tenant, entered into that certain Lease Agreement dated May __,
2002 (the "Lease") with respect to the Land described in Exhibit A hereto and
the Building and other improvements thereon located at 350 Carter Road,
Hopewell, New Jersey [EXPLAIN ANY LEASE ASSIGNMENTS OR AMENDMENTS HERE], which
Lease is evidenced by a Memorandum of Lease dated May ___, 2002 and recorded in
the Office of the Clerk of _________ County, New Jersey (the "Recorder's
Office") in Book ___, Page ___ (the "Memorandum").

                  [SEE ARTICLE 33 REGARDING SURVIVAL OF CERTAIN RIGHTS]

                  WHEREAS, the Lease (including, but not limited to, the
Purchase Option, Right of First Refusal and Expansion Right, as each such term
is defined in the Lease) has terminated.

                  WHEREAS, this Termination is entered into for the purpose of
setting forth upon the public record that the Lease (including, but not limited
to, the Purchase Option, Right of First Refusal and Expansion Right, as each
such term is defined in the Lease) is terminated and null and void and the
Memorandum is of no further force and effect.

                  NOW THEREFORE, for good and valuable consideration, each to
the other in hand paid, the parties hereto, intending to be legally bound
hereby, agree as follows:

                  1. The Lease (including, but not limited to, the Purchase
Option, Right of First Refusal and Expansion Right, as each such term is defined
in the Lease) is hereby terminated and released and the Memorandum is of no
further force or effect.

                  2. The parties hereto acknowledge that this Termination is
intended to be recorded in the Recorder's Office.


                                      J-1
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have executed this
Termination as of the day and year first above written.

                               LANDLORD:

                                     [NAME OF LANDLORD]

                               By:
                                     ----------------------------------------
                                     Name:
                                     Title:


                                     TENANT:
                                     [NAME OF TENANT]


                               By:
                                     ----------------------------------------
                                     Name:
                                     Title:

                                      J-2
<PAGE>




STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ___________________, the _______________ of
_____________________, personally appeared before me, and that such officer,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of said company as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public

                                          My commission expires:  __________





STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ________________, the ___________ of
______________________, personally appeared before me and that such officer,
being authorized to do so, executed the foregoing instrument for purposes
therein contained by signing the name of the corporation as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public

                                          My commission expires:  __________


                                      J-3

<PAGE>


                                    EXHIBIT K

                           FORM OF OPTION TERMINATION

                  THIS OPTION TERMINATION ("Termination") is made as of this
______ day of ______________, 20___, by and between ______________ ("Landlord")
and _________________ ("Tenant").

                  WHEREAS, [Townsend Property Trust Limited Partnership]
[Landlord], as landlord, and [Lexicon Pharmaceuticals (New Jersey), Inc.]
[Tenant], as tenant, entered into that certain Lease Agreement dated May __,
2002 (the "Lease") with respect to the Land described in Exhibit A hereto and
the Building and other improvements thereon located at 350 Carter Road,
Hopewell, New Jersey [EXPLAIN ANY LEASE ASSIGNMENTS OR AMENDMENTS HERE], which
Lease is evidenced by a Memorandum of Lease dated May ___, 2002 and recorded in
the Office of the Clerk of _________ County, New Jersey (the "Recorder's
Office") in Book ___, Page ___ (the "Memorandum").

                  WHEREAS, the Lease includes a [Purchase Option] [Right of
First Refusal] [Expansion Right] (as such term is defined in the Lease) in favor
of Tenant (the "Right"), which right is referenced in the Memorandum.

                  WHEREAS, the Right has terminated.

                  WHEREAS, this Termination is entered into for the purpose of
setting forth upon the public record that the Right is terminated and null and
void.

                  NOW THEREFORE, for good and valuable consideration, each to
the other in hand paid, the parties hereto, intending to be legally bound
hereby, agree as follows:

                  1. The Right is hereby terminated and released and of no
further force or effect.

                  2. The parties hereto acknowledge that this Termination is
intended to be recorded in the Recorder's Office.


                                      K-1
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have executed this
Termination as of the day and year first above written.

                               LANDLORD:

                               [NAME OF LANDLORD]

                               By:
                                    ---------------------------------------
                                     Name:
                                     Title:


                               TENANT:
                               [NAME OF TENANT]


                               By:
                                     --------------------------------------
                                     Name:
                                     Title:

                                      K-2
<PAGE>




STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ___________________, the _______________ of
_____________________, personally appeared before me, and that such officer,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of said company as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public

                                          My commission expires:  __________





STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ________________, the ___________ of
______________________, personally appeared before me and that such officer,
being authorized to do so, executed the foregoing instrument for purposes
therein contained by signing the name of the corporation as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public

                                          My commission expires:  __________


                                      K-3











<PAGE>
-----------------------------------------------------------------------------
Prepared by: (print signer's name below signature)   (FOR RECORDER'S USE ONLY)


-------------------------------------------------

-------------------------------------------------

Kathleen M. Sandone, Esquire
An Attorney-at-Law of the State of New Jersey
-------------------------------------------------


                               MEMORANDUM OF LEASE

     THIS MEMORANDUM OF LEASE is made and entered into by and between the
parties hereto, to evidence their execution of a certain lease dated as of May
23, 2002 (the "Lease").

                                   WITNESSETH:

     1. LANDLORD. The name of the Landlord is TOWNSEND PROPERTY TRUST LIMITED
PARTNERSHIP, a Maryland limited partnership doing business in New Jersey as TPT
LIMITED PARTNERSHIP ("Landlord"), whose address is c/o Townsend Capital, LLC,
210 West Pennsylvania Avenue, Suite 700, Towson, Maryland 21204.

     2. TENANT. The name of the Tenant is LEXICON PHARMACEUTICALS (NEW JERSEY),
INC., a Delaware corporation ("Tenant"), whose address is 279
Princeton-Hightstown Road, East Windsor, New Jersey 08520.

     3. PREMISES. The "Premises" consist of approximately 19 acres of land shown
as Lot 14.03 on the proposed subdivision plan attached hereto as Exhibit B (the
"Land"), which is an unsubdivided portion of a larger tract of land consisting
of approximately 190 acres described by metes and bounds in Exhibit A hereto
(the "Business Campus"), along with the approximately 76,000 square foot office
building located on the Land and known as the "Education Building," 350 Carter
Road, Hopewell, New Jersey.

