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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(MARK ONE)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM _____________ TO _____________

                        COMMISSION FILE NUMBER: 000-30111

                          LEXICON GENETICS INCORPORATED
             (Exact Name of Registrant as Specified in its Charter)

                 DELAWARE                                      76-0474169
      (State or Other Jurisdiction of                       (I.R.S. Employer
      Incorporation or Organization)                     Identification Number)

                           4000 RESEARCH FOREST DRIVE
                           THE WOODLANDS, TEXAS 77381
                         (Address of Principal Executive
                              Offices and Zip Code)

                                 (281) 364-0100
                         (Registrant's Telephone Number,
                              Including Area Code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                    Common Stock, par value $0.001 per share

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of voting stock held by non-affiliates of
the registrant was approximately $333.0 million as of March 7, 2001, based on
the closing price of the common stock on the Nasdaq National Market on such date
of $10.0625 per share. For purposes of the preceding sentence only, all
directors, executive officers and beneficial owners of ten percent or more of
the registrant's common stock are assumed to be affiliates. As of March 7, 2001,
48,469,173 shares of common stock were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Certain sections of the registrant's definitive proxy statement
relating to the registrant's 2001 annual meeting of stockholders, which proxy
statement will be filed under the Securities Exchange Act of 1934 within 120
days of the end of the registrant's fiscal year ended December 31, 2000, are
incorporated by reference into Part III of this annual report on Form 10-K.

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                          LEXICON GENETICS INCORPORATED

                                TABLE OF CONTENTS

    ITEM
                                                                                                          
                                                         PART I
      1.     Business......................................................................................    1
      2.     Properties....................................................................................   19
      3.     Legal Proceedings.............................................................................   19
      4.     Submissions of Matters to a Vote of Security Holders..........................................   19

                                                        PART II
      5.     Market for Registrant's Common Equity and Related Stockholder Matters.........................   20
      6.     Selected Financial Data.......................................................................   21
      7.     Management's Discussion and Analysis of Financial Condition and Results of Operations.........   22
     7A.     Quantitative and Qualitative Disclosure About Market Risk.....................................   25
      8.     Financial Statements and Supplementary Data...................................................   25
      9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..........   25

                                                        PART III
     10.     Directors and Executive Officers of the Registrant............................................   26
     11.     Executive Compensation........................................................................   26
     12.     Security Ownership of Certain Beneficial Owners and Management................................   26
     13.     Certain Relationships and Related Transactions................................................   26

                                                        PART IV
     14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............................   27

  Signatures...............................................................................................   29

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

         The Lexicon name and logo and OmniBank(R) are registered trademarks and
LexVision(TM), Lexgen.com(TM), Internet Universal(TM) and e-Biology(TM) are
trademarks of Lexicon Genetics Incorporated.

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

         In this annual report on Form 10-K, "Lexicon," "we," "us" and "our"
refer to Lexicon Genetics Incorporated.

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

                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

         This annual report on Form 10-K contains forward-looking statements.
These statements relate to future events or our future financial performance. We
have attempted to identify forward-looking statements by terminology including
"anticipate," "believe," "can," "continue," "could," "estimate," "expect,"
"intend," "may," "plan," "potential," "predict," "should" or "will" or the
negative of these terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Item 1. Business - Risk Factors,"
that may cause our or our industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels or activity, performance or achievements expressed or implied by these
forward-looking statements.

         Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We are not under any duty to
update any of the forward-looking statements after the date of this annual
report on Form 10-K to conform these statements to actual results, unless
required by law.

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                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

         Lexicon Genetics is a drug discovery company of the post-genome era,
using gene knockout technology to define the functions of genes for the
discovery of pharmaceutical products. We are using this technology to expand our
LexVision program and fuel drug discovery programs in cancer, cardiovascular
disease, immune disorders, neurological disease, diabetes and obesity. We have
established drug discovery alliances and functional genomics collaborations with
leading pharmaceutical and biotechnology companies, research institutions and
academic institutions throughout the world to commercialize our technology and
further develop our discoveries.

         We generate our gene function discoveries using knockout mice - mice
whose DNA has been altered to disrupt, or "knock out," the function of the
altered gene. Our patented gene trapping and gene targeting technologies enable
us to rapidly generate these knockout mice by altering the DNA of genes in a
special variety of mouse cells, called embryonic stem (ES) cells, which can be
cloned and used to generate mice with the altered gene. We employ an integrated
platform of advanced medical technologies to systematically discover the
functions and potential pharmaceutical uses of the genes we have knocked out. We
believe that our LexVision database, which captures and catalogues the
information resulting from this analysis, and our OmniBank library of more than
100,000 knockout mouse clones provide us and our collaborators significant
opportunities to discover and develop pharmaceutical products based on genomics
- - the study of genes and their function.

         We made substantial business and technical progress in the year 2000:

         o        We commenced our LexVision program and, in September 2000,
                  established our first LexVision collaboration with
                  Bristol-Myers Squibb Company, under which we could receive
                  between $15 million and $25 million in access and delivery
                  fees, in addition to milestone payments and royalties on
                  products Bristol-Myers Squibb develops using our technology;

         o        We established drug discovery alliances with Abgenix, Inc. for
                  the discovery of human monoclonal antibody drugs and with
                  Arena Pharmaceuticals, Inc. for the discovery of small
                  molecule drugs that target an important class of genes called
                  G protein-coupled receptors, or GPCRs;

         o        We entered into functional genomics collaborations with
                  American Home Products, Boehringer Ingelheim Pharmaceuticals,
                  Inc., Pharmacia Corp. and Tularik, Inc.;

         o        We expanded our functional genomics collaboration with
                  Millennium Pharmaceuticals, Inc. and completed the first year
                  of our collaborations with Johnson & Johnson and N.V. Organon,
                  both of which were signed in December 1999;

         o        We nearly doubled the size of our OmniBank library, which we
                  estimate now contains gene knockout clones for more than 40%
                  of all genes in the mammalian genome;

         o        We obtained key patents covering our gene trapping technology
                  and gene function discoveries; and

         o        We completed a $220 million initial public offering, one of
                  the largest in the history of the biotechnology industry.

         Lexicon Genetics was incorporated in Delaware in July 1995, and
commenced operations in September 1995. Our corporate headquarters are located
at 4000 Research Forest Drive, The Woodlands, Texas 77381, and our telephone
number is (281) 364-0100. Our corporate website is located at
www.lexicon-genetics.com. Information found on our website should not be
considered part of this annual report on Form 10-K.

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GENOMICS AND DRUG DISCOVERY

The Human Genome

         The human genome is comprised of complementary strands of
deoxyribonucleic acid, or DNA, molecules organized into 23 pairs of chromosomes.
Genes, which carry the specific information, or code, necessary to construct, or
express, the proteins that regulate human physiology and disease, make up
approximately three to five percent of the genome. The remaining 95% to 97% of
DNA in chromosomes does not code for protein. It is now estimated that the
entire human genome contains approximately 30,000 to 50,000 genes within a total
of approximately 3.5 billion nucleotide base pairs of "genomic" or "chromosomal"
DNA.

         The information contained in genes is used to express proteins via a
two-step process. The first step in protein expression is called transcription,
in which the DNA sequence of a gene is copied into a molecule known as
ribonucleic acid, or RNA. A splicing process within the cell then removes the
introns, or non-coding segments, from the transcript, thereby creating a
messenger RNA, or mRNA. In the second step, the mRNA directs the assembly of the
protein product of the gene in a process called translation.

         The Human Genome Project and other publicly and privately-funded DNA
sequencing efforts have invested considerable resources to sequence the genes in
the human genome, culminating in the completion of a "working draft" of sequence
from the human genome in the year 2000 and its publication in February 2001. The
sequence of a gene alone, however, does not permit reliable predictions of its
function in physiology and disease. As a result, the databases of gene sequences
generated by these efforts can be compared by analogy to a dictionary that
contains thousands of words, but only a handful of definitions.

Functional Genomics

         The efforts to discover these definitions - to define the functions of
the genes in the human genome and, in doing so, discover which genes encode
pharmaceutically-relevant drug targets and therapeutic proteins - are commonly
referred to as functional genomics. Researchers use a variety of methods to
obtain clues about gene function, such as gathering information about where a
gene's transcript is found and where the corresponding protein is expressed in
the cell. Experiments are also conducted using cell culture, biochemical studies
and non-mammalian organisms. While these methods may provide useful information
about gene function at the biochemical and cellular levels, their ability to
provide information about how genes control mammalian physiology, and thus their
usefulness for drug discovery and development, is significantly limited.

         We believe that the method for determining a gene's function that has
the greatest relevance and highest value for drug discovery is to disrupt, or
knock out, the gene in a mouse and assess the physiological, pathological and
behavioral consequences of the disruption of the gene's function. The results of
such an analysis can determine the function and disease relevance of a
particular gene and the potential of the gene or the protein it encodes as a
drug target or therapeutic protein.

         This method of defining gene function possesses a number of advantages
in discovering the most promising human drug targets and therapeutic proteins:

         o        Humans and mice are very similar genetically - large regions
                  of the two genomes contain similar genes in similar order;

         o        Humans and mice share very similar physiology - as a result,
                  the mouse is one of the most widely-used animal model systems
                  in the pharmaceutical industry; and

         o        The mouse is the only mammal for which ES cell cloning
                  technology has been well-established, and it is also the only
                  mammal that can be genetically engineered on a large scale.

         The use of knockout mice has led to substantial successes in
identifying gene function. The methods traditionally used to generate knockout
mice, however, are labor-intensive, slow and often unpredictable, requiring

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highly-skilled scientific personnel and often a year or more of work. These
impediments have limited the rate at which knockout mice may be produced and,
therefore, the rate at which the genes in the mammalian genome may be analyzed.
We estimate that, to date, knockout mice have been made and analyzed for only a
small fraction of all genes.

OUR TECHNOLOGY PLATFORM

         We have developed and refined gene-specific gene targeting and
genome-wide gene trapping technologies that enable us to overcome many of the
limitations of traditional methodologies for generating gene knockouts. We are
using these technologies to rapidly generate knockout mice for the analysis of
the functions of hundreds of genes each year. We employ an integrated platform
of advanced medical technologies to systematically analyze the functions and
pharmaceutical relevance of these genes.

Gene Targeting

         We use gene targeting technology to rapidly generate knockout mice with
alterations in selected genes. Our gene targeting technology, which is covered
by several key patents, enables us to generate highly-specific alterations in
targeted genes, including alterations that selectively disrupt, or conditionally
regulate, the function of the targeted gene. We believe that our experience and
scale of production using gene targeting technology provide us with substantial
advantages in efficiency and speed relative to others using traditional methods
to generate knockout mice.

         We use our gene targeting technology with a second technology known as
Cre/lox recombinase technology to generate alterations that selectively disrupt,
or conditionally regulate, the function of the targeted gene. We use several
other technologies that enable the regulation of the function of targeted genes
by different methods. The regulation of gene activity using these technologies
may closely model the pharmacological action of drugs that interact with
specific targets.

Gene Trapping

         We are using our patented gene trapping technology, a high-throughput
method of generating knockout mouse clones that we invented, to expand our
OmniBank library. Our gene trapping technology uses a type of virus called a
retrovirus that has been genetically engineered. These retroviruses infect cells
in vitro, integrate into the chromosome of the cell and deliver molecular traps
for genes. The gene trap disrupts the function of the gene into which it
integrates, permitting the generation of knockout mice. In addition, the gene
trap stimulates transcription and use the cell's own splicing machinery to
extract a transcript of the trapped gene from the chromosome for automated DNA
sequencing. Because our gene trapping vectors are designed to trap genes in a
manner largely independent of their levels of expression, our OmniBank database
and library includes even those genes that are very rarely expressed. Apply our
gene trapping technology to human cell lines has also allowed us to capture DNA
sequence from thousands of human genes.

         We use our gene trapping retroviruses in an automated process to
rapidly and cost-effectively create knockout mouse clones. Our OmniBank library
currently contains more than 100,000 frozen ES cell clones identified by DNA
sequence in a relational database. We are currently generating approximately
1,500 genetically engineered knockout ES cell clones per week using our gene
trapping technology. We estimate that our OmniBank library currently contains
gene knockout clones for more than 40% of all genes in the mammalian genome.

LexVision Technology Platform

         We employ an integrated platform of advanced medical technologies to
rapidly and systematically discover and catalogue the functions of the genes we
have knocked out using our gene trapping and gene targeting technologies. This
state-of-the-art technology platform enables us to assess the phenotypic
consequences, or function in a living mammal, of the knocked-out gene across a
variety of parameters relevant to human disease, including cancer,
cardiovascular disease, immune disorders, neurological disease, diabetes and
obesity. Most of the technologies we employ are non-invasive, permitting
longitudinal studies of gene function over time that are not feasible using
conventional techniques for the analysis of knockout mice. The information
resulting from this

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analysis is captured in the LexVision relational database for our use, and use
by our collaborators, to discover genomics-based pharmaceutical products.

Drug Discovery Programs

         We are using the discoveries made in our LexVision program to fuel drug
discovery programs in cancer, cardiovascular disease, immune disorders,
neurological disease, diabetes and obesity. We are conducting drug discovery
efforts in these areas on our own and in collaboration with the companies with
which we have established drug discovery alliances.

Research and Development Expenses

         In 2000, we incurred $31.6 million on company-sponsored research and
development activities, including $10.9 million of stock-based compensation
expense.

OUR STRATEGY

         We believe that genomics represents an opportunity for the development
of drugs that address medical needs for which there are presently no effective
treatments, as well as drugs that are more effective or have fewer side effects
than the treatments that are currently available. Drugs on the market today
interact with a total of about 500 specific protein targets, each of which is
encoded by a gene. While estimates of the total number of potential drug targets
encoded within the human genome vary, many experts believe that genomics
research could discover as many as 5,000 new targets for pharmaceutical
development. Very little is known about the functions of most genes, however,
presenting a major challenge to traditional drug discovery research.

         We believe that the solution to this challenge requires redefining the
way drug discovery is conducted by systematically determining the functions of
large numbers of genes in mice, which, as mammals, share significant genetic and
physiological similarities with humans. We believe that the resulting
information will enable us and our collaborators to discover the most promising
drug targets and therapeutic proteins from the human genome.

         Our principal objective is to establish a leadership position in drug
target and therapeutic protein discovery. The key elements of our strategy
include the following:

         o        expand and complete our OmniBank library using our gene
                  trapping technology to generate gene knockouts throughout the
                  mouse genome;

         o        expand our LexVision database using our integrated platform of
                  advanced medical technologies to systematically discover and
                  catalogue the functions of large numbers of genes that encode
                  potential drug targets and therapeutic proteins;

         o        establish additional drug discovery alliances and functional
                  genomics collaborations with researchers at pharmaceutical
                  companies, biotechnology companies and academic institutions;
                  and

         o        develop promising drug candidates through collaborations or
                  with our own resources.

COMMERCIALIZATION

         We believe that the genes we identify and the gene functions we define
have the potential to be valuable in the discovery and development of
therapeutic proteins, antibody, small molecule and gene therapy drugs,
diagnostics, and pharmacology and toxicology applications. Our commercialization
strategy is to:

         o        establish additional subscription agreements for access to our
                  LexVision database and OmniBank database and library;

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         o        enter into additional functional genomics collaborations for
                  the development and analysis of knockout mice;

         o        expand our e-Biology collaborations;

         o        continue progress on our existing drug discovery alliances and
                  establish additional drug discovery and development alliances
                  with leading pharmaceutical and biotechnology companies; and

         o        develop a select group of pharmaceutical products on our own.