     4. LEASE TERM. The term of this Lease (the "Lease Term") commences on the
date that is the earlier to occur of (a) the date the Landlord's Work (as
defined in the Lease) is substantially complete (as defined in the Lease), or
(b) the date Tenant commences a Permitted Use (as defined in the Lease) from all
or any portion of the Premises, and expires on the last day of the month in
which the tenth (10th) anniversary of the Commencement Date falls, provided that
if Tenant elects to receive the Additional T. I. Allowance (as defined in the
Lease), the Lease Term shall be extended through the date that is the tenth
anniversary of the date Landlord funds the Additional T. I. Allowance, subject
to sooner termination as provided in the Lease or extension as provided in the
Lease as described below.

     5. EXTENSION OPTIONS. Tenant has two (2) consecutive options to extend the
Lease Term for five (5) years each.

     6. OPTION TO PURCHASE.

        (a) Tenant has the option to purchase (the "Purchase Option") the
Premises during the period commencing on the Commencement Date and ending on the
last day

<PAGE>


of the calendar month in which the third anniversary of the Commencement Date
falls (the "Purchase Option Period"), but Tenant may not exercise the Purchase
Option unless Final Approval (as defined in the Lease) has been obtained for the
subdivision of the Premises from the balance of the Business Campus. The
Purchase Option Period will be extended for a period commencing on the first day
of the calendar month immediately following the calendar month in which the
third anniversary of the Commencement Date falls and ending on the date that is
one hundred twenty (120) days following such date if Tenant elects to file a
subdivision plan for the subdivision of the Premises from the balance of the
Business Campus as described in Subparagraph 1(e)(ii) of the Lease.

        (b) Conclusive evidence that the Purchase Option has terminated shall
include an instrument (the "Option/Right Termination") in the form attached
hereto as Exhibit D signed by Tenant and recorded in the Mercer County Recorded
of Deeds Office (the "Recorder's Office") stating that the Purchase Option has
been terminated. Tenant hereby unconditionally constitutes and appoints Landlord
(and any transferee of Landlord's interest in the Premises) as its true and
lawful attorney and agent for the sole purposes, except as otherwise set forth
herein, of executing and recording the Option/Right Termination on Tenant's
behalf upon the termination of the Purchase Option. Tenant acknowledges that the
foregoing power granted to Landlord (and any transferee of Landlord's interest
in the Premises) is coupled with an interest and shall not be revocable by
Tenant in any manner or for any reason, including Tenant's dissolution, and any
individual or entity may rely on this appointment.

     7. RIGHT OF FIRST REFUSAL.

        (a) Tenant has the right of first refusal ("Right of First Refusal")
during the period (the "ROFR Period") commencing on the first day of the
calendar month immediately following the calendar month in which the third
anniversary of the Commencement Date falls and ending on the last day of the
calendar month in which the tenth anniversary of the Commencement Date falls,
with respect to any third party offer for the purchase of the Premises, or of
property including the Premises, which Landlord intends to accept (not including
a deed in lieu of foreclosure, a foreclosure sale, or sale by operation of law).

        (b) A sale or ground lease by Landlord of the Premises (or of a larger
portion of the Business Campus including the Premises) which is consummated
prior to the ROFR Period shall be expressly subject to Tenant's Right of First
Refusal.

        (c) If Tenant fails pursuant to the terms and conditions of the Lease to
purchase the Premises or a larger parcel including the Premises that is offered
to Tenant pursuant to the terms of the Lease during the ROFR Period, then the
Right of First Refusal shall terminate; provided, however, that in the event the
property in question is a larger parcel including the Premises, the Right of
First Refusal with respect to the Premises shall survive the sale of such larger
parcel and be binding on the purchaser of such larger parcel for the balance of
the ROFR Period.

        (d) Conclusive evidence that the Right of First Refusal has terminated
shall include an Option/Right Termination in the form attached hereto as Exhibit
D signed by Tenant and recorded in the Recorder's Office stating that the Right
of First Refusal has been

                                       2
<PAGE>


terminated. Tenant hereby unconditionally constitutes and appoints Landlord (and
any transferee of Landlord's interest in the Premises) as its true and lawful
attorney and agent for the sole purpose, except as otherwise set forth herein,
of executing and recording the Option/Right Termination on Tenant's behalf upon
the termination of the Right of First Refusal. Tenant acknowledges that the
foregoing power granted to Landlord (and any transferee of Landlord's interest
in the Premises) is coupled with an interest and shall not be revocable by
Tenant in any manner or for any reason, including Tenant's dissolution, and any
individual or entity may rely on this appointment.

      8. EXPANSION RIGHT.

        (a) Tenant has the following rights under the Lease (collectively, the
"Expansion Right"):

            (i) During the period commencing on the Commencement Date and ending
on the last day of the calendar month in which the fifth anniversary of the
Commencement Date falls, Landlord agrees to reserve sufficient "floor area
ratio" (as such term is used in Hopewell Township's land use and development
ordinances) ("FAR") on the portion of the Business Campus shown on Exhibit B
hereto as Lot 14.04 (the "Expansion Parcel") in order to develop one or more
buildings (the "Expansion Building(s)") for Tenant, and Landlord agrees during
such time period, upon written notice from Tenant, to negotiate in good faith,
the development, and leasing by Tenant, of the Expansion Building(s). During the
portion of such period commencing on the Commencement Date and ending on the
last day of the calendar month in which the third anniversary of the
Commencement Date falls, Landlord's obligation to reserve FAR and to negotiate
in good faith the development, and leasing by Tenant, of the Expansion
Building(s) on the Expansion Parcel shall be limited to 150,000 rentable square
feet in the aggregate. During the portion of such period commencing on the third
anniversary of the Commencement Date and ending on the last day of the calendar
month in which the fifth anniversary of the Commencement Date falls, Landlord's
obligation to reserve FAR and to negotiate in good faith the development, and
leasing by Tenant, of the Expansion Building(s) on the Expansion Parcel shall be
limited to 100,000 rentable square feet in the aggregate.

            (ii) If Landlord and Tenant conduct a negotiation with respect to
the development of Expansion Building(s) during the period commencing on the
Commencement Date and ending on the last day of the calendar month in which the
fifth anniversary of the Commencement Date falls and, notwithstanding the good
faith attempts of the parties to reach agreement, (1) no agreement is reached
and negotiations are terminated by either party (the date of the termination
being referred to herein as the "Negotiation Termination Date"), or (2) no
agreement is reached by the last day of such period; or (3) Tenant does not
request in writing to Landlord to negotiate with respect to the development, and
leasing by Tenant, of an Expansion Building prior to the end of the last day of
such period, then, effective upon the earlier of the Negotiation Termination
Date or the last day of such period, Tenant shall have no further right to
require Landlord to negotiate for the development, and leasing by Tenant, of an
Expansion Building; provided, however, that for the balance of the Lease Term,
Landlord shall notify Tenant prior to developing the last available 100,000 RSF
of FAR for the Expansion Parcel and Tenant shall have the right, within ten (10)
business days of receiving said notice, to notify Landlord in writing ("Tenant's
Negotiation Notice") that Tenant desires to




                                       3
<PAGE>

negotiate in good faith with Landlord for the development, and lease by Tenant,
of an Expansion Building not to exceed 100,000 RSF, and if Tenant so notifies
Landlord, Landlord and Tenant shall promptly commence good faith negotiations
regarding the terms of such development and leasing; and if, notwithstanding the
good faith efforts of Landlord and Tenant, (A) no such agreement is reached and
negotiations are terminated by either party, or (B) no such agreement is reached
on or before the date which is forty five (45) days from the date Landlord
receives Tenant's Negotiation Notice, then Tenant's Expansion Right shall expire
and be null and void and Tenant shall have no further Expansion Right under the
Lease.

        (b) A sale or ground lease by Landlord of the Expansion Parcel (or of a
larger portion of the Business Campus including the Expansion Parcel) which is
consummated during the Lease Term while the Expansion Right is still effective
shall be expressly subject to Tenant's Expansion Right.

        (c) Conclusive evidence that Tenant's Expansion Right has terminated
shall include an Option/Right Termination in the form attached hereto as Exhibit
D signed by Tenant and recorded in the Recorder's Office stating that Tenant's
Expansion Right has been terminated. Tenant hereby unconditionally constitutes
and appoints Landlord (and any transferee of Landlord's interest in the
Expansion Parcel) as its true and lawful attorney and agent for the sole
purpose, except as otherwise set forth herein, of executing and recording the
Option/Right Termination on Tenant's behalf upon the termination of Tenant's
Expansion Right. Tenant acknowledges that the foregoing power granted to
Landlord (and any transferee of Landlord's interest in the Expansion Parcel) is
coupled with an interest and shall not be revocable by Tenant in any manner or
for any reason, including Tenant's dissolution, and any individual or entity may
rely on this appointment.

     9. UTILITY SERVICE.

        (a) Landlord is obligated under the terms of the Lease to operate,
maintain, repair and replace certain Utility Facilities (as defined in the
Lease) in order to supply the Premises with utility services until such time as,
with respect to each particular type of such utility service, such utility
service is provided directly to the Premises by the local utility or
municipality or a private utility company, and subject to Tenant's obligation to
pay its pro rata cost of such utility service as set forth in the Lease
(collectively, "Tenant's Utility Rights/Obligations").

        (b) Certain of the Utility Facilities are located on the Premises and
certain of the Utility Facilities are located on other portions of the Business
Campus off the Premises. A sale or ground lease by Landlord of the Land or any
other portion of the Business Campus that includes any Utility Facilities
serving the Premises shall be expressly subject to Tenant's Utility
Rights/Obligations, and the parties to any such transaction shall execute and
record the Utility Easement (as defined in the Lease).

    10. PARKING RIGHTS.

        (a) During the Lease Term, including any extensions thereof, Tenant has
the right to use the parking lot located on the east side of the Business Campus
(but not on



                                       4
<PAGE>


the Premises) as identified on Exhibit B attached hereto (the "Parking Lot"),
until such time (if any) that the Parking Lot is replaced by the Replacement Lot
(as defined in the Lease), at which time Tenant shall have the exclusive right
to use the Replacement Lot and no further right to use the Parking Lot. Tenant's
rights and obligations under the Lease with respect to the Parking Lot and
Replacement Lot shall be referred to herein as "Tenant's Parking
Rights/Obligations."

        (b) A sale of ground lease by Landlord of all or any portion of the
Business Campus that includes the Parking Lot or Replacement Lot shall expressly
be subject to Tenant's Parking Rights/Obligations with respect thereto
including, but not limited to, the obligations of the parties to such
transaction to execute and record the Parking Easement (as defined in the
Lease).

    11. TERMINATION. This Memorandum of Lease shall terminate and cease to
be effective upon the termination of the Lease. Conclusive evidence that the
Lease has terminated shall include an instrument in the form attached hereto as
Exhibit C (the "Termination Notice") signed by Tenant and recorded with the
Recorder's Office stating that the Lease has been terminated. Upon termination
of this Lease, the Purchase Option, Right of First Refusal and Tenant's
Expansion Right shall each automatically terminate. Notwithstanding the
foregoing, a termination of the Lease in connection with the purchase of the
Premises pursuant to the Purchase Option or Right of First Refusal by Lexicon
Pharmaceuticals (New Jersey), Inc., or an Affiliated Entity (as defined in the
Lease) or a Permitted Assignee (as defined in the Lease) of Lexicon
Pharmaceuticals (New Jersey), Inc. shall not extinguish the Expansion Right (to
the extent still effective under the terms of the Lease at the time of such
purchase of the Premises) and the Expansion Right (to the extent still effective
under the terms of the Lease at the time of such purchase of the Premises) shall
continue to bind the Expansion Parcel and such purchaser pursuant to the terms
of the Lease following such purchase and termination of the Lease for so long as
the Premises is owned by Lexicon Pharmaceuticals (New Jersey), Inc., or an
Affiliated Entity (as defined in the Lease) or a Permitted Assignee (as defined
in the Lease) of Lexicon Pharmaceuticals (New Jersey), Inc. Tenant hereby
unconditionally constitutes and appoints Landlord (and any transferee of
Landlord's interest in the Lease) as its true and lawful attorney and agent for
the sole purpose, except as otherwise set forth herein, of executing and
recording the Termination Notice on Tenant's behalf upon the termination of the
Lease. Tenant acknowledges that the foregoing power granted to Landlord (and any
transferee of Landlord's interest in the Lease) is coupled with an interest and
shall not be revocable by Tenant in any manner or for any reason, including
Tenant's dissolution, and any individual or entity may rely on this appointment.

    12. INCORPORATION OF LEASE. Reference is made to the Lease for the
remaining terms and provisions thereof, all of which are incorporated herein by
reference.

    13. COUNTERPARTS. This Memorandum of Lease may be signed in one or more
counterparts, all of which when taken together shall constitute one and the same
instrument.


                                       5
<PAGE>

            IN WITNESS WHEREOF, the parties have executed this Memorandum of
Lease as of the 23rd day of May, 2002.

                         LANDLORD:

                         TOWNSEND PROPERTY TRUST LIMITED PARTNERSHIP, DOING
                         BUSINESS IN NEW JERSEY AS TPT LIMITED PARTNERSHIP

                         By: DWT A II, LLC, ITS GENERAL PARTNER

                         By:
                                  -----------------------------------------
                                  Name:
                                  Title:


                         TENANT:

                         LEXICON PHARMACEUTICALS (NEW JERSEY), INC.