         In implementing our commercialization strategy, we have entered into
the following collaboration and alliance agreements:

LexVision Collaboration

         Bristol-Myers Squibb Company. We established a LexVision collaboration
with Bristol-Myers Squibb in September 2000, under which Bristol-Myers Squibb
has non-exclusive access to our LexVision database and OmniBank library for the
discovery of small molecule drugs. We could receive between $15 million and $25
million in access and delivery fees under this agreement, in addition to
milestone payments and royalties on products Bristol-Myers Squibb develops using
our technology. The agreement has a term of five years, although either party
may terminate the agreement after three years.

Drug Discovery Alliances

         Abgenix, Inc. We established a drug discovery alliance with Abgenix in
July 2000 to discover novel antibody drugs using our functional genomics
technologies and Abgenix's technology for generating fully human monoclonal
antibodies. We and Abgenix will each have the right to obtain exclusive
commercialization rights, including sublicensing rights, for an equal number of
qualifying antibodies, and will each receive milestone payments and royalties on
sales of antibody drugs from the collaboration that are commercialized by the
other party or a third party sublicensee. Each party will bear its own expenses
under the collaboration. The agreement has a term of three years, subject to the
right of the parties to extend the term for up to three additional one-year
periods.

         Arena Pharmaceuticals, Inc. We established a joint research
collaboration with Arena in June 2000 to discover novel drug candidates that
target an important class of receptors called G protein-coupled receptors, or
GPCRs, using our proprietary functional genomics technologies and Arena's
CART(TM) technology. Each company will fund its own efforts and share equally in
upfront fees, milestones and royalties generated from products developed from
alliance GPCRs. We expect most of these products to be licensed to third
parties, but we and Arena may elect to jointly fund further development of
select products discovered in the alliance.

Functional Genomics Collaborations

         Millennium Pharmaceuticals, Inc. We established a multi-year functional
genomics agreement in July 1999 for the creation of gene-targeted knockout mice
for use by Millennium in the validation of potential drug targets identified and
selected by Millennium. We had a separate agreement with Millennium for access
to our human gene sequence database that expired in April 2000. We substantially
expanded our functional genomics agreement with Millennium in June 2000,
increasing the number of knockout mice that we will generate for Millennium over
the remaining term of the agreement. The term of the agreement extends until
June 2002.

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         OmniBank Universal Agreements. The OmniBank Universal program allows
pharmaceutical and biotechnology companies to obtain non-exclusive access to our
OmniBank database and to obtain OmniBank and gene-targeted knockout mice under
predefined terms. Pharmaceutical and biotechnology companies that identify drug
targets of interest through either OmniBank or custom knockout mice also have
the option to engage us to analyze the phenotypes of those mice. We typically
receive annual subscription fees and fees for knockout mice with annual minimum
commitments and, under some of these agreements, may receive royalties on
products developed using novel genes discovered in OmniBank. We have entered
into agreements with the following companies under this program:

COMPANY                                                           DATE OF AGREEMENT        END OF ACCESS PERIOD
- -------                                                           -----------------        --------------------
                                                                                     
Abgenix, Inc.                                                     January 2001             January 2004
Tularik Inc.                                                      October 2000             October 2003
American Home Products                                            March 2000               March 2003
Boehringer Ingelheim Pharmaceuticals, Inc.                        February 2000            February 2003
   (a subsidiary of Boehringer Ingelheim GmBH, International)
Pharmacia Corp.                                                   January 2000             January 2003
The R.W. Johnson Pharmaceutical Research Institute                December 1999            December 2001
   (a subsidiary of Johnson & Johnson)
N.V. Organon                                                      December 1999            December 2002
   (a subsidiary of Akzo Nobel)
DuPont Pharmaceuticals Company                                    July 1998
   (a subsidiary of E.I. du Pont de Nemours and Company)

         We have entered into additional functional genomics collaboration
agreements with more than 30 companies and academic institutions throughout the
world under which we receive research fees for the generation of knockout mice
and, with participating institutions, certain rights to license inventions or
royalties on products discovered using such mice.

         e-Biology Global Collaboration Program. Finding the best targets for
drug discovery among the estimated 30,000 to 50,000 genes contained in the human
genome is a task of such complexity and scale that it will require the combined
efforts of leading research scientists worldwide. The identification of drug
targets and therapeutic proteins using our technology will require the
application of in-depth scientific and medical knowledge to prioritize genes for
functional studies and to execute those studies. Therefore, we believe that the
magnitude of our OmniBank functional genomics resource uniquely enables
collaboration through the Internet to accelerate the discovery of gene function.

         Researchers at pharmaceutical companies, biotechnology companies and
academic institutions worldwide subscribe to our OmniBank database through the
Internet. Our bioinformatics software allows subscribers to mine our OmniBank
database for interesting genes and knockout mice. Subscribers can acquire
OmniBank knockout mice on a non-exclusive basis and determine the function of
genes under our e-Biology collaboration program. In this program, we receive
fees for OmniBank knockout mice and, with participating institutions, certain
rights to license inventions or to receive royalties on pharmaceutical products
discovered using our mice. In cases where we do not obtain such rights, our
e-Biology collaborations leverage the value of OmniBank since we may also elect
to pursue any clone acquired through that program for gene function research
either on our own or with a commercial collaborator. We believe that Lexgen.com
and our e-Biology collaborations will allow us to harvest high-value functional
genomics information for application in drug discovery and facilitate
collaborations between us and pharmaceutical and biotechnology companies. We
have entered into more than 100 agreements under our e-Biology collaboration
program with researchers at leading institutions throughout the world.

         Technology Sublicenses. We have granted non-exclusive, internal-use
sublicenses under certain of our gene targeting patent rights to a total of
fourteen leading pharmaceutical and biotechnology companies. These agreements
typically have a term of one to three years, in some cases with provisions for
subsequent renewals.

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PATENTS AND PROPRIETARY RIGHTS

         We will be able to protect our proprietary rights from unauthorized use
by third parties only to the extent that those rights are covered by valid and
enforceable patents or are effectively maintained as trade secrets. Accordingly,
patents and other proprietary rights are an essential element of our business.
We seek patent protection for the genes, proteins and drug targets that we
discover. Specifically, we seek patent protection for:

         o        the sequences of genes that we believe to be novel, including
                  full-length genes and the partial gene sequences contained in
                  our human gene trap and OmniBank databases, the proteins they
                  encode and their predicted utility as a drug target or
                  therapeutic protein;

         o        the utility of genes and the drug targets or therapeutic
                  proteins they encode based on our discoveries of their
                  biological functions using knockout mice; and

         o        various enabling technologies in the fields of mutagenesis, ES
                  cell manipulation and transgenic or knockout mice.

         We own or have exclusive rights to three issued U.S. patents that cover
our gene trapping technology and five issued U.S. patents that cover specific
knockout mice and discoveries of the functions of genes made using knockout
mice. We have licenses under 38 additional U.S. patents, and corresponding
foreign patents and patent applications, in the fields of gene targeting, gene
trapping and genetic manipulation of mouse ES cells. These include patents
covering the use of positive-negative selection, isogenic DNA and Cre/lox
technology to which we hold exclusive rights in certain fields. We have filed or
have exclusive rights to more than 300 pending patent applications in the United
States, the European Patent Office, the national patent offices of other foreign
countries or under the Patent Cooperation Treaty, covering our gene trapping
technology, the DNA sequences of genes and other products and processes.
Collectively, these patent applications cover, among other things, more than 200
full-length human gene sequences, more than 50,000 partial human gene sequences,
and more than 35,000 knockout mouse clones and corresponding mouse gene
sequence tags. Patents typically have a term of no longer than 20 years from the
date of filing.

         All of our employees, consultants and advisors are required to execute
a confidentiality agreement upon the commencement of employment or consultation.
In general, the agreement provides that all inventions conceived by the employee
or consultant, and all confidential information developed or made known to the
individual during the term of the agreement, shall be our exclusive property and
shall be kept confidential, with disclosure to third parties allowed only in
specified circumstances. We cannot assure you, however, that these agreements
will provide useful protection of our proprietary information in the event of
unauthorized use or disclosure of such information.

COMPETITION

         The biotechnology and pharmaceutical industries are highly competitive
and characterized by rapid technological change. We face significant competition
in each of the aspects of our business from for-profit companies such as Human
Genome Sciences, Inc., Incyte Pharmaceuticals, Inc., Millennium Pharmaceuticals,
Inc., Deltagen, Inc., DNX (a subsidiary of Xenogen Corporation) and Celera
Genomics, among others, many of which have substantially greater financial,
scientific and human resources than we do. In addition, the Human Genome Project
and a large number of universities and other not-for-profit institutions, many
of which are funded by the U.S. and foreign governments, are also conducting
research to discover genes and their functions.

         While we are not aware of any other commercial entity that is
developing large-scale gene trap mutagenesis in ES cells, we face significant
competition from entities using traditional knockout mouse technology and other
technologies. Several companies and a large number of academic institutions
create knockout mice for third parties using these methods, and a number of
companies create knockout mice for use in their own research.

         Many of our competitors in drug discovery and development have
substantially greater research and product development capabilities and
financial, scientific, marketing and human resources than we have. As a result,
our competitors may succeed in developing products earlier than we do, obtaining
approvals from the FDA or other regulatory agencies for those products more
rapidly than we do, or developing products that are more effective than

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those we propose to develop. Similarly, our collaborators face similar
competition from other competitors who may succeed in developing products more
quickly, or developing products that are more effective, than those developed by
our collaborators. We expect that competition in this field will intensify.

GOVERNMENT REGULATION

Regulation of Pharmaceutical Products

         The development, production and marketing of any pharmaceutical
products developed by us or our collaborators will be subject to extensive
regulation by United States and foreign governmental authorities. In the United
States, new drugs are subject to regulation under the Federal Food, Drug and
Cosmetic Act and biological products are subject to regulation both under
certain provisions of that Act and under the Public Health Services Act. The FDA
regulates, among other things, the development, testing, manufacture, safety,
efficacy, record keeping, labeling, storage, approval, advertising, promotion,
sale and distribution of biologics and new drugs. The process of obtaining FDA
approval has historically been costly and time-consuming.

         The standard process required by the FDA before a pharmaceutical agent
may be marketed in the United States includes:

         o        preclinical tests;

         o        submission to the FDA of an Investigational New Drug
                  application, or IND, which must become effective before human
                  clinical trials may commence;

         o        adequate and well-controlled human clinical trials to
                  establish the safety and efficacy of the drug or biologic in
                  our intended application;

         o        for drugs, submission of a New Drug Application, or NDA, or a
                  Biologic License Application, or BLA, with the FDA; and

         o        FDA approval of the NDA or BLA prior to any commercial sale or
                  shipment of the drug.

         In addition to obtaining FDA approval for each product, each drug
manufacturing establishment must be inspected and approved by the FDA. All
manufacturing establishments are subject to inspections by the FDA and by other
federal, state and local agencies and must comply with current Good
Manufacturing Practices requirements.

         The preclinical studies can take several years to complete, and there
is no guarantee that an IND based on those studies will become effective to even
permit clinical testing to begin. Once clinical trials are initiated, they
generally take two to five years, but may take longer, to complete. After
completion of clinical trials of a new drug or biologic product, FDA marketing
approval of the NDA or BLA must be obtained. This process requires substantial
time and effort and there is no assurance that the FDA will accept the NDA or
BLA for filing and, even if filed, that approval will be granted. In the past,
the FDA's approval of the NDA or BLA has taken, on average, two to five years;
if questions arise, approval can take more than five years.

         In addition to regulatory approvals that must be obtained in the United
States, a drug product is also subject to regulatory approval in other countries
in which it is marketed, although the requirements governing the conduct of
clinical trials, product licensing, pricing, and reimbursement vary widely from
country to country. No action can be taken to market any drug product in a
country until an appropriate application has been approved by the regulatory
authorities in that country. FDA approval does not assure approval by other
regulatory authorities. The current approval process varies from country to
country, and the time spent in gaining approval varies from that required for
FDA approval. In some countries, the sale price of a drug product must also be
approved. The pricing review period often begins after market approval is
granted. Even if a foreign regulatory authority approves a drug product, it may
not approve satisfactory prices for the product.

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Other Regulations

         In addition to the foregoing, our business is and will be subject to
regulation under various state and federal environmental laws, including the
Occupational Safety and Health Act, the Resource Conservation and Recovery Act
and the Toxic Substances Control Act. These and other laws govern our use,
handling and disposal of various biological, chemical and radioactive substances
used in and wastes generated by our operations. We believe that we are in
material compliance with applicable environmental laws and that our continued
compliance with these laws will not have a material adverse effect on our
business. We cannot predict, however, whether new regulatory restrictions on the
production, handling and marketing of biotechnology products will be imposed by
state or federal regulators and agencies or whether existing laws and
regulations will not adversely affect us in the future.

EMPLOYEES AND CONSULTANTS

         We believe that our success will be based on, among other things,
achieving and retaining scientific and technological superiority and identifying
and retaining capable management. We have assembled a highly qualified team of
scientists as well as executives with extensive experience in the biotechnology
industry.

         As of March 1, 2001, the Company employed 322 persons, of whom 64 hold
M.D., Ph.D. or D.V.M. degrees and 46 hold other advanced degrees. We believe
that our relationship with our employees is good.

SCIENTIFIC ADVISORY PANEL MEMBERS

         We have consulting relationships with a number of scientific advisors,
organized into panels focused on specific human diseases or conditions. At our
request, these advisors review the feasibility of product development programs
under consideration, provide advice concerning advances in areas related to our
technology and aid in recruiting personnel. Most of these advisors receive cash
and stock-based compensation for their services, as well as access to our
OmniBank database and mice from our OmniBank library. All of the advisors are
employed by academic institutions or other entities and may have commitments to
or advisory agreements with other entities that may limit their availability to
us. Our advisors are required to disclose and assign to us any ideas,
discoveries and inventions they develop in the course of providing consulting
services to us. We also use consultants for various administrative needs. None
of our consultants or advisors is otherwise affiliated with us. Our scientific
advisors and consultants include the following persons:

NAME AND PANEL                                      AFFILIATION                                 TITLE
- --------------                                      -----------                                 -----

AGING AND CANCER
Carlo M. Croce, M.D.                     Thomas Jefferson University        Director, Kimmel Cancer Center
Richard Fishel, Ph.D.                    Thomas Jefferson University        Professor of Microbiology and Immunology
H. Earl Ruley, Ph.D.                     Vanderbilt University              Professor, Department of Microbiology and
                                                                            Immunology

ENDOCRINOLOGY AND OSTEOPOROSIS
John D. Brunzell, M.D.                   University of Washington           Professor of Medicine, Division of
                                                                            Metabolism, Endocrinology & Nutrition
Raif S. Geha, M.D.                       Harvard Medical School             Professor of Pediatrics and Immunology
J. Wesley Pike, Ph.D.                    University of Cincinnati           Professor, Department of Molecular and
                                                                            Cellular Physiology
Clifford J. Rosen, M.D.                  Maine Center for Osteoporosis      Medical Director for the Maine Center for
                                         Research and Foundation            Osteoporosis Research and Foundation

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CARDIOVASCULAR
Thomas M. Coffman, M.D.                  Duke University Medical Center     Professor of Medicine, Chief Division of
                                                                            Nephrology
Howard Rockman, M.D.                     Duke University Medical Center     Associate Professor of Medicine
Oliver Smithies, Ph.D.                   University of North Carolina       Excellence Professor, Department of
                                                                            Pathology and Laboratory Medicine

METABOLISM, DIABETES AND OBESITY
Qais Al-Awqati, M.D.                     Columbia University                Professor Physiology and Cell Biophysiology
Wolf-Georg Forsmann, M.D., Ph.D.         Neidersachsisches Institut fur     Direktor, Professor Neidersachsisches
                                         Peptid-Forschung                   Institut fur Peptid-Forschung GmbH
Kenneth Heskel Gabbay, M.D.              Baylor College of Medicine         Head, Section of Molecular Diabetes and
                                                                            Metabolism, Department of Pediatrics
Beverly Koller, Ph.D.                    University of North Carolina       Assistant Professor, Department of Medicine
G. Stanley McKnight, Ph.D.               University of Washington           Professor, Department of Pharmacology
Richard D. Palmiter, Ph.D.               University of Washington           Professor of Biochemistry and Howard Hughes
                                                                            Medical Institute Investigator

GENOMICS AND BIOINFORMATICS
Eric Douglas Green, M.D., Ph.D.          National Human Genome Research     Chief, Genome Technology
                                         Institute
Steven R. Gullans, Ph.D.                 Harvard Institutes of Medicine     Associate Professor of Medicine
Paul S. Meltzer, M.D., Ph.D.             National Human Genome Research     Head, Section of Molecular Genetics, Cancer
                                         Institute                          Genetics Branch
William R. Pearson, Ph.D.                University of Virginia             Professor of Biochemistry
Gregory D. Schuler, Ph.D.                National Center for                Staff Scientist
                                         Biotechnology Information

NEUROLOGY AND DEGENERATIVE DISEASES
Robert Edwards, M.D.                     University of California San       Professor, Department of Neurology and
                                         Francisco                          Physiology
Jeffrey L. Noebels, M.D., Ph.D.          Baylor College of Medicine         Professor of Neurology, Neuroscience and
                                                                            Molecular Genetics
Rudolph E. Tanzi, Ph.D.                  Harvard Medical School             Associate Professor of Neurology
                                                                            (Neuroscience)
Laurence Tecott, M.D., Ph.D.             University of California San       Assistant Professor, Department of Psychiatry
                                         Francisco

RISK FACTORS

         Our business is subject to risks and uncertainties, including those
described below:

RISKS RELATED TO OUR BUSINESS

We have a history of net losses, and we expect to continue to incur net losses
and may not achieve or maintain profitability

         We have incurred net losses since our inception, including net losses
of approximately $26.0 million for the year ended December 31, 2000. As of
December 31, 2000, we had an accumulated deficit of approximately $54.9 million.
We are unsure when we will become profitable, if ever. The size of our net
losses will depend, in part, on the rate of growth, if any, in our revenues and
on the level of our expenses.