                         By:
                                  -----------------------------------------
                                  Name:
                                  Title:


                                       6
<PAGE>



STATE OF MARYLAND

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ___________________, the _______________ of
DWT A II, LLC, general partner of Townsend Property Trust Limited Partnership,
personally appeared before me, and that such member, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of said company as general partner of said partnership as such member.

                  Given under my hand and official seal on _____________, 2002.


                                          ----------------------------------
                                          Notary Public

My commission expires:  __________





STATE OF NEW JERSEY

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ________________, the ___________ of
Lexicon Pharmaceuticals (New Jersey), Inc., personally appeared before me and
that such officer, being authorized to do so, executed the foregoing instrument
for purposes therein contained by signing the name of the corporation as such
officer.

                  Given under my hand and official seal on _____________, 2002.


                                          ----------------------------------
                                          Notary Public

My commission expires:  __________





Mail to: Mark S. DePillis, Esquire
         Ballard Spahr Andrews & Ingersoll, LLP
         1735 Market Street, 51st Floor
         Philadelphia, Pennsylvania  19103



                                       7
<PAGE>


                                   EXHIBIT C

                        FORM OF LEASE TERMINATION NOTICE

                  THIS TERMINATION OF LEASE ("Termination") is made as of this
______ day of ______________, 20___, by and between ______________ ("Landlord")
and _________________ ("Tenant").

                  WHEREAS, [Townsend Property Trust Limited Partnership]
[Landlord], as landlord, and [Lexicon Pharmaceuticals (New Jersey), Inc.]
[Tenant], as tenant, entered into that certain Lease Agreement dated May __,
2002 (the "Lease") with respect to the Land described in Exhibit A hereto and
the Building and other improvements thereon located at 350 Carter Road,
Hopewell, New Jersey [explain any lease assignments or amendments here], which
Lease is evidenced by a Memorandum of Lease dated May ___, 2002 and recorded in
the Office of the Clerk of _________ County, New Jersey (the "Recorder's
Office") in Book ___, Page ___ (the "Memorandum").

                  [See Article 33 regarding survival of certain rights]

                  WHEREAS, the Lease (including, but not limited to, the
Purchase Option, Right of First Refusal and Expansion Right, as each such term
is defined in the Lease) has terminated.

                  WHEREAS, this Termination is entered into for the purpose of
setting forth upon the public record that the Lease (including, but not limited
to, the Purchase Option, Right of First Refusal and Expansion Right, as each
such term is defined in the Lease) is terminated and null and void and the
Memorandum is of no further force and effect.

                  NOW THEREFORE, for good and valuable consideration, each to
the other in hand paid, the parties hereto, intending to be legally bound
hereby, agree as follows:

                  1. The Lease (including, but not limited to, the Purchase
Option, Right of First Refusal and Expansion Right, as each such term is defined
in the Lease) is hereby terminated and released and the Memorandum is of no
further force or effect.

                  2. The parties hereto acknowledge that this Termination is
intended to be recorded in the Recorder's Office.


                                      C-1
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have executed this
Termination as of the day and year first above written.

                               LANDLORD:

                               [NAME OF LANDLORD]

                               By:
                                        -----------------------------------
                               Name:
                               Title:


                               TENANT:

                               [NAME OF TENANT]


                               By:
                                        -----------------------------------
                               Name:
                               Title:

                                      C-2
<PAGE>


STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ___________________, the _______________ of
_____________________, personally appeared before me, and that such officer,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of said company as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public
                                          My commission expires:  __________


STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ________________, the ___________ of
______________________, personally appeared before me and that such officer,
being authorized to do so, executed the foregoing instrument for purposes
therein contained by signing the name of the corporation as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public
                                          My commission expires:  __________




                                      C-3
<PAGE>


                                    EXHIBIT D

                        FORM OF OPTION/RIGHT TERMINATION

                  THIS OPTION TERMINATION ("Termination") is made as of this
______ day of ______________, 20___, by and between ______________ ("Landlord")
and _________________ ("Tenant").

                  WHEREAS, [Townsend Property Trust Limited Partnership]
[Landlord], as landlord, and [Lexicon Pharmaceuticals (New Jersey), Inc.]
[Tenant], as tenant, entered into that certain Lease Agreement dated May __,
2002 (the "Lease") with respect to the Land described in Exhibit A hereto and
the Building and other improvements thereon located at 350 Carter Road,
Hopewell, New Jersey [explain any lease assignments or amendments here], which
Lease is evidenced by a Memorandum of Lease dated May ___, 2002 and recorded in
the Office of the Clerk of _________ County, New Jersey (the "Recorder's
Office") in Book ___, Page ___ (the "Memorandum").

                  WHEREAS, the Lease includes a [Purchase Option] [Right of
First Refusal] [Expansion Right] (as such term is defined in the Lease) in favor
of Tenant (the "Right"), which right is referenced in the Memorandum.

                  WHEREAS, the Right has terminated.

                  WHEREAS, this Termination is entered into for the purpose of
setting forth upon the public record that the Right is terminated and null and
void.

                  NOW THEREFORE, for good and valuable consideration, each to
the other in hand paid, the parties hereto, intending to be legally bound
hereby, agree as follows:

                  1.The Right is hereby terminated and released and of no
further force or effect.

                  2.The parties hereto acknowledge that this Termination is
intended to be recorded in the Recorder's Office.


                                      D-1
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have executed this
Termination as of the day and year first above written.

                               LANDLORD:

                               [NAME OF LANDLORD]

                               By:
                                        ------------------------------------
                               Name:
                               Title:


                               TENANT:

                               [NAME OF TENANT]


                               By:
                                        ------------------------------------
                               Name:
                               Title:




                                      D-2
<PAGE>




STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ___________________, the _______________ of
_____________________, personally appeared before me, and that such officer,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of said company as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public
                                          My commission expires:  __________



STATE OF _______________

COUNTY OF ______________

                  I, the undersigned, a notary public in and for the county and
state aforesaid, hereby certify that ________________, the ___________ of
______________________, personally appeared before me and that such officer,
being authorized to do so, executed the foregoing instrument for purposes
therein contained by signing the name of the corporation as such officer.

                  Given under my hand and official seal on _____________, 20___.


                                          ----------------------------------
                                          Notary Public
                                          My commission expires:  __________




                                      D-3
<PAGE>
             SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT


     THIS SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT ("Agreement")
is entered into as of May 23, 2002 (the "Effective Date") by and between CDC
MORTGAGE CAPITAL INC., a New York corporation (the "Mortgagee") and LEXICON
PHARMACEUTICALS (NEW JERSEY), INC., a Delaware corporation (hereinafter,
collectively the "Tenant"), with reference to the following facts:

     A. TOWNSEND PROPERTY TRUST LIMITED PARTNERSHIP, a Maryland limited
partnership doing business in New Jersey as TPT LIMITED PARTNERSHIP, whose
address is 210 West Pennsylvania Avenue, Suite 700, Towson, Maryland 21204 (the
"Landlord") owns fee simple title or a leasehold interest in the real property
described in Exhibit "A" attached hereto (the "Property").

     B. Mortgagee has made a loan to Landlord in the original principal amount
of Two Hundred Thirty-One Million Seven Hundred Thirty-Five Thousand and No/100
Dollars ($231,735,000.00) (the "Loan").

     C. To secure the Loan, Landlord has encumbered the Property by entering
into that certain Mortgage dated April 19, 2000 in favor of Mortgagee (as
amended, increased, renewed, extended, spread, consolidated, severed, restated,
or otherwise changed from time to time, the "Mortgage") recorded in the Office
of the Clerk of Monmouth County, New Jersey.

     D. Pursuant to the Lease dated May 23, 2002 (the "Lease"), Landlord demised
to Tenant a portion of the Property consisting of the following (the "Leased
Premises"): the approximately 19 acre parcel of land shown on the Site Plan
attached hereto as Exhibit "B" with the approximately 76,000 square foot
building and other improvements located thereon.

     E. Tenant and Mortgagee desire to agree upon the relative priorities of
their interests in the Property and their rights and obligations if certain
events occur.

     NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee
agree:

1.   Definitions. The following terms shall have the following meanings for
purposes of this Agreement.

     a. Foreclosure Event. A "Foreclosure Event" means: (i) foreclosure under
the Mortgage; (ii) any other exercise by Mortgagee of rights and remedies
(whether under the Mortgage or under applicable law, including bankruptcy law)
as holder of the Loan and/or the Mortgage, as a result of which a Successor
Landlord becomes owner of the Property; or (iii) delivery by Landlord to
Mortgagee (or its designee or nominee) of a deed or other conveyance of
Landlord's interest in the Property in lieu of any of the foregoing.

     b. Former Landlord. A "Former Landlord" means Landlord and any other party
that was landlord under the Lease at any time before the occurrence of any
attornment under this Agreement.

<PAGE>

     c. Offset Right. An "Offset Right" means any right or alleged right of
Tenant to any offset, defense (other than one arising from actual payment and
performance, which payment and performance would bind a Successor Landlord
pursuant to this Agreement), claim, counterclaim, reduction, deduction, or
abatement against Tenant's payment of Rent or performance of Tenant's other
obligations under the Lease, arising (whether under the Lease or under
applicable law) from Landlord's breach or default under the Lease.

     d. Rent. The "Rent" means any fixed rent, base rent or additional rent
under the Lease.

     e. Successor Landlord. A "Successor Landlord" means any party that becomes
owner of the Property as the result of a Foreclosure Event.

     f. Termination Right. A "Termination Right" means any right of Tenant to
cancel or terminate the Lease or to claim a partial or total eviction arising
(whether under the Lease or under applicable law) from Landlord's breach or
default under the Lease.

     g. Other Capitalized Terms. If any capitalized term is used in this
Agreement and no separate definition is contained in this Agreement, then such
term shall have the same respective definition as set forth in the Lease.

2.   Subordination. Subject to Article 3 hereof, the Lease, as the same may
hereafter be modified, amended or extended, shall be, and shall at all times
remain, subject and subordinate to the terms, conditions and provisions of the
Mortgage, the lien imposed by the Mortgage, and all advances made under the
Mortgage.

3.   Nondisturbance, Recognition and Attornment.

     a. No Exercise of Mortgage Remedies Against Tenant. So long as the Tenant
is not in default under this Agreement or under the Lease, beyond any applicable
grace or cure periods (an "Event of Default"), Mortgagee (i) shall not terminate
or disturb Tenant's possession of the Leased Premises or any other material
rights or privileges of Tenant under the Lease, except in accordance with the
terms of the Lease and (ii) shall not name or join Tenant as a defendant in any
exercise of Mortgagee's rights and remedies arising upon a default under the
Mortgage or in any Foreclosure Event unless applicable law requires Tenant to be
made a party thereto as a condition to proceeding against Landlord or
prosecuting such rights and remedies. In the latter case, Mortgagee may join
Tenant as a defendant in such action only for such purpose and not to terminate
the Lease or otherwise adversely affect Tenant's rights under the Lease or this
Agreement in such action, provided that Mortgagee pays for Tenant's actual,
out-of-pocket, reasonable costs of defense.

     b. Recognition and Attornment. Upon Successor Landlord taking title to the
Property (i) Successor Landlord shall be bound to Tenant under all the terms and
conditions of the Lease (except as provided in this Agreement); (ii) Tenant
shall recognize and attorn to Successor Landlord as Tenant's direct landlord
under the Lease as affected by this Agreement; and (iii) the Lease shall
continue in full force and effect as a direct lease, in accordance with its


                                       2
<PAGE>


terms (except as provided in this Agreement), between Successor Landlord and
Tenant. Tenant hereby acknowledges notice that pursuant to the Mortgage and
assignment of rents, leases and profits, Landlord has granted to the Mortgagee
an absolute, present assignment of the Lease and Rents which provides that
Tenant continue making payments of Rents and other amounts owed by Tenant under
the Lease to the Landlord and to recognize the rights of Landlord under the
Lease until notified otherwise in writing by the Mortgagee. After receipt of
such notice from Mortgagee, the Tenant shall thereafter make all such payments
directly to the Mortgagee or as the Mortgagee may otherwise direct, without any
further inquiry on the part of the Tenant, provided that all such payments
received by Mortgagee (or other party as directed by Mortgagee) shall be
credited against Tenant's rent and other obligations under the Lease. Landlord
consents to the foregoing and waives any right, claim or demand which Landlord
may have against Tenant by reason of such payments to Mortgagee or as Mortgagee
directs.

     c. Further Documentation. The provisions of this Article 3 shall be
effective and self-operative without any need for Successor Landlord or Tenant
to execute any further documents. Tenant and Successor Landlord shall, however,
confirm the provisions of this Article 3 in writing upon request by either of
them within ten (10) days of such request.