         We derive substantially all of our revenues from subscriptions to our
databases, functional genomics collaborations for the development and, in some
cases, analysis of knockout mice, and technology licenses, and will

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continue to do so for the foreseeable future. Revenues from database
subscriptions, collaborations and licenses are uncertain because our existing
agreements have fixed terms or relate to specific projects of limited duration.
Our ability to secure future agreements will depend upon our ability to address
the needs of our potential future subscribers and collaborators.

         A large portion of our expenses are fixed, including expenses related
to facilities, equipment and personnel. In addition, we expect to spend
significant amounts to fund research and development and to enhance our core
technologies. As a result, we expect that our operating expenses will increase
significantly in the near term and, consequently, we will need to generate
significant additional revenues to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis.

Our quarterly operating results have been and likely will continue to fluctuate,
and we believe that quarter-to-quarter comparisons of our operating results are
not a good indication of our future performance

         Our quarterly operating results have fluctuated in the past and are
likely to do so in the future. In addition to the risks and uncertainties
described in this section, some of the factors that could cause our operating
results to fluctuate include:

         o        our ability to establish new database subscriptions or
                  research contracts with collaborators and new technology
                  licenses, and the timing of such arrangements;

         o        the expiration or other termination of database subscriptions
                  or research contracts with our collaborators or technology
                  licenses, which may not be renewed or replaced;

         o        the success rate of our discovery efforts leading to milestone
                  payments and royalties;

         o        the timing and willingness of our collaborators to
                  commercialize products which would result in milestone
                  payments and royalties; and

         o        general and industry-specific economic conditions, which may
                  affect our and our collaborators' research and development
                  expenditures.

         Due to the likelihood of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price would probably decline.

We are an early-stage company with an unproven business strategy

         Our business strategy of using our gene sequence databases and knockout
mice to select promising candidates for drug target development and
commercializing our discoveries through collaborations and alliances is
unproven. Our success will depend upon our ability to enter into additional
collaboration and alliance agreements on favorable terms, determine which genes
have potential value and select an appropriate commercialization strategy for
each potential product we or our collaborators choose to pursue.

         Biotechnology and pharmaceutical companies have successfully developed
and commercialized only a limited number of gene-based products to date. We have
not proven our ability to identify gene-based drugs or drug targets with
commercial potential, or to develop or commercialize drugs or drug targets that
we do identify. It is difficult to successfully select those genes with the most
potential for commercial development, and we do not know that any products based
on genes that we discover can be successfully commercialized. In addition, we
may experience unforeseen technical complications in the processes we use to
generate our gene sequence database and functional genomics resources. These
complications could materially delay or limit the use of those databases and
resources, substantially increase the anticipated cost of generating them or
prevent us from implementing our processes at appropriate quality and throughput
levels.

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   14

We face substantial competition in the discovery of the DNA sequences of genes
and their functions and in our drug discovery and product development efforts

         There are a finite number of genes in the human genome, and we believe
that the majority of such genes have been identified by us or others conducting
genomic research and that virtually all will be identified within the next few
years. We face significant competition in our efforts to discover and patent the
sequence and other information derived from such genes from entities using
alternative, and in some cases higher volume and larger scale, approaches for
the same purpose.

         We also face competition from entities using more traditional methods
to discover genes related to particular diseases. Many of these entities have
substantially greater financial, scientific and human resources than we do. A
large number of universities and other not-for-profit institutions, many of
which are funded by the U.S. and foreign governments, are also conducting
research to discover genes. A substantial portion of this research has been
conducted under the international Human Genome Project, a multi-billion dollar
program funded by the U.S. government and The Wellcome Trust. One or more of
these entities may discover and establish a patent position in one or more of
the genes that we wish to study or use in the development of a pharmaceutical
product.

         We face significant competition in our drug discovery and product
development efforts from entities using traditional knockout mouse technology
and other functional genomics technologies, as well as from those using other
traditional drug discovery techniques. These competitors may develop products
earlier than we do, obtain regulatory approvals faster than we can and develop
products that are more effective than ours. Our ability to use our patent rights
to prevent competition in the creation and use of knockout mice is more limited
outside of the United States. Competitors could discover and establish patents
in genes or gene products that we or our collaborators identify as a drug target
or therapeutic protein. Numerous companies, academic institutions and government
consortia are engaged in efforts to determine the function of genes and gene
products. Furthermore, other methods for conducting functional genomics research
may ultimately prove superior, in some or all respects, to the use of knockout
mice. In addition, technologies more advanced than or superior to our gene
trapping technology may be developed, thereby rendering our gene trapping
technology obsolete.

We rely heavily on collaborators to develop and commercialize products based on
genes that we identify as promising candidates for development as drug targets

         Since we do not currently possess the resources necessary to develop,
obtain approvals for or commercialize potential products based on genes
contained in our databases or genes that we identify as promising candidates for
development as drug targets or therapeutic proteins, we must enter into
collaborative arrangements to develop and commercialize these products. We will
have limited or no control over the resources that any collaborator may devote
to this effort. Any of our present or future collaborators may not perform their
obligations as expected. These collaborators may breach or terminate their
agreements with us or otherwise fail to conduct product discovery, development
or commercialization activities successfully or in a timely manner. Further, our
collaborators may elect not to develop products arising out of our collaborative
arrangements or may not devote sufficient resources to the development,
approval, manufacture, marketing or sale of these products. If any of these
events occurs, we may not be able to develop or commercialize potential
products.

         Some of our agreements provide us with rights to participate in the
commercial development of compounds or therapeutic approaches derived from our
collaborations or access to our databases, technology or intellectual property.
We may not be able to obtain such rights in future collaborations or agreements.
Our ability to obtain such rights depends in part on the validity of our
intellectual property, the advantages and novelty of our technologies and
databases and our negotiating position relative to each potential collaborator
or customer. Previous attempts by others in the industry to obtain these rights
with respect to the development of knockout mice and related technologies have
generated considerable controversy, especially in the academic community.

Any cancellation by or conflicts with our collaborators could harm our business

         Our collaboration agreements may not be renewed and may be terminated
in the event either party fails to fulfill its obligations under these
agreements. Any failure to renew or cancellation by a collaborator could mean a
significant loss of revenues and volatility in our earnings.

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   15

         In addition, we may pursue opportunities in fields that could conflict
with those of our collaborators. Moreover, disagreements could arise with our
collaborators over rights to our intellectual property or our rights to share in
any of the future revenues of compounds or therapeutic approaches developed by
our collaborators. These kinds of disagreements could result in costly and
time-consuming litigation. Any conflict with our collaborators could reduce our
ability to obtain future collaboration agreements and could have a negative
impact on our relationship with existing collaborators, adversely affecting our
business and revenues. Some of our collaborators could also become competitors
in the future. Our collaborators could develop competing products, preclude us
from entering into collaborations with their competitors or terminate their
agreements with us prematurely. Any of these developments could harm our product
development efforts.

We have no experience in developing and commercializing products on our own

         Our ability to develop and commercialize products on our own will
depend on our ability to internally develop preclinical, clinical, regulatory
and sales and marketing capabilities, or enter into arrangements with third
parties to provide those functions. We may not be successful in developing these
capabilities or entering into agreements with third parties on favorable terms,
or at all. Further, our reliance upon third parties for these capabilities could
reduce our control over such activities and could make us dependent upon these
parties. Our inability to develop or contract for these capabilities would
significantly impair our ability to develop and commercialize products.

We may engage in future acquisitions, which may be expensive and time consuming
and from which we may not realize anticipated benefits

         We may acquire additional businesses, technologies and products, if we
determine that these businesses, technologies and products complement our
existing technology or otherwise serve our strategic goals. We currently have no
commitments or agreements with respect to any acquisitions. If we do undertake
any transactions of this sort, the process of integrating an acquired business,
technology or product may result in operating difficulties and expenditures and
may absorb significant management attention that would otherwise be available
for ongoing development of our business. Moreover, we may never realize the
anticipated benefits of any acquisition. Future acquisitions could result in
potentially dilutive issuances of our equity securities, the incurrence of debt
and contingent liabilities and amortization expenses related to goodwill and
other intangible assets, which could adversely affect our results of operations
and financial condition.

If we lose our key personnel or are unable to attract and retain additional
personnel, we may be unable to pursue collaborations or develop our own products

         We are highly dependent on Arthur T. Sands, M.D., Ph.D., our president
and chief executive officer, as well as other principal members of our
management and scientific staff. The loss of any of these personnel would have a
material adverse effect on our business, financial condition or results of
operations and could inhibit our product development and commercialization
efforts. Although we have entered into employment agreements with some of our
key personnel, including Dr. Sands, these employment agreements are for a
limited period of time and not all key personnel have employment agreements.

         Recruiting and retaining qualified scientific personnel to perform
future research and development work will be critical to our success.
Competition for experienced scientists is high. Failure to recruit and retain
scientific personnel on acceptable terms could prevent us from achieving our
business objectives.

We may encounter difficulties in managing our growth, which could increase our
losses

         We have experienced a period of rapid growth that has placed and, if
this growth continues, will continue to place a strain on our human and capital
resources. If we are unable to manage our growth effectively, our losses could
increase. The number of our employees increased from 57 at December 31, 1997 to
93 at December 31, 1998, 122 at December 31, 1999, 287 at December 31, 2000 and
322 at March 1, 2001. We intend to increase the number of our employees
significantly during the remainder of 2001. Our ability to manage our operations
and growth effectively requires us to continue to expend funds to improve our
operational, financial and management controls,

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reporting systems and procedures. If we are unable to successfully implement
improvements to our management information and control systems in an efficient
or timely manner, or if we encounter deficiencies in existing systems and
controls, our management may not have adequate information to manage our
day-to-day operations.

Because our entire OmniBank mouse clone library is located at a single facility,
the occurrence of a disaster could significantly disrupt our business

         Our OmniBank mouse clone library and its back-up are stored in liquid
nitrogen freezers located at our facility in The Woodlands, Texas. If a disaster
such as a fire, flood, hurricane, tornado or similar event significantly damages
or destroys the facility in which our mouse clone library and back-up are
stored, our business could be disrupted until we could regenerate the library
and, as a result, our stock price could decline. Our business interruption
insurance may not be sufficient to compensate us in the event of a major
interruption due to such a disaster.

We may need additional capital in the future and, if it is not available, we
will have to curtail or cease operations

         Our future capital requirements will be substantial and will depend on
many factors, including our ability to obtain database subscription and
collaboration agreements and government grants, the amount and timing of
payments under such agreements and grants, the level and timing of our research
and development expenditures, market acceptance of our products, the resources
we devote to developing and supporting our products and other factors. Our
capital requirements will also be affected by any expenditures we make in
connection with license agreements and acquisitions of and investments in
complementary technologies and businesses.

         We anticipate that our existing capital resources will enable us to
maintain our currently planned operations for at least the next several years.
However, changes may occur that would consume available capital resources
significantly sooner than we expect. If our capital resources are insufficient
to meet future capital requirements, we will have to raise additional funds to
continue the development of our technologies and complete the commercialization
of products, if any, resulting from our technologies. We may be unable to raise
sufficient additional capital; if so, we will have to curtail or cease
operations.

RISKS RELATED TO OUR INDUSTRY

Our ability to patent our discoveries is uncertain because patent laws and their
interpretation are highly uncertain and subject to change

         The patent positions of biotechnology firms generally are highly
uncertain and involve complex legal and factual questions that will determine
who has the right to develop a particular product. No clear policy has emerged
regarding the breadth of claims covered in biotechnology patents. The
biotechnology patent situation outside the United States is even more uncertain
and is currently undergoing review and revision in many countries. Changes in,
or different interpretations of, patent laws in the United States and other
countries might allow others to use our discoveries or to develop and
commercialize our products without any compensation to us. We anticipate that
these uncertainties will continue for a significant period of time.

Our patent applications may not result in enforceable patent rights

         Our disclosures in our patent applications may not be sufficient to
meet the statutory requirements for patentability. Additionally, our current
patent applications cover many genes and we expect to file patent applications
in the future covering many more genes. As a result, we cannot predict which of
our patent applications will result in the granting of patents or the timing of
the granting of our patents. Our ability to obtain patent protection based on
genes or partial gene sequences will depend, in part, upon identification of a
function for the gene or gene sequences sufficient to meet the statutory
requirement that an invention have utility and that a patent application
describe the invention with sufficient specificity. While the U.S. Patent and
Trademark Office has issued guidelines for the examination of patent
applications claiming gene sequences, their therapeutic uses and novel proteins
coded by such genes, the impact of these guidelines is uncertain and may delay
or negatively impact our patent position. Biologic data in addition to that
obtained by our current technologies may be required for issuance of patents or
human therapeutics. If required, obtaining such biologic data could delay, add
substantial

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costs to, or affect our ability to obtain patent protection. There can be no
assurance that the disclosures in our current or future patent applications,
including those we may file with our collaborators, will be sufficient to meet
these requirements. Alternatively, if the level of biologic or other
experimental data required to obtain a patent is determined to be minimal, then
other companies who emphasize determining the gene sequence without significant
biologic function information will obtain a prior and superior patent position
to us and our collaborators. Even if patents are issued, there may be current or
future uncertainty as to the scope of the coverage or protection provided by any
such patents. In addition, the Human Genome Project, as well as many companies
and institutions, have identified genes and deposited partial gene sequences in
public databases and are continuing to do so. These public disclosures might
limit the scope of our claims or make unpatentable subsequent patent
applications on full-length genes.