4.   Protection of Successor Landlord.  Notwithstanding anything to the
contrary in the Lease or the Mortgage, Successor Landlord shall not be liable
for or bound by any of the following matters:

     a. Claims Against Former Landlord. Any Offset Right that Tenant may have
against any Former Landlord relating to any event or occurrence before the date
of attornment, including any claim for damages of any kind whatsoever as the
result of any breach by Former Landlord that occurred before the date of
attornment. The foregoing shall not limit either (i) Tenant's right to exercise
against Successor Landlord any Offset Right otherwise available to Tenant
because of events occurring after the date of attornment or (ii) Successor
Landlord's obligation to correct any conditions that existed as of the date of
attornment and violate Successor Landlord's obligations as landlord under the
Lease.

     b. Prepayments. Except for the payment of Rent for the second full calendar
month of the Term of the Lease which is due upon execution of the Lease, any
payment of Rent that Tenant may have made to Former Landlord more than thirty
(30) days before the date such Rent was first due and payable under the Lease
with respect to any period after the date of attornment other than, and only to
the extent that, the Lease expressly required such a prepayment.

     c. Payment; Security Deposit; Work. Any obligation: (i) to pay Tenant any
sum(s) that any Former Landlord owed to Tenant (other than the Tenant
Improvement Allowance), unless such sums, if any, shall have been actually
delivered to Mortgagee by way of an assumption of escrow accounts or otherwise,
provided, however, that if Successor Landlord does not fund the Additional T.I.
Allowance to Tenant, the Annual Base Rental shall not increase as described in
Paragraph 5(h) and Exhibit D of the Lease; (ii) with respect to any security
deposited with Former Landlord, unless such security was actually delivered to
Mortgagee; (iii) to commence or complete any initial construction of
improvements in the Leased Premises or any expansion or rehabilitation of
existing improvements thereon; or (iv) arising from




                                       3
<PAGE>

representations and warranties related to Former Landlord unless such obligation
arising from any such representation or warranty is continuing.

     d. Modification, Amendment or Waiver. Any modification or amendment of the
Lease, or any waiver of the terms of the Lease, made without Mortgagee's written
consent and except for assignments or subleases made in strict conformance with
the applicable provisions of the Lease.

     e. Surrender, Etc. Any negotiated surrender, cancellation, or termination
of the Lease, in whole or in part, agreed upon between Landlord and Tenant,
unless effected unilaterally by Tenant pursuant to the express terms of the
Lease or agreed to in writing by Mortgagee or Successor Landlord.

5.   Exculpation of Successor Landlord. Notwithstanding anything to the contrary
in this Agreement or the Lease, Successor Landlord's obligations and liability
under the Lease shall never extend beyond Successor Landlord's (or its
successors' or assigns') interest, if any, in the Leased Premises from time to
time, including insurance and condemnation proceeds, security deposits, escrows,
Successor Landlord's interest in the Lease, and the proceeds from any sale,
lease or other disposition of the Property (or any portion thereof) by Successor
Landlord (collectively, the "Successor Landlord's Interest"). Tenant shall look
exclusively to Successor Landlord's Interest (or that of its successors and
assigns) for payment or discharge of any obligations of Successor Landlord under
the Lease as affected by this Agreement. If Tenant obtains any money judgment
against Successor Landlord with respect to the Lease or the relationship between
Successor Landlord and Tenant, then Tenant shall look solely to Successor
Landlord's Interest (or that of its successors and assigns) to collect such
judgment. Tenant shall not collect or attempt to collect any such judgment out
of any other assets of Successor Landlord.

6.   Mortgagee's Right to Cure.  Notwithstanding anything to the contrary in
the Lease or this Agreement, before exercising any Offset Right or Termination
Right:

     a. Notice to Mortgagee. Tenant shall provide Mortgagee with notice of the
breach or default by Landlord giving rise to same (the "Default Notice") and,
thereafter, the opportunity to cure such breach or default as provided for
below.

     b. Mortgagee's Cure Period. After Mortgagee receives a Default Notice,
Mortgagee shall have a period of 30 days beyond the time available to Landlord
under the Lease in which to cure the breach or default by Landlord. Mortgagee
shall have no obligation to cure (and shall have no liability or obligation for
not curing) any breach or default by Landlord, except to the extent that
Mortgagee agrees or undertakes otherwise in writing. In addition, unless Tenant
notifies Mortgagee that Tenant intends to exercise its rights to self help under
Paragraph 10(m) of the Lease, as to any breach or default by Landlord the cure
of which requires possession and control of the Property, provided that
Mortgagee undertakes by written notice to Tenant to exercise reasonable efforts
to cure or cause to be cured by a receiver such breach or default within the
period permitted by this paragraph, Mortgagee's cure period shall continue for
such additional time not to exceed 180 days (the "Extended Cure Period") as
Mortgagee may reasonably require to either: (i) obtain possession and control of
the Property with due diligence



                                       4
<PAGE>

and thereafter cure the breach or default with reasonable diligence and
continuity; or (ii) obtain the appointment of a receiver and give such receiver
a reasonable period of time in which to cure the default.

7.   Miscellaneous.

     a. Notices. Any notice or request given or demand made under this Agreement
by one party to the other shall be in writing, and may be given or be served by
hand delivered personal service, or by depositing the same with a reliable
overnight courier service or by deposit in the United States mail, postpaid,
registered or certified mail, and addressed to the party to be notified, with
return receipt requested or by telefax transmission, with the original machine-
generated transmit confirmation report as evidence of transmission. Notice
deposited in the mail in the manner hereinabove described shall be effective
from and after the expiration of three (3) days after it is so deposited;
however, delivery by overnight courier service shall be deemed effective on the
next succeeding business day after it is so deposited and notice by personal
service or telefax transmission shall be deemed effective when delivered to its
addressee or within two (2) hours after its transmission unless given after 3:00
p.m. on a business day, in which case it shall be deemed effective at 9:00 a.m.
on the next business day. For purposes of notice, the addresses and telefax
number of the parties shall, until changed as herein provided, be as follows:

         i.  If to the Mortgagee, at:

             CDC Mortgage Capital Inc.
             9 West 57th Street, 36th Floor
             New York, New York 10019
             Attention: Real Estate Administration (Gary DiGiuseppe)

             Telecopy No.: 212-891-6263

         ii. If to the Tenant, at:

             Prior to the Commencement Date under the Lease:

             Lexicon Pharmaceuticals (New Jersey), Inc.
             279 Princeton-Hightstown Road
             East Windsor, New Jersey 08520

             Telecopy No.: 281-863-8088

             After the Commencement Date under the Lease:

             Lexicon Pharmaceuticals (New Jersey), Inc.
             350 Carter Road
             Princeton, New Jersey 08540

                                       5
<PAGE>

             Telecopy No.: 281-863-8088

             with copies to:

             Steven M. Cohen, Esquire
             Morgan Lewis & Bockius, LLP
             1701 Market Street
             Philadelphia PA  19103

             Telecopy No.: 215-963-5299

             and

             Lexicon Genetics Incorporated
             8800 Technology Forest Place
             The Woodlands, Texas 77393-2167
             Attention:  General Counsel

             Telecopy No.: 281-863-8088

         b. Successors and Assigns. This Agreement shall bind and benefit the
parties, their successors and assigns, any Successor Landlord, and its
successors and assigns. If Mortgagee assigns the Mortgage, then upon delivery to
Tenant of written notice thereof accompanied by the assignee's written
assumption of all obligations under this Agreement, all liability of the
assignor shall terminate.

         c. Entire Agreement. This Agreement constitutes the entire agreement
between Mortgagee and Tenant regarding the subordination of the Lease to the
Mortgage and the rights and obligations of Tenant and Mortgagee as to the
subject matter of this Agreement.

         d. Interaction with Lease and with Mortgage. If this Agreement
conflicts with the Lease, then this Agreement shall govern as between the
parties and any Successor Landlord, including upon any attornment pursuant to
this Agreement. This Agreement supersedes, and constitutes full compliance with,
any provisions in the Lease that provide for subordination of the Lease to, or
for delivery of nondisturbance agreements by the holder of, the Mortgage.

         e. Mortgagee's Rights and Obligations. Except as expressly provided for
in this Agreement, Mortgagee shall have no obligations to Tenant with respect to
the Lease. If an attornment occurs pursuant to this Agreement, then all rights
and obligations of Mortgagee as Mortgagee under this Agreement shall terminate,
without thereby affecting in any way the rights and obligations of Successor
Landlord provided for in this Agreement.

         f. Interpretation; Governing Law. The interpretation, validity and
enforcement of this Agreement shall be governed by and construed under the
internal laws of the State in which the Leased Premises are located, excluding
such State's principles of conflict of laws.

                                       6
<PAGE>

         g. Amendments. This Agreement may be amended, discharged or terminated,
or any of its provisions waived, only by a written instrument executed by the
party to be charged.

         h. Due Authorization. Tenant represents to Mortgagee that it has full
authority to enter into this Agreement, which has been duly authorized by all
necessary actions. Mortgagee represents to Tenant that it has full authority to
enter into this Agreement, which has been duly authorized by all necessary
actions.

         i. Execution. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]




                                       7
<PAGE>


         IN WITNESS WHEREOF, the Mortgagee and Tenant have caused this Agreement
to be executed as of the date first above written.

ATTEST:                              MORTGAGEE:
                                     ---------

                                     CDC MORTGAGE CAPITAL INC.,
                                     a New York corporation

                                     By:
-------------------------------          ------------------------------
Name:                                    Name:
Title:                                   Title:


                                     TENANT:
                                     ------

                                     LEXICON PHARMACEUTICALS (NEW JERSEY), INC.,
                                     a Delaware Corporation

                                     By:
-------------------------------          ------------------------------
Name:                                    Name:
Title:                                   Title:


                                       8
<PAGE>



                               LANDLORD'S CONSENT


         Landlord consents and agrees to the foregoing Agreement, which was
entered into at Landlord's request. The foregoing Agreement shall not alter,
waive or diminish any of Landlord's obligations under the Mortgage or the Lease.
The above Agreement discharges any obligations of Mortgagee under the Mortgage
and related loan documents to enter into a nondisturbance agreement with Tenant.
Landlord is not a party to the above Agreement.

                               LANDLORD:
                               --------

                               TOWNSEND PROPERTY TRUST LIMITED PARTNERSHIP,
                               doing business in new Jersey as
                               TPT LIMITED PARTNERSHIP

                               By:  DWT A II, LLC, its general partner


                               By:
                                    ----------------------------------------
                                    Name:
                                    Title:

Dated: May 23, 2002



                                       9
<PAGE>


                           MORTGAGEE'S ACKNOWLEDGMENT

STATE OF _______________________     :
                                     : SS
COUNTY OF ______________________     :


         On this, the __ day of _______________, 2002, before me a Notary Public
in and for the State of ________________, the undersigned officer, personally
appeared ________________ ______________________ , who acknowledged
himself/herself to be a _________________________________ of CDC Mortgage
Capital Inc., a New York corporation, and that he/she, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself/herself as such officer.

         I certify that I am not an officer or director of the above-named bank,
banking institution or trust company. [STRIKE IF INAPPLICABLE]

         In witness whereof, I hereunto set my hand and official seal.


                                                                  [SEAL]
                                    Notary Public


My Commission Expires:




_______________________________




                                       10
<PAGE>


                             TENANT'S ACKNOWLEDGMENT

STATE OF _______________________      :
                                      : SS
COUNTY OF ______________________      :


         On this, the __ day of _______________, 2002, before me a Notary Public
in and for the State of ________________, the undersigned officer, personally
appeared ________________ ______________________ , who acknowledged that he/she
is the ______________________ of Lexicon Pharmaceuticals (New Jersey), Inc., a
Delaware corporation, and that he/she as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself/herself as such officer.

         In witness whereof, I hereunto set my hand and official seal.


                                                                  [SEAL]
                               Notary Public in and for the State of __________

My Commission Expires:




_______________________________




                                       11
<PAGE>


                                LIST OF EXHIBITS

         If any exhibit is not attached hereto at the time of execution of this
Agreement, it may thereafter be attached by written agreement of the parties,
evidenced by initialing said exhibit.

Exhibit "A" - Legal Description of the Land

Exhibit "B" - Site Plan Showing the Leased Premises







                                       12

<PAGE>
                            CONFIDENTIALITY AGREEMENT


         THIS CONFIDENTIALITY AGREEMENT (this "Agreement") is entered into
effective as of May 23, 2002 (the "Effective Date") by and between LEXICON
PHARMACEUTICALS (NEW JERSEY), INC., a Delaware corporation ("LexPharma"),
LEXICON GENETICS INCORPORATED, a Delaware corporation ("Lexicon"), and TOWNSEND
PROPERTY TRUST LIMITED PARTNERSHIP, a Maryland limited partnership doing
business in New Jersey as "TPT Limited Partnership" ("Townsend").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, Townsend and LexPharma have entered into a lease of even date
herewith (the "Lease") pursuant to which LexPharma leases from Townsend that
certain building known as 350 Carter Road, Hopewell, New Jersey and certain
surrounding real estate (the "Premises");

         WHEREAS, in connection with the entry onto the Premises in connection
with the exercise of its rights, and performance of its duties, under the Lease,
Townsend may become aware of Confidential Information (hereinafter defined); and

         WHEREAS, in consideration of LexPharma's execution of the Lease and in
recognition of the confidential and proprietary nature of the Confidential
Information, Townsend agrees to treat such Confidential Information in the
manner provided by this Agreement.