         Other companies or institutions have filed and will file patent
applications that attempt to patent genes or gene sequences that may be similar
to our patent applications. The U.S. Patent and Trademark Office could decide
competing patent claims in an interference proceeding. Any such proceeding would
be costly, and we may not prevail. In addition, patent applications filed by
third parties may have priority over patent applications we file. In this event,
the prevailing party may require us or our collaborators to stop pursuing a
potential product or to negotiate a license arrangement to pursue the potential
product. We may not be able to obtain a license from the prevailing party on
acceptable terms, or at all.

         Some court decisions indicate that disclosure of a partial sequence may
not be sufficient to support the patentability of a full-length sequence. These
decisions have been confirmed by recent pronouncements of the U.S. Patent and
Trademark Office. We believe that these court decisions and the uncertain
position of the U.S. Patent and Trademark Office present a significant risk that
the U.S. Patent and Trademark Office will not issue patents based on patent
disclosures limited to partial gene sequences, like those represented in our
human gene trap database. In addition, we are uncertain about the scope of the
coverage, enforceability and commercial protection provided by any patents
issued on the basis of partial gene sequences.

If other companies and institutions obtain patents claiming the functional uses
of genes and gene products based upon gene sequence information and predictions
of gene function, we may be unable to obtain patents for our discoveries of
biological functions in knockout mice

         We intend to pursue patent protection covering the novel uses and
functions of new and known genes and proteins in mammalian physiology and
disease states. While an actual description of the biological function of a gene
or protein should enhance a patent position, we cannot assure you that such
information will increase the probability of issuance of any patents. Further,
many other entities are currently filing patents on genes which are identical or
similar to our filings. Many such applications seek to protect partial human
gene sequences, full-length gene sequences and the deduced protein products
encoded by the sequences while others use biological or other laboratory data.
Some of these applications attempt to assign biologic function to the DNA
sequences based on computer predictions. There is the significant possibility
that patents claiming the functional uses of genes and gene products will be
issued to our competitors based on such information.

We are presently involved in patent litigation and may be involved in future
patent litigation and other disputes regarding intellectual property rights, and
can give no assurances that we will prevail in any such litigation or other
dispute

         Our potential products and those of our collaborators may give rise to
claims that they infringe the patents of others. This risk will increase as the
biotechnology industry expands and as other companies obtain more patents and
attempt to discover genes through the use of high-speed sequencers. In addition,
many companies have well-established patent portfolios directed to common
techniques, methods and means of developing, producing and manufacturing
pharmaceutical products. Other companies or institutions could bring legal
actions against us or our collaborators for damages or to stop us or our
collaborators from manufacturing and marketing the affected products. If any of
these actions are successful, in addition to our potential liability for
damages, these entities may require us or our collaborators to obtain a license
in order to continue to manufacture or market the affected products or may force
us to terminate manufacturing or marketing efforts.

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         We may need to pursue litigation against others to enforce our patents
and intellectual property rights. Patent litigation is expensive and requires
substantial amounts of management attention. In addition, the eventual outcome
of any such litigation is uncertain.

         On May 24, 2000, we filed a complaint against Deltagen, Inc. in U.S.
District Court for the District of Delaware alleging that Deltagen is willfully
infringing the claims of United States Patent No. 5,789,215, under which we hold
an exclusive license from GenPharm International, Inc. This patent covers
methods of engineering the animal genome, including methods for the production
of knockout mice by homologous recombination, using isogenic DNA technology. In
the complaint, we are seeking unspecified damages from Deltagen, as well as
injunctive relief. Deltagen has counterclaimed for a declaratory judgment that
the patent is invalid and unenforceable and is not infringed by Deltagen. On
November 14, 2000, Deltagen filed an amended counterclaim alleging antitrust
claims against us and GenPharm, for which Deltagen is seeking unspecified
damages.

         On October 13, 2000, we filed a second complaint against Deltagen, Inc.
in U.S. District Court for the Northern District of California alleging that
Deltagen is willfully infringing the claims of United States Patents Nos.
5,464,764, 5,487,992, 5,627,059, and 5,631,153, under which also we hold
exclusive licenses from GenPharm International. These patents cover methods and
vectors for using positive-negative selection for producing gene targeted, or
"knockout," cells and animals, including the production of knockout mice by
homologous recombination. In the complaint, we are seeking unspecified damages
from Deltagen, as well as injunctive relief. Deltagen has counterclaimed for a
declaratory judgment that the patents are invalid and unenforceable and are not
infringed by Deltagen.

         While we believe that our complaints against Deltagen are meritorious
and that Deltagen's counterclaims against us are without merit, we can provide
no assurance that we will prevail in our litigation against Deltagen or that, if
we prevail, any damages or equitable remedies awarded will be commercially
valuable. If Deltagen prevails in declaring our patents invalid or on its
antitrust claim against us, our business and financial position could be
adversely affected. Furthermore, we are likely to incur substantial costs and
expend substantial personnel time in pursuing our litigation against Deltagen.

         We believe that there will continue to be significant litigation in our
industry regarding patent and other intellectual property rights. We and many of
our competitors have and are continuing to expend significant amounts of time,
money and management resources on intellectual property litigation. If we become
involved in additional litigation, it could consume a substantial portion of our
resources and could negatively affect our results of operations.

         Patent litigation involves substantial risks. Each time we sue for
patent infringement we face the risk that the patent will be held invalid or
unenforceable. Such a determination is binding on us for all future litigation
involving that patent. Furthermore, in light of recent U.S. Supreme Court
precedent, our ability to enforce our patents against state agencies, including
state sponsored universities and research labs is limited by the Eleventh
Amendment to the U.S. Constitution. Finally, opposition by academicians and the
government may hamper our ability to enforce our patent against academic or
government research laboratories. Enforcement of our patents may cause our
reputation in the academic community to be injured.

Issued patents may not fully protect our discoveries, and our competitors may be
able to commercialize products similar to those covered by our issued patents

         Issued patents may not provide commercially-meaningful protection
against competitors. Other companies or institutions may challenge our or our
collaborators' patents or independently develop similar products that could
result in an interference proceeding in the Patent and Trademark Office or a
legal action. In the event any single researcher or institution infringes upon
our or our collaborators' patent rights, enforcing these rights may be difficult
and time consuming. Others may be able to design around these patents or develop
unique products providing effects similar to our products. We may be required to
choose between pursuing litigation against infringers and being unable to
recover damages or otherwise enforce our patent rights.

         In addition, others may discover uses for genes or proteins other than
those uses covered in our patents, and these other uses may be separately
patentable. Even if we have a patent claim on a particular gene, the holder of a
patent covering the use of that gene could exclude us from selling a product
that is based on the same use of that

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gene. In addition, with respect to certain of our patentable inventions, we have
decided not to pursue patent protection outside the United States, both because
we do not believe it is cost effective and because of confidentiality concerns.
Accordingly, our international competitors could develop, and receive foreign
patent protection for gene sequences and functions for which we are seeking U.S.
patent protection.

Our rights to the use of technologies licensed by third parties are not within
our control

         We rely, in part, on licenses to use certain technologies which are
material to our business. We do not own the patents which underly these
licenses. Our rights to use these technologies and practice the inventions
claimed in the licensed patents are subject to our licensors abiding by the
terms of those licenses and not terminating them. In many cases, we do not
control the prosecution or filing of the patents to which we hold licenses. We
rely upon our licensors to prevent infringement of those patents. The scope of
our rights under our licenses may be subject to dispute by our licensors or
third parties.

We may be unable to protect our trade secrets

         While we have entered into confidentiality agreements with employees
and collaborators, we may not be able to prevent the disclosure of our trade
secrets. In addition, other companies or institutions may independently develop
substantially equivalent information and techniques.

We may become subject to regulation under the Animal Welfare Act, which could
subject us to additional costs and permit requirements

         The Animal Welfare Act, or AWA, is the federal law that currently
covers animals in laboratories. It applies to institutions or facilities using
any regulated live animals for research, testing, teaching or experimentation,
including diagnostic laboratories and private companies in the pharmaceutical
and biotechnology industries. The AWA currently does not cover rats or mice.
However, the United States Department of Agriculture, which enforces the AWA,
has entered into a proposed settlement agreement under which it has agreed to
commence the process of adopting regulations under the AWA to include mice
within its coverage.

         Currently, the AWA imposes a wide variety of specific regulations which
govern the humane handling, care, treatment and transportation of certain
animals by producers and users of research animals, most notably personnel,
facilities, sanitation, cage size, feeding, watering and shipping conditions. If
the USDA includes mice in its regulations, we will become subject to
registration, inspections and reporting requirements. Compliance with the AWA
could be expensive, and the regulations eventually adopted by the USDA could
impair our research and production efforts.

We and our collaborators are subject to extensive and uncertain government
regulatory requirements, which could increase our operating costs or adversely
affect our ability to obtain government approval of products based on genes that
we identify in a timely manner or at all

         Since we develop animals containing changes in their genetic make-up,
we may become subject to a variety of laws, guidelines, regulations and treaties
specifically directed at genetically modified organisms, or GMOs. The area of
environmental releases of GMOs is rapidly evolving and is currently subject to
intense regulatory scrutiny, particularly internationally. If we become subject
to these laws we could incur substantial compliance costs. For example, the
Biosafety Protocol, or the BSP, a recently adopted treaty, is expected to cover
certain shipments from the United States to countries abroad that have signed
the BSP. The BSP is also expected to cover the importation of living modified
organisms, a category that could include our animals. If our animals are not
contained as described in the BSP, our animals could be subject to the
potentially extensive import requirements of countries that are signatories to
the BSP.

         Drugs and diagnostic products are subject to an extensive and uncertain
regulatory approval process by the FDA and comparable agencies in other
countries. The regulation of new products is extensive, and the required process
of laboratory testing and human studies is lengthy and expensive. The burden of
these regulations will fall on us to the extent we develop proprietary products
on our own. If the products are the result of a collaboration effort, these
burdens may fall on our collaborating partner or may be shared with us. We may
not be able to obtain

                                       17
   20

FDA approvals for those products in a timely manner, or at all. We may encounter
significant delays or excessive costs in our efforts to secure necessary
approvals or licenses. Even if we obtain FDA regulatory approvals, the FDA
extensively regulates manufacturing, labeling, distributing, marketing,
promotion and advertising after product approval. Moreover, several of our
product development areas may involve relatively new technology and have not
been the subject of extensive product testing in humans. The regulatory
requirements governing these products and related clinical procedures remain
uncertain and the products themselves may be subject to substantial review by
foreign governmental regulatory authorities that could prevent or delay approval
in those countries. Regulatory requirements ultimately imposed on our products
could limit our ability to test, manufacture and, ultimately, commercialize our
products.

Security risks in electronic commerce or unfavorable internet regulation may
deter future use of our products and services

         We provide access to our databases and the opportunity to acquire our
knockout mice on the Internet. A fundamental requirement to conduct
Internet-based electronic commerce is the secure transmission of confidential
information over public networks. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments may result in a
compromise or breach of the algorithms we use to protect content and
transactions on Lexgen.com or proprietary information in our OmniBank database.
Anyone who is able to circumvent our security measures could misappropriate our
proprietary information, confidential customer information or cause
interruptions in our operations. We may be required to incur significant costs
to protect against security breaches or to alleviate problems caused by
breaches. Further, a well-publicized compromise of security could deter people
from using the Internet to conduct transactions that involve transmitting
confidential information.

         Because of the growth in electronic commerce, Congress has held
hearings on whether to regulate providers of services and transactions in the
electronic commerce market, and federal or state authorities could enact laws,
rules or regulations affecting our business or operations. If enacted and
applied to our business, these laws, rules or regulations could render our
business or operations more costly, burdensome, less efficient or impracticable.

We use hazardous chemicals and radioactive and biological materials in our
business; any disputes relating to improper handling, storage or disposal of
these materials could be time consuming and costly

         Our research and development processes involve the use of hazardous
materials, including chemicals and radioactive and biological materials. Our
operations also produce hazardous waste products. We cannot eliminate the risk
of accidental contamination or discharge or any resultant injury from these
materials. Federal, state and local laws and regulations govern the use,
manufacture, storage, handling and disposal of these materials. We could be
subject to civil damages in the event of an improper or unauthorized release of,
or exposure of individuals to, these hazardous materials. In addition, claimants
may sue us for injury or contamination that results from our use or the use by
third parties of these materials, and our liability may exceed our total assets.
Compliance with environmental laws and regulations may be expensive, and current
or future environmental regulations may impair our research, development or
production efforts.

We may be sued for product liability

         We or our collaborators may be held liable if any product we or our
collaborators develop, or any product which is made with the use or
incorporation of any of our technologies, causes injury or is found otherwise
unsuitable during product testing, manufacturing, marketing or sale. Although we
currently have and intend to maintain product liability insurance, this
insurance may become prohibitively expensive, or may not fully cover our
potential liabilities. Inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential product liability
claims could prevent or inhibit the commercialization of products developed by
us or our collaborators. If we are sued for any injury caused by our or our
collaborators' products, our liability could exceed our total assets.

                                       18
   21

Public perception of ethical and social issues may limit or discourage the use
of our technologies, which could reduce our revenues

         Our success will depend in part upon our ability to develop products
discovered through our gene trapping and knockout mouse technologies.
Governmental authorities could, for ethical, social or other purposes, limit the
use of genetic processes or prohibit the practice of our gene trapping and
knockout mouse technologies. Claims that genetically engineered products are
unsafe for consumption or pose a danger to the environment may influence public
perceptions. The subject of genetically modified organisms, like knockout mice,
has received negative publicity and aroused public debate in some countries.
Ethical and other concerns about our technologies, particularly the use of genes
from nature for commercial purposes and the products resulting from this use,
could adversely affect the market acceptance of our technologies.

ITEM 2.  PROPERTIES

         We currently lease approximately 104,000 square feet of space for our
corporate offices and laboratories in buildings located in The Woodlands, Texas,
a suburb of Houston, Texas. Our facilities at this location include a 28,000
square foot state-of-the art animal facility completed in January 1999. We
believe this is one of the largest facilities in the world dedicated to the
generation and analysis of knockout mice.

         In October 2000, we entered into a synthetic lease agreement under
which the lessor purchased our current laboratory and office space and animal
facility and agreed to fund the construction of an additional 128,000
square-foot laboratory and office space and a second 60,000 square-foot animal
facility. The construction of these new facilities is expected to be completed
in the fourth quarter of 2001.

ITEM 3.  LEGAL PROCEEDINGS

         On May 24, 2000, we filed a complaint against Deltagen, Inc. in U.S.
District Court for the District of Delaware alleging that Deltagen is willfully
infringing the claims of United States Patent No. 5,789,215, under which we hold
an exclusive license from GenPharm International, Inc. This patent covers
methods of engineering the animal genome, including methods for the production
of knockout mice by homologous recombination, using isogenic DNA technology. In
the complaint, we are seeking unspecified damages from Deltagen, as well as
injunctive relief. Deltagen has counterclaimed for a declaratory judgment that
the patent is invalid and unenforceable and is not infringed by Deltagen. On
November 14, 2000, Deltagen filed an amended counterclaim alleging antitrust
claims against us and GenPharm, for which Deltagen is seeking unspecified
damages.

         On October 13, 2000, we filed a second complaint against Deltagen, Inc.
in U.S. District Court for the Northern District of California alleging that
Deltagen is willfully infringing the claims of United States Patents Nos.
5,464,764, 5,487,992, 5,627,059, and 5,631,153, under which also we hold
exclusive licenses from GenPharm International. These patents cover methods and
vectors for using positive-negative selection for producing gene targeted, or
"knockout," cells and animals, including the production of knockout mice by
homologous recombination. In the complaint, we are seeking unspecified damages
from Deltagen, as well as injunctive relief. Deltagen has counterclaimed for a
declaratory judgment that the patents are invalid and unenforceable and are not
infringed by Deltagen.

         While we believe that our complaints against Deltagen are meritorious
and that Deltagen's counterclaims against us are without merit, we can provide
no assurance that we will prevail in our litigation against Deltagen or that, if
we prevail, any damages or equitable remedies awarded will be commercially
valuable. If Deltagen prevails in declaring our patents invalid or on its
antitrust claim against us, our business and financial position could be
adversely affected. Furthermore, we are likely to incur substantial costs and
expend substantial personnel time in pursuing our litigation against Deltagen.

         We are not a party to any material legal proceedings other than the
Deltagen litigation.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted during the fourth quarter of the year ended
December 31, 2000.

                                       19
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                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock has been quoted on The Nasdaq National Market under
the symbol "LEXG" since April 7, 2000. Prior to that time, there was no public
market for our common stock. The following table sets forth, for the periods
indicated, the range of the high and low closing prices per share for our common
stock as reported on The Nasdaq National Market.

                                                                                           HIGH               LOW
                                                                                           ----               ---
2000
                                                                                                      
Second Quarter (April 1, 2000 through June 30, 2000)............................          $35.00            $ 9.12
Third Quarter...................................................................          $47.12            $24.69
Fourth Quarter..................................................................          $29.56            $10.75

         As of March 7, 2001, there were approximately 138 holders of record of
our common stock.

         We have never paid cash dividends on our common stock. We anticipate
that we will retain all of our future earnings, if any, for use in the expansion
and operation of our business and do not anticipate paying cash dividends in the
foreseeable future.

         The effective date of the Registration Statement on Form S-1
(Registration No. 333-96469) filed under the Securities Act of 1933, as amended,
relating to the initial public offering of our common stock was April 6, 2000.
On the same date, we signed an underwriting agreement with J.P. Morgan
Securities, Inc., Credit Suisse First Boston Corporation, CIBC World Markets
Corp. and Punk, Ziegel & Company, L.P., the managing underwriters for the
initial public offering and the representatives of the underwriters named in the
underwriting agreement, for the initial public offering of 10,000,000 shares of
our common stock at an initial public offering price of $22.00 per share. The
offering commenced on April 7, 2000 and was closed on April 12, 2000. The
initial public offering resulted in gross proceeds of $220.0 million. We
received net proceeds of $203.2 million after deducting underwriting discounts
of $15.4 million and estimated offering expenses of $1.4 million.

         Concurrently with the closing of the initial public offering, the
4,244,664 outstanding shares of our Series A Preferred Stock were automatically
converted into 12,733,992 shares of common stock. As a result, we no longer have
any outstanding preferred stock.

         From the time of receipt through December 31, 2000, the net proceeds of
our initial public offering were applied toward:

                                                                                     
o        purchases and installation of equipment and build-out of facilities:           $  7,259,000

o        repayment of indebtedness:                                                     $  1,620,000

o        working capital:                                                               $ 36,378,000

o        short-term investments in U.S. Government debt obligations
         and investment grade commercial paper:                                         $157,943,000

         Except for the repayment of $917,000 of indebtedness to a director in
the second quarter of 2000, we have made no payments to our directors or
officers or their associates, holders of 10% or more of any class of our equity
securities or to our affiliates, other than payments to officers for salaries in
the ordinary course of business.

                                       20
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ITEM 6.  SELECTED FINANCIAL DATA

         The statements of operations data for each of the years ended December
31, 1998, 1999 and 2000, and the balance sheet data as of December 31, 1999 and
2000, have been derived from our audited financial statements included elsewhere
in this annual report on Form 10-K that have been audited by Arthur Andersen
LLP, independent public accountants. The statements of operations data for the
years ended December 31, 1996 and 1997, and the balance sheet data as of
December 31, 1996, 1997 and 1998 have been derived from our audited financial
statements not included in this annual report on Form 10-K. Our historical
results are not necessarily indicative of results to be expected for any future
period. The data presented below have been derived from financial statements
that have been prepared in accordance with accounting principles generally
accepted in the United States and should be read with our financial statements,
including the notes, and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this annual report on
Form 10-K.

                                                 ----------------------------------------------------------------------------
                                                                              YEAR ENDED DECEMBER 31,
                                                 ----------------------------------------------------------------------------
                                                     1996            1997            1998            1999            2000
                                                 ------------    ------------    ------------    ------------    ------------
                                                                                                  
STATEMENTS OF OPERATIONS DATA:                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues .....................................   $        306    $        968    $      2,242    $      4,738    $     14,459
Operating expenses:
   Research and development, including
     stock-based compensation of
     $10,883 in 2000 .........................          2,409           4,971           8,410          14,646          31,647
   General and administrative,
     including stock-based compensation of
     $9,958 in 2000 ..........................            764           1,473           2,024           2,913          18,289
                                                 ------------    ------------    ------------    ------------    ------------
Total operating expenses .....................          3,173           6,444          10,434          17,559          49,936
                                                 ------------    ------------    ------------    ------------    ------------
Loss from operations .........................         (2,867)         (5,476)         (8,192)        (12,821)        (35,477)
Interest income (expense), net ...............            (12)             74             711             346           9,483
                                                 ------------    ------------    ------------    ------------    ------------
Net loss .....................................         (2,879)         (5,402)         (7,481)        (12,475)        (25,994)
Accretion on redeemable
    convertible preferred stock ..............             --              --            (357)           (535)           (134)
                                                 ------------    ------------    ------------    ------------    ------------
Net loss attributable to
    common stockholders ......................   $     (2,879)   $     (5,402)   $     (7,838)   $    (13,010)   $    (26,128)
                                                 ============    ============    ============    ============    ============
Net loss per common share,
    basic and diluted ........................   $      (0.17)   $      (0.23)   $      (0.32)   $      (0.53)   $      (0.63)
                                                 ============    ============    ============    ============    ============
Shares used in computing net
   loss per common share, basic
   and diluted ...............................     17,346,228      23,988,969      24,445,422      24,530,427      41,618,075

                                               -------------------------------------------------------------
                                                                      AS OF DECEMBER 31,
                                               -------------------------------------------------------------
                                                  1996         1997         1998        1999         2000
                                               ---------    ---------    ---------    ---------    ---------
                                                                                    
BALANCE SHEET DATA:                                                          (IN THOUSANDS)
Cash, cash equivalents
  and marketable securities ................   $      --    $   1,980    $  19,422    $   9,156    $ 202,680
Working capital ............................        (303)       1,009       18,102        2,021      194,801
Total assets ...............................       1,090        4,917       28,516       22,295      220,693
Long-term debt, net of current portion .....          81        5,268        5,024        3,577        1,834
Redeemable convertible preferred stock .....          --           --       29,515       30,050           --
Accumulated deficit ........................      (3,551)      (8,953)     (16,434)     (28,909)     (54,903)
Stockholders' equity (deficit) .............         521       (1,931)      (9,034)     (21,936)     207,628

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ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

         The following discussion and analysis should be read with "Selected
Financial Data" and our financial statements and notes included elsewhere in
this annual report on Form 10-K.

OVERVIEW

         We are defining the functions of genes for drug discovery using
knockout mice. Our proprietary gene trapping and gene targeting technologies
enable us to rapidly generate these knockout mice by altering the DNA of genes
in a special variety of mouse cells, called embryonic stem (ES) cells, which can
be cloned and used to generate mice with the altered gene. We employ an
integrated platform of advanced medical technologies to systematically analyze
the functions and pharmaceutical relevance of the genes we have knocked out. Our
LexVision program captures the information resulting from this analysis for our
use, and use by our collaborators, to discover pharmaceutical products based on
genomics - the study of genes and their function.

         We derive substantially all of our revenues from subscriptions to our
databases, functional genomics collaborations for the development and, in some
cases, analysis of knockout mice, and technology licenses. To date, we have
generated a substantial portion of our revenues from a limited number of
sources.

         Since our inception, we have incurred significant losses and, as of
December 31, 2000, we had an accumulated deficit of $54.9 million. Our losses
have resulted principally from costs incurred in research and development,
general and administrative costs associated with our operations, and non-cash
stock-based compensation expenses associated with stock options granted to
employees and consultants prior to our April 2000 initial public offering.
Research and development expenses consist primarily of salaries and related
personnel costs, material costs, legal expenses resulting from intellectual
property prosecution and other expenses related to our drug discovery and
LexVision programs, the expansion of our OmniBank library, the development and
analysis of knockout mice and our other functional genomics research efforts. We
expense our research and development costs as they are incurred. General and
administrative expenses consist primarily of salaries and related expenses for
executive, finance and other administrative personnel, professional fees and
other corporate expenses including business development and general legal
activities, as well as expenses related to our patent infringement litigation
against Deltagen, Inc. In connection with the expansion of our drug discovery
and LexVision programs, our OmniBank database and library and our functional
genomics research efforts, we expect to incur increasing research and
development and general and administrative costs. As a result, we will need to
generate significantly higher revenues to achieve profitability.

         Deferred stock-based compensation and related amortization represents
the difference between the exercise price of stock options granted and the fair
value of our common stock at the applicable date of grant. Stock-based
compensation is amortized over the vesting period of the individual stock
options for which it was recorded, generally four years. If employees and
consultants continue to vest in accordance with their individual stock options,
we expect to record amortization expense for deferred stock-based compensation
as follows: $10.9 million during 2001, $10.9 million during 2002, $10.9 million
during 2003 and $900,000 during 2004. The amount of stock-based compensation
expense to be recorded in future periods may decrease if unvested options for
which deferred stock compensation expense has been recorded are subsequently
canceled or forfeited or may increase if additional options are granted to
individuals other than employees or directors.

         Our quarterly operating results will depend upon many factors,
including our success in establishing new database subscription and research
contracts with collaborators, expirations of such contracts, the success rate of
our discovery efforts leading to milestones and royalties, the timing and
willingness of collaborators to commercialize products which may result in
royalties, and general and industry-specific economic conditions which may
affect research and development expenditures. As a consequence, our quarterly
operating results have fluctuated in the past and are likely to do so in the
future.

         As of December 31, 2000, we had net operating loss carryforwards of
approximately $34.9 million. We also had research and development tax credit
carryforwards of approximately $1.7 million. The net operating loss and credit
carryforwards will expire at various dates beginning in 2011, if not utilized.
Utilization of the net operating losses and credits may be significantly limited
due to a change in ownership as defined by provisions of the Internal

                                       22
   25

Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.

RESULTS OF OPERATIONS

Years Ended December 31, 1999 and 2000

         Revenues. Total revenues increased 205% to $14.5 million in 2000 from
$4.7 million in 1999. Of the $9.8 million increase in total revenues, $2.4
million was derived from increased database subscription and technology license
fees and $7.4 million was derived from increased revenues from functional
genomics collaborations for the development and analysis of knockout mice.

         In 2000, the Merck Genome Research Institute, or MGRI, and Millennium
Pharmaceuticals, Inc. represented 35% and 14% of revenues, respectively. In
1999, Millennium and ZymoGenetics, Inc. represented 28% and 23% of revenues,
respectively.

         In September 2000, we concluded our 1997 agreement with MGRI. In
connection with the conclusion of the MGRI agreement, we recognized $3.1 million
of deferred revenues remaining from the $4.0 million cash payment made to us by
MGRI when the agreement was signed and an additional $1.0 million of revenue
related to a final, non-refundable cash payment that we received from MGRI. As a
result of these arrangements with MGRI, our revenues for the third quarter of
2000 were substantially greater than our revenues in prior quarters and in the
fourth quarter of 2000, and are likely to be significantly greater than our
quarterly revenues for at least the first quarter of 2001. As a result of these
and other factors, our quarterly operating results have fluctuated in the past
and are likely to do so in the future. We do not believe that quarter-to-quarter
comparisons of our operating results are a good indication of our future
performance.

         Research and Development Expenses. Research and development expenses,
including stock-based compensation expense, increased 116% to $31.6 million in
2000 from $14.6 million in 1999. The largest part of the increase, $10.9
million, or 64% of the increase, represented stock-based compensation relating
to option grants made prior to our April 2000 initial public offering. The
remaining increase of $6.1 million was attributable to continued growth of
research and development activities, primarily related to increased personnel
costs to support the expansion of our drug discovery and LexVision programs, our
OmniBank database and library, the development and analysis of knockout mice and
our other functional genomics research efforts.

         General and Administrative Expenses. General and administrative
expenses, including stock-based compensation expense, increased 528% to $18.3
million in 2000 from $2.9 million in 1999. The largest part of the increase,
$10.0 million, or 65% of the increase, represented stock-based compensation
relating to option grants made prior to our April 2000 initial public offering.
The remaining increase of $5.4 million was due primarily to additional personnel
costs for business development and finance and administration, as well as
expenses associated with our patent infringement litigation against Deltagen,
Inc.

         Interest Income and Interest Expense. Interest income increased to $9.9
million in 2000 from $649,000 in 1999. This increase resulted from an increased
cash and investment balance as a result of proceeds received in our initial
public offering. Interest expense increased 39% to $422,000 in 2000 from
$303,000 in 1999.

         Net Loss and Net Loss Per Common Share. Net loss attributable to common
stockholders increased to $26.1 million in 2000 from $13.0 million in 1999. Net
loss per common share increased to $0.63 in 2000 from $0.53 in 1999. Most of the
net loss for 2000 was attributable to stock-based compensation expense.
Excluding stock-based compensation expense and assuming the conversion of the
redeemable convertible preferred stock into common stock occurred on the date of
original issuance (May 1998), we would have had a net loss of $5.2 million and
$12.5 million in 2000 and 1999, respectively, and net loss per common share of
$0.11 and $0.33 in 2000 and 1999, respectively.

                                       23
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Years Ended December 31, 1999 and 1998

         Revenues. Total revenues increased 111% to $4.7 million in 1999 from
$2.2 million in 1998. Of the $2.5 million increase, $1.4 million was derived
from increased database subscription and license fees and $1.1 million was
derived from increased fees for the development of knockout mice.

         In 1999, Millennium Pharmaceuticals, Inc. and ZymoGenetics, Inc.
represented 28% and 23% of revenues, respectively. In 1998, ZymoGenetics, Merck
& Co. Inc., and Genetics Institute represented 24%, 12% and 11% of revenues,
respectively.

         Research and Development Expenses. Research and development expenses
increased 74% to $14.6 million in 1999 from $8.4 million for 1998. The increase
of $6.2 million was attributable to continued growth of research and development
activities, including $2.6 million related to increased personnel and laboratory
supply costs to support the generation of our human gene sequence databases,
OmniBank database and library and the development of knockout mice and $2.9
million related to higher operating expenses as a result of the completion of
our new animal facility in January 1999, with the remainder due to expansion in
operating activities. As of December 31, 1999, production costs incurred in the
development of knockout mice for commercial sale have not been significant.

         General and Administrative Expenses. General and administrative
expenses increased 44% to $2.9 million during 1999 from $2.0 million for 1998.
The increase of $889,000 was due to $721,000 related to compensation for
business development, finance and administrative personnel, with the remainder
due to overall expansion in our operations.

         Interest Income and Interest Expense. Interest income decreased 23% to
$649,000 in 1999 from $838,000 in 1998. This decrease resulted from a declining
cash and investment balance due to cash used in operating activities. Interest
expense increased 139% to $303,000 in 1999 from interest expense of $127,000 in
1998. This increase resulted from higher debt obligation balances in 1999.

         Net Loss and Net Loss Per Common Share. Net loss increased to $12.5
million in 1999 from $7.5 million in 1998. Net loss per common share increased
to $0.53 in 1999 from $0.32 in 1998.