         NOW THEREFORE, the parties hereby agree as follows:

         1. Definition of Confidential Information. "Confidential Information"
is information (including, without limitation, technology, know-how, trade
secrets, formulas, processes, ideas, inventions (whether or not patentable),
biological, chemical and other materials of LexPharma and/or Lexicon, research
data and other technical information of LexPharma and/or Lexicon, as well as
business and financial information, analyses, studies and data of LexPharma
and/or Lexicon) which is (i) clearly marked as "confidential" (or words of
similar meaning), or (ii) if disclosed orally, summarized in writing marked as
"confidential" (or words of similar meaning) by Lexicon or LexPharma, as the
case may be, in a written notice to Townsend within thirty (30) days following
such disclosure, provided that such orally disclosed information shall not be
considered "Confidential Information" hereunder until Townsend receives such
notice that such information is confidential; provided, further that if at the
time of such oral disclosure Townsend is also orally notified that the
information is confidential, then at such time as Townsend receives the written
notice, such information shall be considered Confidential Information as of the
date Townsend became aware of such information.

         2. Treatment of Confidential Information. Townsend agrees (a) to hold
the Confidential Information in strict confidence and to take reasonable
precautions to protect such Confidential Information (including, without
limitation, all precautions Townsend normally employs with respect to its own
confidential information), (b) not to divulge any such Confidential Information
or any information derived therefrom to any third person, (c) not to make any
use whatsoever at any time of such Confidential Information, (d) not to derive
any commercial benefit (whether direct or indirect) from such Confidential
Information, and (e) not to copy or reverse engineer any such Confidential
Information. Any employee, agent, contractor, invitee or Affiliate of Townsend
given access to any such Confidential Information shall be similarly bound.
Without granting any right or license, Lexicon or LexPharma, as the case may be,
agrees that the foregoing provisions shall not apply



                                               Townsend-LexPharma Hopewell Lease
                                                       Confidentiality Agreement
<PAGE>


with respect to any information that Townsend can reasonably document (i) is or
hereafter becomes (through no improper action or inaction by Townsend or any
Affiliate, agent, consultant or employee) generally available to the public,
(ii) was in Townsend's possession or known by it prior to the date hereof, (iii)
was or hereafter is rightfully disclosed to Townsend by a third party without
restriction, or (iv) is hereafter independently developed by employees of
Townsend provided that such employees have not had access to or knowledge of
Confidential Information disclosed hereunder. Confidential Information disclosed
hereunder shall not be deemed to be within the foregoing exceptions merely
because such information is embraced by more general information in the public
domain or in the possession of Townsend. Townsend may make disclosures required
by court order, but Townsend shall use diligent efforts to limit such
disclosure(s) and to obtain confidential treatment or a protective order and
shall allow Lexicon or LexPharma, as the case may be, to participate in the
proceeding. LexPharma and/or Lexicon (as the case may be) shall use commercially
reasonable efforts to conceal Confidential Information when Townsend or its
employees, agents, contractors or invitees are on the Premises; provided that
LexPharma or Lexicon (as the case may be) has had reasonable notice prior to
such parties' arrival on the Premises.

         3. Return of Confidential Information. Immediately upon a request by
Lexicon or LexPharma, as the case may be, at any time, Townsend will turn over
to Lexicon or LexPharma, as the case may be, all Confidential Information and
all documents or media containing any such Confidential Information and any and
all copies or extracts thereof. Townsend understands that nothing herein
requires the disclosure of any Confidential Information of Lexicon or LexPharma,
as the case may be.

         4. Intentionally Deleted.

         5. Remedies for Breach. Townsend acknowledges and agrees that due to
the unique nature of the Confidential Information, there can be no adequate
remedy at law for any breach of its obligations hereunder, that any such breach
may allow Townsend or third parties to unfairly compete with Lexicon or
LexPharma, as the case may be, and therefore, that upon any such breach or any
threat thereof, Lexicon or LexPharma, as the case may be, shall be entitled to
appropriate equitable relief in addition to whatever remedies it might have at
law. Townsend will notify Lexicon in writing immediately upon the occurrence of
any such unauthorized release or other breach of which it becomes aware.

         6. Validity. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future state or federal laws or rules
and regulations promulgated thereunder effective during the term hereof, such
provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom.

         7. Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey, without regard to the conflicts of law provisions thereof,
and the federal and state courts of the State of New Jersey shall have exclusive
jurisdiction with respect to any claims or disputes arising between the parties
with regard to any matters related to this Agreement.

         8. Entire Agreement; Amendment. This Agreement supersedes all prior
discussions and writings and constitutes the entire agreement between the
parties with respect to the subject matter hereof. No waiver or modification of
this Agreement will be binding upon either party unless made in writing and
signed by a duly authorized representative of such party and no failure or delay
in enforcing any right will be deemed a waiver.




                                               Townsend-LexPharma Hopewell Lease
                                                       Confidentiality Agreement



                                      -2-
<PAGE>

         9. Counterparts. This Agreement may be executed in identical
counterparts, each of which shall be deemed to be an original instrument, and
all of which together will constitute one and the same Agreement.

         10. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the successors and permitted assigns of the parties
hereto.

         11. Term. Without granting any right or license, this Agreement and the
obligations of the parties with respect to Confidential Information hereunder
will terminate on the fifth anniversary of the Effective Date set forth above.

         12. Definition of Affiliate. The term "Affiliate" shall mean, with
respect to a party, any corporation or business entity that, directly or
indirectly, controls, is controlled by, or is under common control with a party.
For the purposes of this definition, "control" means the possession, directly or
indirectly of the power to direct or cause the direction of the management and
policies of a corporation or business entity, whether through the ownership of
voting securities, by contract, or otherwise.

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

                             LEXICON PHARMACEUTICALS
                             (NEW JERSEY), INC.


                             By:
                                  ------------------------------------------
                             Name:    Alan Main
                             Title:   Senior Vice President


                             LEXICON GENETICS INCORPORATED


                             By:
                                  ------------------------------------------
                             Name:    Jeff Wade
                             Title:   Executive Vice President and
                                      General Counsel


                             TOWNSEND PROPERTY TRUST LIMITED
                             PARTNERSHIP


                             By:
                                --------------------------------------------
                             Name:
                                  ------------------------------------------
                             Title:
                                   -----------------------------------------

                                               Townsend-LexPharma Hopewell Lease
                                                       Confidentiality Agreement

                                      -3-

</TEXT>
</DOCUMENT>