LIQUIDITY AND CAPITAL RESOURCES

         We have financed our operations from inception primarily through sales
of common and preferred stock, contract and milestone payments to us under our
database subscription and collaboration agreements and equipment financing
arrangements. From our inception through December 31, 2000, we had received net
proceeds of $241.4 million from issuances of common and preferred stock,
including $203.2 million of net proceeds from the initial public offering of our
common stock in April 2000. In addition, from our inception through December 31,
2000, we received $24.6 million in cash payments from database subscription and
technology license fees, functional genomics collaborations for the development
and analysis of knockout mice, sales of reagents and government grants, of which
$22.7 million had been recognized as revenues through December 31, 2000.

         As of December 31, 2000, we had $202.7 million in cash, cash
equivalents and marketable securities, as compared to $9.2 million as of
December 31, 1999. We used $1.5 million in operations in 2000. This consisted of
the net loss for the year of $26.0 million offset by non-cash charges of $20.8
million related to stock-based compensation expense and $2.6 million related to
depreciation expense offset partially by a net decrease in other working capital
accounts of $1.0 million. We used $165.4 million in investing activities in
2000, principally as a result of the purchase of marketable securities with the
net proceeds of our initial public offering in April 2000, and purchases of
property and equipment.

         In June 1999, we entered into a $5.0 million financing arrangement for
the purchase of property and equipment which is secured by the equipment
financed. As of December 31, 2000, we had drawn down a total of approximately
$4.2 million and had $832,000 remaining available under this arrangement. As of
December 31, 2000, $2.8 million of the borrowings were outstanding under this
arrangement. This facility accrues interest at a weighted-average rate of
approximately 11.7% and principal and interest is due in monthly installments
through 2003. This debt may be retired through payment at the end of the second
quarter of 2001.

                                       24
   27

         In October 2000, we entered into a synthetic lease agreement under
which the lessor purchased our current laboratory and office space and animal
facility and agreed to fund the construction of additional laboratory and office
space and a second animal facility. Including the purchase price for our
existing facilities, the synthetic lease provides for funding of up to $45.0
million in property and improvements. The term of the agreement is six years,
which includes the construction period and a lease period. Lease payments for
our existing facilities are approximately $795,000 per year. Lease payments for
the new facilities will begin upon completion of construction, which is expected
in the fourth quarter of 2001. Future lease payments are subject to fluctuation
based on LIBOR rates. Based on a year-end LIBOR rate of 6.4%, our total lease
payments for our existing facilities and the new facilities would be
approximately $3.0 million per year. At the end of the lease term, the lease may
be extended for one-year terms, up to seven additional terms, or we may purchase
the properties for a price including the outstanding lease balance. If we elect
not to renew the lease or purchase the properties, we must arrange for the sale
of the properties to a third party. Under the sale option, we have guaranteed a
percentage of the total original cost as the residual fair value of the
properties.

         Our capital requirements depend on numerous factors, including our
ability to obtain database subscription and collaboration agreements, the amount
and timing of payments under such agreements, the level and timing of our
research and development expenditures, market acceptance of our products, the
resources we devote to developing and supporting our products and other factors.
We expect to devote substantial capital resources to continue our research and
development efforts, to expand our support and product development activities,
and for other general corporate activities. We believe that our current cash
balances, which include the net proceeds of our April 2000 initial public
offering and revenues to be derived from subscriptions to our databases,
functional genomics collaborations for the research, development and analysis of
knockout mice, will be sufficient to fund our operations for at least the next
several years. During or after this period, if cash generated by operations is
insufficient to satisfy our liquidity requirements, we may need to sell
additional equity or debt securities or obtain additional credit arrangements.
Additional financing may not be available on terms acceptable to us or at all.
The sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders.

IMPACT OF INFLATION

         The effect of inflation and changing prices on our operations was not
significant during the periods presented.

DISCLOSURE ABOUT MARKET RISK

         Our exposure to market risk is confined to our cash and cash
equivalents which have maturities of less than three months. We maintain an
investment portfolio which consists of U.S. Government debt obligations and
investment grade commercial paper that mature one to twelve months after
December 31, 2000, which we believe are subject to limited credit risk. We
currently do not hedge interest rate exposure. Because of the short-term
maturities of our investments, we do not believe that an increase in market
rates would have any negative impact on the realized value of our investment
portfolio.

         We have operated primarily in the United States and all sales to date
have been made in U.S. dollars. Accordingly, we have not had any material
exposure to foreign currency rate fluctuations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         See "Disclosure about Market Risk" under "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
quantitative and qualitative disclosures about market risk.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements required by this Item are incorporated under
Item 14 in Part IV of this report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None.

                                       25
   28

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this Item as to the directors and executive
officers of the Company is hereby incorporated by reference from the information
appearing under the captions "Election of Directors" and "Executive Officers" in
the Company's definitive proxy statement which involves the election of
directors and is to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 2000.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by this Item as to the management of the
Company is hereby incorporated by reference from the information appearing under
the captions "Executive Compensation" and "Election of Director - Director
Compensation" in the Company's definitive proxy statement which involves the
election of directors and is to be filed with the Commission pursuant to the
Securities Exchange Act of 1934 within 120 days of the end of the Company's
fiscal year on December 31, 2000. Notwithstanding the foregoing, in accordance
with the instructions to Item 402 of Regulation S-K, the information contained
in the Company's proxy statement under the sub-heading "Report of the
Compensation Committee of the Board of Directors" and "Performance Graph" shall
not be deemed to be filed as part of or incorporated by reference into this
annual report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item as to the ownership by management
and others of securities of the Company is hereby incorporated by reference from
the information appearing under the caption "Stock Ownership of Certain
Beneficial Owners and Management" to the Company's definitive proxy statement
which involves the election of directors and is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item as to certain business
relationships and transactions with management and other related parties of the
company is hereby incorporated by reference to such information appearing under
the captions "Certain Transactions" and "Compensation Committee Interlocks and
Insider Participation" in the Company's definitive proxy statement which
involves the election of directors and is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 2000.

                                       26
   29

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)      Documents filed as a part of this report:

                  1.       Financial Statements

                                                                                                             Page
                                                                                                           -------
                                                                                                        
                     Report of Independent Public Accountants............................................    F-1
                     Balance Sheets......................................................................    F-2
                     Statements of Operations............................................................    F-3
                     Statements of Stockholders' Equity (Deficit)........................................    F-4
                     Statements of Cash Flows............................................................    F-5
                     Notes to Financial Statements.......................................................    F-6

                           All other financial statement schedules are omitted
                  because they are not applicable or not required, or because
                  the required information is included in the financial
                  statements or notes thereto.

                  2.       Exhibits

         EXHIBIT NO.                                     DESCRIPTION
         -----------                                     -----------

              3.1  ---   Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company's Registration
                         Statement on Form S-1 (Registration No. 333-96469) and incorporated by reference herein).

              3.2  ---   Restated Bylaws (filed as Exhibit 3.2 to the Company's Registration Statement on Form S-1
                         (Registration No. 333-96469) and incorporated by reference herein).

             10.1  ---   Employment Agreement with Arthur T. Sands, M.D., Ph.D. (filed as Exhibit 10.1 to the
                         Company's Registration Statement on Form S-1 (Registration No. 333-96469) and incorporated
                         by reference herein).

             10.2  ---   Employment Agreement with James R. Piggott, Ph.D. (filed as Exhibit 10.2 to the Company's
                         Registration Statement on Form S-1 (Registration No. 333-96469) and incorporated by
                         reference herein).

             10.3  ---   Employment Agreement with Jeffrey L. Wade, J.D. (filed as Exhibit 10.3 to the Company's
                         Registration Statement on Form S-1 (Registration No. 333-96469) and incorporated by
                         reference herein).

             10.4  ---   Employment Agreement with Brian P. Zambrowicz, Ph.D. (filed as Exhibit 10.4 to the
                         Company's Registration Statement on Form S-1 (Registration No. 333-96469) and incorporated
                         by reference herein).

             10.5  ---   Employment Agreement with Julia P. Gregory (filed as Exhibit 10.5 to the Company's
                         Registration Statement on Form S-1 (Registration No. 333-96469) and incorporated by
                         reference herein).

             10.6  ---   Employment Agreement with Randall B. Riggs (filed as Exhibit 10.6 to the Company's
                         Registration Statement on Form S-1 (Registration No. 333-96469) and incorporated by
                         reference herein).

             10.7  ---   Form of Indemnification Agreement with Officers and Directors (filed as Exhibit 10.7
                         to the Company's Registration Statement on Form S-1 (Registration No. 333-96469)
                         and incorporated by reference herein).

             10.8  ---   2000 Equity Incentive Plan (filed as Exhibit 10.8 to the Company's Registration Statement
                         on Form S-1 (Registration No. 333-96469) and incorporated by reference herein).

                                       27
   30

         EXHIBIT NO.                                     DESCRIPTION
         -----------                                     -----------

             10.9  ---   2000 Non-Employee Directors' Stock Option Plan (filed as Exhibit 10.9 to the Company's
                         Registration Statement on Form S-1 (Registration No. 333-96469) and incorporated by
                         reference herein).

           +10.10  ---   LexVision Database and Collaboration Agreement with Bristol-Myers Squibb, dated
                         September 26, 2000 between Lexicon Genetics Incorporated and Bristol-Myers Squibb
                         Company (filed as Exhibit 16.1 to the Company's Current Report on Form 8-K dated
                         September 26, 2000 and incorporated by reference herein).

            10.11  ---   Master Loan and Security Agreement dated May 21, 1999, with FINOVA Capital Corporation
                         (filed as Exhibit 10.12 to the Company's Registration Statement on Form S-1
                         (Registration No. 333-964969) and incorporated by reference herein.).

           *10.12  ---   Synthetic Lease Financing Facility with First Security Bank, National Association, the
                         Lenders and Holders named therein, and Bank of America, N.A.

            *23.1  ---   Consent of Arthur Andersen LLP

             24.1  ---   Power of Attorney (contained in signature page)

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

* Filed herewith.

+ Confidential treatment has been requested for a portion of this exhibit. The
confidential portions of this exhibit have been omitted and filed separately
with the Securities and Exchange Commission.

         (b)      Reports on Form 8-K:

         On October 10, 2000, we filed a Current Report on Form 8-K dated
September 26, 2000 relating to the establishment of our LexVision(TM) Database
and Collaboration Agreement with Bristol-Myers Squibb Company.

                                       28
   31

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                                     LEXICON GENETICS INCORPORATED

Date:  March 14, 2001                By: /s/ ARTHUR T. SANDS
                                         -------------------------------------
                                         Arthur T. Sands, M.D., Ph.D.
                                         President and Chief Executive Officer

Date:  March 14, 2001                By: /s/ JULIA P. GREGORY
                                         -------------------------------------
                                         Julia P. Gregory
                                         Executive Vice President and
                                         Chief Financial Officer

                                       29
   32

                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Julia P. Gregory and Jeffrey L. Wade, or
either of them, each with the power of substitution, his attorney-in-fact, to
sign any amendments to this Form 10-K (including post-effective amendments), and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, here ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

               SIGNATURE                                  TITLE                                       DATE
               ---------                                  -----                                       ----

                                                                                            
/s/ ARTHUR T. SANDS                      President and Chief Executive Officer                    March 14, 2001
- ------------------------------------     (Principal Executive Officer)
Arthur T. Sands, M.D., Ph.D.

/s/ JULIA P. GREGORY                     Executive Vice President and Chief Financial Officer     March 14, 2001
- ------------------------------------     (Principal Financial and Accounting Officer)
Julia P. Gregory

/s/ C. THOMAS CASKEY                     Chairman of the Board of Directors                       March 14, 2001
- ------------------------------------
C. Thomas Caskey, M.D.

/s/ SAM L. BARKER                        Director                                                 March 14, 2001
- ------------------------------------
Sam L. Barker, Ph.D.

/s/ GORDON A. CAIN                       Director                                                 March 14, 2001
- ------------------------------------
Gordon A. Cain

/s/ PATRICIA M. CLOHERTY                 Director                                                 March 14, 2001
- ------------------------------------
Patricia M. Cloherty

/s/ ROBERT J. LEFKOWITZ                  Director                                                 March 14, 2001
- ------------------------------------
Robert J. Lefkowitz, M.D.

/s/ WILLIAM A. MCMINN                    Director                                                 March 14, 2001
- ------------------------------------
William A. McMinn

                                       30
   33

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Lexicon Genetics Incorporated:

We have audited the accompanying balance sheets of Lexicon Genetics Incorporated
(a Delaware corporation) as of December 31, 1999 and December 31, 2000, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of Lexicon's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lexicon Genetics Incorporated
as of December 31, 1999 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas
February 27, 2001

                                      F-1
   34

                          LEXICON GENETICS INCORPORATED

                                 BALANCE SHEETS

                                                                                           ------------------------------------
                                                                                                    AS OF DECEMBER 31,
                                                                                           ------------------------------------
                                                                                                1999                  2000
                                                                                           ---------------      ---------------
                                                                                                          
ASSETS
Current assets:
    Cash and cash equivalents ........................................................     $     2,025,585      $    37,811,039
    Marketable securities ............................................................           7,130,848          164,869,291
    Accounts receivable, net of allowance for doubtful accounts
       of $100,000 in 2000 ...........................................................           3,391,648            2,814,707
    Prepaid expenses and other current assets ........................................              76,257              536,480
                                                                                           ---------------      ---------------
       Total current assets ..........................................................          12,624,338          206,031,517
Property and equipment, net of accumulated depreciation of
    $3,087,397 and $5,708,366, respectively ..........................................           9,388,624           14,477,235
Other assets .........................................................................             281,605              184,200
                                                                                           ---------------      ---------------
       Total assets ..................................................................     $    22,294,567      $   220,692,952
                                                                                           ===============      ===============

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Accounts payable .................................................................     $       591,590      $     2,522,722
    Accrued liabilities ..............................................................             600,686            3,023,725
    Deferred revenue .................................................................           8,209,574            4,671,818
    Current portion of long-term debt ................................................             874,174            1,012,246
    Current portion of capital lease obligations .....................................             127,119                   --
    Current portion of related party note payable ....................................             200,004                   --
                                                                                           ---------------      ---------------
       Total current liabilities .....................................................          10,603,147           11,230,511
Long-term debt, net of current portion ...............................................           2,854,365            1,833,982
Capital lease obligations, net of current portion ....................................               6,279                   --
Related party note payable, net of current portion ...................................             716,663                   --
                                                                                           ---------------      ---------------
       Total liabilities .............................................................          14,180,454           13,064,493

Commitments and contingencies

Redeemable convertible Series A preferred stock, $.01 par value; 4,244,664 and
    no shares authorized, respectively; 4,244,664
    and no shares issued and outstanding, respectively ...............................          30,050,236                   --

Stockholders' equity (deficit):
    Preferred stock, $.01 par value; 5,755,336 and 5,000,000 shares
       authorized, respectively; no shares issued and outstanding ....................                  --                   --
    Common stock, $.001 par value; 75,000,000 and 120,000,000 shares
       authorized, 24,540,201 and 48,271,735 shares issued and
       outstanding, respectively .....................................................              24,540               48,272
    Additional paid-in capital .......................................................           7,863,392          296,119,625
    Deferred stock compensation ......................................................            (915,422)         (33,636,725)
    Accumulated deficit ..............................................................         (28,908,633)         (54,902,713)
                                                                                           ---------------      ---------------
       Total stockholders' equity (deficit) ..........................................         (21,936,123)         207,628,459
                                                                                           ---------------      ---------------
       Total liabilities and stockholders' equity (deficit) ..........................     $    22,294,567      $   220,692,952
                                                                                           ===============      ===============

   The accompanying notes are an integral part of these financial statements.

                                      F-2
   35

                          LEXICON GENETICS INCORPORATED

                            STATEMENTS OF OPERATIONS

                                                             ---------------------------------------------------------
                                                                              YEAR ENDED DECEMBER 31,
                                                             ---------------------------------------------------------
                                                                   1998                1999                 2000
                                                             ---------------      ---------------      ---------------
                                                                                              
Revenues:
   Subscription and license fees .......................     $       761,950      $     2,197,696      $     4,578,861
   Collaborative research ..............................           1,072,205            2,120,016            9,504,400
   Reagents ............................................             204,445              229,967              276,719
   Grants ..............................................             203,242              190,024               98,581
                                                             ---------------      ---------------      ---------------
     Total revenues ....................................           2,241,842            4,737,703           14,458,561
Operating expenses:
   Research and development, including stock-based
     compensation of $10,883,123 in 2000 ...............           8,409,770           14,645,773           31,646,848
   General and administrative, including stock-based
     compensation of $9,957,959 in 2000 ................           2,024,322            2,913,121           18,288,628
                                                             ---------------      ---------------      ---------------
     Total operating expenses ..........................          10,434,092           17,558,894           49,935,476
                                                             ---------------      ---------------      ---------------
Loss from operations ...................................          (8,192,250)         (12,821,191)         (35,476,915)
Interest income ........................................             838,110              648,906            9,904,873
Interest expense .......................................             126,665              302,802              422,038
                                                             ---------------      ---------------      ---------------
Net loss ...............................................          (7,480,805)         (12,475,087)         (25,994,080)
Accretion on redeemable convertible preferred stock ....            (356,946)            (535,416)            (133,854)
                                                             ---------------      ---------------      ---------------
Net loss attributable to common stockholders ...........     $    (7,837,751)     $   (13,010,503)     $   (26,127,934)
                                                             ===============      ===============      ===============

Net loss per common share, basic and diluted ...........     $         (0.32)     $         (0.53)     $         (0.63)
                                                             ===============      ===============      ===============
Shares used in computing net loss per common share,
   basic and diluted ...................................          24,445,422           24,530,427           41,618,075

   The accompanying notes are an integral part of these financial statements.

                                      F-3
   36

                          LEXICON GENETICS INCORPORATED

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                        -------------------------------------------------------------------------------------------
                                                                    STOCKHOLDERS' EQUITY (DEFICIT)
                                        -------------------------------------------------------------------------------------------
                                                                                                                          TOTAL
                                                 COMMON STOCK          ADDITIONAL       DEFERRED                      STOCKHOLDERS'
                                        ----------------------------    PAID-IN          STOCK         ACCUMULATED       EQUITY
                                            SHARES       PAR VALUE      CAPITAL       COMPENSATION       DEFICIT        (DEFICIT)
                                        -------------  -------------  -------------   -------------   -------------   -------------

Balance at December 31, 1997 .........     24,422,694  $      24,423  $   6,997,468   $          --   $  (8,952,741)  $  (1,930,850)
Common stock warrants issued with
  debt agreement .....................             --             --         24,750              --              --          24,750
Warrants issued in conjunction with
  redeemable convertible Series A
  preferred stock ....................             --             --        498,597              --              --         498,597
Common stock warrants issued for
  lease option .......................             --             --        195,855              --              --         195,855
Exercise of common stock options .....         68,001             68         15,119              --              --          15,187
Accretion on redeemable
  convertible preferred stock to
  redemption value ...................             --             --       (356,946)             --              --        (356,946)
Net loss .............................             --             --             --              --      (7,480,805)     (7,480,805)
                                        -------------  -------------  -------------   -------------   -------------   -------------
Balance at December 31, 1998 .........     24,490,695         24,491      7,374,843              --     (16,433,546)     (9,034,212)
Exercise of common stock options .....         49,506             49         22,910              --              --          22,959
Accretion on redeemable
  convertible preferred stock
  to redemption value ................             --             --       (535,416)             --              --        (535,416)
Deferred stock compensation ..........             --             --      1,001,055      (1,001,055)             --              --
Amortization of deferred stock
  compensation .......................             --             --             --          85,633              --          85,633
Net loss .............................             --             --             --              --     (12,475,087)    (12,475,087)
                                        -------------  -------------  -------------   -------------   -------------   -------------
Balance at December 31, 1999 .........     24,540,201         24,540      7,863,392        (915,422)    (28,908,633)    (21,936,123)
Initial public offering of
  common stock .......................     10,000,000         10,000    203,174,518              --              --     203,184,518
Accretion on redeemable
  convertible preferred stock
  to redemption value ................             --             --       (133,854)             --              --        (133,854)
Conversion of redeemable
  convertible preferred stock
  to common stock ....................     12,733,992         12,734     30,171,356              --              --      30,184,090
Deferred stock compensation ..........             --             --     53,562,385     (53,562,385)             --              --
Amortization of deferred stock
  compensation .......................             --             --             --      20,841,082              --      20,841,082
Exercise of common stock options .....        849,042            849      1,110,713              --              --       1,111,562
Exercise of common stock warrants ....        148,500            149        371,115              --              --         371,264
Net loss .............................             --             --             --              --     (25,994,080)    (25,994,080)
                                        -------------  -------------  -------------   -------------   -------------   -------------
Balance at December 31, 2000 .........     48,271,735  $      48,272  $ 296,119,625   $ (33,636,725)  $ (54,902,713)  $ 207,628,459
                                        =============  =============  =============   =============   =============   =============

   The accompanying notes are an integral part of these financial statements.

                                      F-4
   37

                          LEXICON GENETICS INCORPORATED

                            STATEMENTS OF CASH FLOWS

                                                                              -----------------------------------------------
                                                                                            YEAR ENDED DECEMBER 31,
                                                                              -----------------------------------------------
                                                                                  1998              1999             2000
                                                                              -------------    -------------    -------------
                                                                                                       
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss ...............................................................   $  (7,480,805)   $ (12,475,087)   $ (25,994,080)
   Adjustments to reconcile net loss to net cash used in
      operating activities
     Depreciation .........................................................         756,600        1,901,446        2,620,969
     Loss on sale of asset ................................................          21,819               --               --
     Amortization of deferred stock compensation ..........................              --           85,633       20,841,082
     Amortization of lease option .........................................          17,180           41,232               --
     Amortization of deferred financing costs .............................          24,750               --               --
     Changes in operating assets and liabilities
       (Increase) decrease in accounts receivable .........................      (1,070,309)      (1,718,169)         576,941
       Increase in prepaid expenses and other current assets ..............         (12,875)         (58,786)        (460,223)
       (Increase) decrease in other assets ................................          (3,736)         (60,875)          97,405
       Increase (decrease) in accounts payable and
          accrued liabilities .............................................         800,410         (401,170)       4,354,171
       Increase (decrease) in deferred revenue ............................         638,750        3,070,824       (3,537,756)
                                                                              -------------    -------------    -------------
         Net cash used in operating activities ............................      (6,308,216)      (9,614,952)      (1,501,491)
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of property and equipment ....................................      (5,658,953)      (4,100,286)      (7,709,580)
   Purchase of marketable securities ......................................     (40,426,865)     (12,549,053)    (269,846,653)
   Maturities of marketable securities ....................................      24,026,708       21,818,363      112,108,210
   Proceeds from sale of asset ............................................          47,000               --               --
                                                                              -------------    -------------    -------------
         Net cash provided by (used in) investing activities ..............     (22,012,110)       5,169,024     (165,448,023)
CASH FLOWS FROM FINANCING ACTIVITIES
   Principal payments on capital lease obligations ........................        (209,569)        (218,853)        (133,398)
   Proceeds from debt borrowings ..........................................              --        4,168,060               --
   Repayment of debt borrowings ...........................................        (100,000)        (522,854)      (1,461,478)
   Proceeds from issuance of common stock .................................          15,187           22,959      204,329,844
   Proceeds from issuance of redeemable convertible
      Series A preferred stock ............................................      29,656,471               --               --
                                                                              -------------    -------------    -------------
         Net cash provided by financing activities ........................      29,362,089        3,449,312      202,734,968
                                                                              -------------    -------------    -------------
Net increase (decrease) in cash and cash equivalents ......................       1,041,763         (996,616)      35,785,454
Cash and cash equivalents at beginning of year ............................       1,980,438        3,022,201        2,025,585
                                                                              -------------    -------------    -------------
Cash and cash equivalents at end of year ..................................   $   3,022,201    $   2,025,585    $  37,811,039
                                                                              =============    =============    =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid for interest .................................................   $      49,331    $     409,469    $     422,038

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
   Purchases of equipment under capital lease obligations .................   $      58,297    $      49,052    $          --
   Warrants issued in conjunction with lease option .......................   $     195,855    $          --    $          --
   Conversion of redeemable convertible preferred stock
      into common stock ...................................................   $          --    $          --    $  30,184,090
   Conversion of related party note payable into common stock .............   $          --    $          --    $     337,500

   The accompanying notes are an integral part of these financial statements.

                                      F-5
   38

                          LEXICON GENETICS INCORPORATED

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2000

1. ORGANIZATION AND OPERATIONS

Lexicon Genetics Incorporated (Lexicon or the Company) is a Delaware corporation
incorporated on July 7, 1995. Lexicon was organized to research, develop and
market products and services related to functional genomics and drug target
identification.

Lexicon has financed its operations from inception primarily through sales of
common and preferred stock, contract and milestone payments received under
subscription and collaboration agreements, and equipment financing arrangements.
Lexicon's future success is dependent upon many factors, including, but not
limited to, its ability to discover promising candidates for drug target or
therapeutic protein development using its gene knockout technology, establish
additional research contracts and agreements for access to its technology,
achieve milestones under such contracts and agreements, obtain and enforce
patents and other proprietary rights in its discoveries, comply with federal and
state regulations, and maintain sufficient capital to fund its activities. As a
result of the aforementioned factors and the related uncertainties, there can be
no assurance of Lexicon's future success.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.

Cash, Cash Equivalents and Marketable Securities: Lexicon considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents. Management determines the appropriate classification of its cash
equivalents and marketable securities at the time of purchase. Marketable
securities consist of U.S. Government agency debt obligations and investment
grade commercial paper that mature one to twelve months after December 31, 2000.
Management has classified Lexicon's marketable securities as held-to-maturity
securities in the accompanying financial statements. Held-to-maturity securities
are carried at purchase cost plus accrued interest, which approximates fair
value.

Concentration of Credit Risk: Lexicon's cash equivalents and marketable
securities represent potential concentrations of credit risk. Lexicon minimizes
potential concentrations of risk in cash equivalents and marketable securities
by placing investments in high-quality financial instruments. At December 31,
2000, management believes that Lexicon has no significant concentrations of
credit risk and has incurred no impairments in the carrying values of its cash
equivalents and marketable securities.

Significant Customers: For the years ended December 31, 1998, 1999 and 2000,
three, two and two entities represented 48%, 51% and 49% of Lexicon's revenues,
respectively.

Property and Equipment: Property and equipment are carried at cost and
depreciated using the straight-line method over the estimated useful life of the
assets which ranges from three to seven years. Maintenance, repairs and minor
replacements are charged to expense as incurred. Significant renewals and
betterments are capitalized.

Revenue Recognition: Revenues are earned from services performed pursuant to
database subscription and access agreements, and collaborations for the
development and, in some cases, analysis of knockout mice. Subscription and
access fees received are recognized ratably over the subscription or access
period. Payments received in advance under these arrangements are recorded as
deferred revenue until earned. Collaborative research payments are

                                      F-6
   39

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

non-refundable, regardless of the success of the research effort, and are
recognized as revenue as Lexicon performs its obligations related to such
research. Milestone-based fees are recognized upon completion of specified
milestones according to contract terms. Revenues for the supply of reagents to
collaboration partners and customers are recognized upon shipment.
Non-refundable sublicense fees are recognized as revenue upon the grant of the
sublicense to third parties, when performance is complete and there is no
continuing involvement. Grant revenue is recognized as the related costs are
incurred.

Research and Development Expenses: Research and development expenses consist of
costs incurred for company-sponsored as well as collaborative research and
development activities. These costs include direct and research-related overhead
expenses and are expensed as incurred. Research and development expenses also
include certain costs associated with the production of custom knockout mice
associated with specific collaborative research agreements. Through December 31,
2000, total production costs incurred have not been significant. Patent costs
and technology license fees for technologies that are utilized in research and
development and have no alternative future use are expensed when incurred.

Stock-based Compensation: As further discussed in Note 7, the Company recognized
approximately $20.8 million of stock-based compensation during 2000. This
expense is included in the financial statements as follows:

                                                                                       
       Research and development.......................................................    $    10,883,123
       General and administrative.....................................................          9,957,959
                                                                                          ---------------
            Total stock-based compensation............................................    $    20,841,082
                                                                                          ===============

Net Loss Per Common Share: Net loss per common share is computed using the
weighted average number of shares of common stock outstanding. Shares associated
with stock options, warrants and convertible preferred stock are not included
because they are antidilutive.

The table below sets forth certain unaudited statements of operations data, and
net loss per common share and pro forma net loss per common share data, for each
quarter of 1999 and 2000. Net loss per common share included in the Company's
2000 quarterly reports on Form 10-Q for the 1999 and 2000 quarters ended June 30
and September 30 was based on pro forma weighted average shares outstanding
rather than actual weighted average shares outstanding, as is appropriately
reflected in the table below. Net loss per common share is computed using the
weighted average number of shares of common stock outstanding during the
applicable period. Pro forma net loss per common share is computed using the
weighted average number of common shares outstanding during the applicable
period, including pro forma effects of the automatic conversion of outstanding
redeemable convertible preferred stock into shares of Lexicon's common stock
effective upon the closing of Lexicon's initial public offering (see Note 6) as
if such conversion occurred on the date of original issuance (May 1998). Net
loss attributable to common stockholders includes the effect of accretion on
redeemable convertible preferred stock.

                                      F-7
   40

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                                     ------------------------------------------------------------    ------------
                                                                              QUARTER ENDED                           YEAR ENDED
                                                     ------------------------------------------------------------    ------------
                                                       MARCH 31        JUNE 30       SEPTEMBER 30     DECEMBER 31    DECEMBER 31
                                                     ------------    ------------    ------------    ------------    ------------
                                                                                (UNAUDITED)
                                                                                                      
1999
Net loss .........................................   $ (2,742,540)   $ (3,250,296)   $ (3,829,920)   $ (2,652,331)   $(12,475,087)
Net loss attributable to common stockholders .....   $ (2,876,395)   $ (3,384,149)   $ (3,963,774)   $ (2,786,185)   $(13,010,503)

Net loss per common share, basic and diluted .....   $      (0.12)   $      (0.14)   $      (0.16)   $      (0.11)   $      (0.53)
                                                     ============    ============    ============    ============    ============
Pro forma net loss per common share, basic
   and diluted ...................................   $      (0.08)   $      (0.09)   $      (0.10)   $      (0.07)   $      (0.33)
                                                     ============    ============    ============    ============    ============

Shares used in computing net loss per
   common share ..................................     24,522,327      24,531,954      24,531,954      24,534,415      24,530,427
                                                     ============    ============    ============    ============    ============

Shares used in computing pro forma net loss per
   common share ..................................     37,256,319      37,265,946      37,265,946      37,268,407      37,264,419
                                                     ============    ============    ============    ============    ============

2000
Net loss .........................................   $(13,418,099)   $ (3,516,704)   $ (1,539,880)   $ (7,519,397)   $(25,994,080)
Net loss attributable to common stockholders .....   $(13,551,953)   $ (3,516,704)   $ (1,539,880)   $ (7,519,397)   $(26,127,934)

Net loss per common share, basic and diluted .....   $      (0.55)   $      (0.08)   $      (0.03)   $      (0.16)   $      (0.63)
                                                     ============    ============    ============    ============    ============
Pro forma net loss per common share, basic
   and diluted ...................................   $      (0.36)   $      (0.08)   $      (0.03)   $      (0.16)   $      (0.58)
                                                     ============    ============    ============    ============    ============

Shares used in computing net loss per
   common share ..................................     24,613,012      45,816,588      47,780,441      48,123,053      41,618,075
                                                     ============    ============    ============    ============    ============

Shares used in computing pro forma net loss per
   common share ..................................     37,347,004      46,796,126      47,780,441      48,123,053      45,027,724
                                                     ============    ============    ============    ============    ============

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1999 and 2000, are as follows:

                                        ------------------------------------------------
                                                                AS OF DECEMBER 31,
                                        USEFUL LIVES      ------------------------------
                                          IN YEARS           1999               2000
                                        ------------      ------------      ------------
                                                                   
Computers and software ............                3      $  2,275,528      $  4,413,649
Furniture and fixtures ............              5-7           386,760         1,077,528
Laboratory equipment ..............                7         4,678,492         9,082,785
Leasehold improvements ............                7         5,135,241         5,611,639
                                                          ------------      ------------
                                                            12,476,021        20,185,601
Less: Accumulated depreciation ....                         (3,087,397)       (5,708,366)
                                                          ------------      ------------
    Net property and equipment ....                       $  9,388,624      $ 14,477,235
                                                          ============      ============

As of December 31, 1999, Lexicon held equipment under capital lease obligations
totaling $133,398. These capital lease obligations were repaid during 2000.

4. FINANCING AND DEBT OBLIGATIONS

In June 1999, Lexicon entered into a $5,000,000 financing agreement for the
purchase of property and equipment. As of December 31, 2000, Lexicon had drawn
down a total of $4,168,060 and had $831,940 remaining available under this
arrangement. As of December 31, 2000, $2,846,228 of borrowings were outstanding
under this arrangement, all of which was secured by the financed equipment. This
facility accrues interest at a weighted average rate of 11.7% and principal and
interest is due in monthly installments of $106,054 through 2003.

In August 1997, Lexicon entered into note purchase agreements with two
individuals under which they received an aggregate of $1,100,000 in exchange for
the issuance of two notes payable in the amount of $100,000 and $1,000,000,
respectively, the latter of which was payable to a member of the Board of
Directors. Lexicon paid the entire balance of the $100,000 note in 1998.
Furthermore, during 2000, $337,500 of the $1,000,000 note was used to exercise
warrants held by the director and the remaining balance was repaid to the
director.

                                      F-8
   41

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES

Lexicon recognizes deferred tax liabilities and assets for the expected future
tax consequences of events that have been recognized differently in the
financial statements and tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement carrying amounts and tax bases of liabilities and assets
using enacted tax rates and laws in effect in the years in which the differences
are expected to reverse. Deferred tax assets are evaluated for realization based
on a more-likely-than-not criteria in determining if a valuation should be
provided.

The components of Lexicon's deferred tax assets (liabilities) at December 31,
1999 and 2000, are as follows:

                                                                 ------------------------------
                                                                       AS OF DECEMBER 31,
                                                                 ------------------------------
                                                                     1999              2000
                                                                 ------------      ------------
                                                                             
Deferred tax assets:
  Net operating loss carry-forwards ........................     $  9,466,857      $ 12,207,590
  Technology license .......................................          114,293            64,260
  Research and development tax credits .....................          670,663         1,735,064
  Start-up and organizational costs ........................           38,332            81,452
  Stock based compensation .................................               --         2,680,937
  Accrued expenses and other ...............................               --            61,683
                                                                 ------------      ------------
       Total deferred tax assets ...........................       10,290,145        16,830,986

Deferred tax liabilities:
  Property and equipment ...................................         (234,490)         (780,229)
  Other ....................................................          (42,312)           (3,151)
                                                                 ------------      ------------
       Total deferred tax liabilities ......................         (276,802)         (783,380)
Less: Valuation allowance ..................................      (10,013,343)      (16,047,606)
                                                                 ------------      ------------
       Net deferred tax assets .............................     $         --      $         --
                                                                 ============      ============

As of December 31, 2000, Lexicon has generated net operating loss (NOL)
carryforwards of approximately $34.9 million and research and development tax
credits of approximately $1.7 million available to reduce future income taxes.
These carryforwards begin to expire in 2011. A change in ownership, as defined
by federal income tax regulations, could significantly limit Lexicon's ability
to utilize its carryforwards. Lexicon's ability to utilize its current and
future NOLs to reduce future taxable income and tax liabilities may be limited.
Additionally, because federal tax laws limit the time during which these
carryforwards may be applied against future taxes, Lexicon may not be able to
take full advantage of these attributes for federal income tax purposes. As
Lexicon has had cumulative losses and there is no assurance of future taxable
income, valuation allowances have been established to fully offset the deferred
tax assets of approximately $10.0 million and $16.0 million at December 31, 1999
and 2000, respectively. The valuation allowance increased approximately $6.0
million during 2000, primarily due to Lexicon's net loss.

6. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND CAPITAL STOCK

Stock Dividend: Lexicon's Board of Directors declared a stock dividend to effect
a stock split of three shares for every one share of common stock then
outstanding, effective April 5, 2000. The accompanying financial statements and
footnotes give retroactive effect to the stock split for all periods presented.

Common Stock: In April 2000, Lexicon completed the initial public offering of
10,000,000 shares of its common stock at an initial public offering price of
$22.00 per share, for net proceeds of $203.2 million, after deducting
underwriting discounts of $15.4 million and offering expenses of $1.4 million.

                                      F-9
   42

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Redeemable Convertible Series A Preferred Stock: In May 1998, Lexicon completed
the private placement of 4,244,664 shares of redeemable convertible Series A
preferred stock (Series A Preferred Stock) at a price of $7.50 per share, for
net proceeds of approximately $29.6 million, after deducting placement agent
fees and offering costs of approximately $2.2 million.

The Series A Preferred Stock was convertible into common stock at a conversion
price of $2.50 per share of common stock, and was redeemable on May 7, 2003, for
a sum of the following: (a) the greater of $2.50 per share or the fair market
value of the number of shares of common stock into which a share of Series A
Preferred Stock could then be converted and (b) an amount per share equal to all
declared but unpaid dividends. The Series A Preferred Stock was converted
according to its terms into 12,733,992 shares of common stock upon the April
2000 closing of Lexicon's initial public offering of common stock. Prior to the
conversion, the Series A Preferred Stock was being accreted to its May 7, 2003
redemption value of $31,834,980. The Series A Preferred Stock was not included
as a component of total stockholders' equity (deficit) in the accompanying
financial statements due to its redemption features.

On September 14, 1995, Lexicon entered into a registration rights agreement with
its founding stockholders. The agreement was subsequently extended to other
stockholders and holders of warrants and was amended and restated as of May 7,
1998. As amended and restated, the registration rights agreement provides
holders of registrable securities with the right to require Lexicon to register
the offering of their shares under the Securities Act of 1933, as amended, under
certain circumstances and subject to certain exceptions. Such rights may be
exercised by holders of registrable securities who, in the aggregate, hold (a)
at least 25 percent of the then-outstanding registrable securities that were
originally issued to a director and founding stockholder of Lexicon or (b) 25
percent of the then-outstanding registrable securities issued upon conversion of
the Series A Preferred Stock. The registration rights agreement also provides
holders of registrable securities with the right to include their shares in
offerings registered under the Securities Act of 1933, as amended, for the
account of Lexicon or for the account of other holders of registration rights,
subject to certain exceptions. The registration rights agreement provides that
Lexicon shall pay the expenses associated with all such registrations.

7. STOCK OPTIONS AND WARRANTS

Stock Options: In September 1995, Lexicon's Board of Directors approved the 1995
Stock Option Plan, which was subsequently amended and restated in February 2000
as the 2000 Equity Incentive Plan (the "equity incentive plan"). The equity
incentive plan will terminate in 2010 unless the board terminates it sooner. The
Board of Directors authorized and reserved an aggregate of 11,250,000 shares of
common stock for issuance under the equity incentive plan. The equity incentive
plan provides for the grant of incentive stock options to employees and
nonstatutory stock options to employees, directors and consultants of Lexicon.
The plan also permits the grant of stock bonuses and restricted stock purchase
awards. Incentive stock options will have an exercise price of 100% or more of
the fair market value of our common stock on the date of grant. Nonstatutory
stock options may have an exercise price as low as 85% of fair market value on
the date of grant. The purchase price of other stock awards may not be less than
85% of fair market value. However, the board may award bonuses in consideration
of past services without a purchase payment. Shares may be subject to a
repurchase option in the discretion of the board. The equity incentive plan
provides that it will be administered by the board, or a committee appointed by
the board, which determines recipients and types of options to be granted,
including number of shares under the option and the exercisability of the
shares. On January 1 of each year for ten years, beginning in 2001, the number
of shares reserved for issuance under the equity incentive plan automatically
will be increased by the greater of:

         o        5% of Lexicon's outstanding shares on a fully-diluted basis;
                  or

         o        that number of shares that could be issued under awards
                  granted under the equity incentive plan during the prior
                  12-month period.

                                      F-10
   43

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Board of Directors may provide for a lesser increase in the number of shares
reserved under the equity incentive plan for any year.

The total number of shares reserved in the aggregate may not exceed 60,000,000
shares over the ten-year period. As December 31, 2000, options to purchase
8,252,505 shares of common stock were outstanding under the equity incentive
plan and 966,549 options had been exercised.

In February 2000, Lexicon adopted the 2000 Non-Employee Directors' Stock Option
Plan (the "directors' plan") to provide for the automatic grant of options to
purchase shares of common stock to non-employee directors of Lexicon. Lexicon
reserved a total of 600,000 shares of its common stock for issuance under the
directors' plan. Non-employee directors elected after the closing of Lexicon's
initial public offering will receive an initial option to purchase 30,000 shares
of common stock. In addition, on the date of each of Lexicon's annual meetings
of stockholders, beginning with the annual meeting in 2001, each non-employee
director who has been a director for at least six months will automatically be
granted an option to purchase 6,000 shares of common stock. On the day after
each annual meeting of Lexicon's stockholders, for 10 years, starting in 2001,
the share reserve will automatically be increased by a number of shares equal to
the greater of:

         o        0.3% of Lexicon's outstanding shares on a fully-diluted basis;
                  or

         o        that number of shares that could be issued under options
                  granted under the directors' plan during the prior 12-month
                  period.

Options granted under the directors' plan will become vested and exercisable
over a period of five years and will have an exercise price equal to the fair
market value of Lexicon's common stock on the date of grant. The option term is
ten years. As of December 31, 2000, Lexicon had not issued any options under the
directors' plan.

Stock-based Compensation: Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," allows companies to adopt one of
two methods for accounting for stock options. Lexicon has elected the method
that requires disclosure only of stock-based compensation. Because of this
election, Lexicon is required to account for its employee stock-based
compensation plans under Accounting Principles Board (APB) Opinion No. 25 and
its related interpretations. Accordingly, deferred compensation is recorded for
stock-based compensation grants based on the excess of the estimated fair value
of the common stock on the measurement date over the exercise price. The
deferred compensation is amortized over the vesting period of each unit of
stock-based compensation grant, generally four years. If the exercise price of
the stock-based compensation grants is equal to the estimated fair value of
Lexicon's stock on the date of grant, no compensation expense is recorded.

                                      F-11
   44
                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

During the years ended December 31, 1999 and 2000, Lexicon recorded
approximately $1.0 million and $54.1 million, respectively, in aggregate
deferred compensation relating to options issued to employees and non-employee
directors. During the years ended December 31, 1999 and 2000, Lexicon recognized
approximately $86,000 and $20.0 million respectively, in compensation expense
relating to these options. Additionally, during the year ended December 31,
2000, Lexicon reversed approximately $1.3 million of deferred compensation and
additional paid in capital for unamortized deferred compensation related to the
forfeiture of nonvested options by terminated employees. Total amortization
expense was revised to the extent amortization had previously been recorded for
nonvested options.

The following pro forma information regarding net loss is required by SFAS No.
123, and has been determined as if Lexicon had accounted for its employee stock
options under the fair-value method as defined by SFAS No. 123. The fair value
of these options was estimated at the date of grant using the Black-Scholes
method and the following assumptions for 1998, 1999 and 2000: volatility factor
ranging from 29% to 67%, risk-free interest rates ranging from 5.13% to 8%,
expected option lives of seven years, three percent expected turnover, and no
dividends.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of the options using the
straight-line method. Lexicon's pro forma information follows:

                                                                 ---------------------------------------------------------
                                                                                  YEAR ENDED DECEMBER 31,
                                                                 ---------------------------------------------------------
                                                                       1998                 1999                 2000
                                                                 ---------------      ---------------      ---------------
                                                                                                  
Net loss
    As reported ............................................     $    (7,480,805)     $   (12,475,087)     $   (25,994,080)
    Pro forma ..............................................     $    (8,484,922)     $   (14,117,799)     $   (32,499,268)
Net loss per common share, basic and diluted
    As reported ............................................     $         (0.32)     $         (0.53)     $         (0.63)
    Pro forma ..............................................     $         (0.36)     $         (0.60)     $         (0.78)

Lexicon records the fair value of options issued to non-employee consultants,
including Scientific Advisory Board members, at the fair value of the options
issued. Any expense is recognized over the service period or at the date of
issuance if the options are fully vested and no performance obligation exists.
Options to purchase 45,000 and 372,000 shares of common stock were issued to
non-employees in 1999 and 2000, respectively, and during the years ended
December 31, 1999 and 2000, Lexicon recognized approximately $26,000 and
$836,000, respectively, in expense relating to these options. The fair values of
the issuances in 1999 and 2000 were estimated using the Black-Scholes pricing
model with the assumptions noted in the preceding paragraphs, resulting in an
aggregate fair value of approximately $57,000 and $6.4 million, respectively.
Additionally, during the year ended December 31, 2000, Lexicon reversed
approximately $5.6 million of deferred compensation and additional paid in
capital for unamortized deferred expense related to the forfeiture of nonvested
options. Total amortization expense was revised to the extent amortization had
previously been recorded for non-vested options.

If vesting continues in accordance with the outstanding individual stock
options, Lexicon expects to record amortization expense for deferred stock
compensation as follows: $10.9 million during 2001, $10.9 million during 2002,
$10.9 million during 2003 and $900,000 during 2004.

The following is a summary of option activity under the Company's stock option
plans:

                                                                 ------------------------------------
                                                                                         WEIGHTED
                                                                     OPTIONS              AVERAGE
                                                                   OUTSTANDING        EXERCISE PRICE
                                                                 ---------------      ---------------
                                                                                
Balance at December 31, 1997 ...............................           2,801,550      $          0.74
    Granted ................................................           2,128,650                 2.48
    Exercised ..............................................             (68,001)                0.22
    Canceled ...............................................            (123,225)                1.32
                                                                 ---------------
Balance at December 31, 1998 ...............................           4,738,974      $          1.51
    Granted ................................................           1,064,700                 2.50
    Exercised ..............................................             (49,506)                0.46
    Canceled ...............................................            (557,613)                2.03
                                                                 ---------------
Balance at December 31, 1999 ...............................           5,196,555      $          1.67
    Granted ................................................           4,463,650                 6.61
    Exercised ..............................................            (849,042)                1.31
    Canceled ...............................................            (558,658)                2.40
                                                                 ---------------
Balance at December 31, 2000 ...............................           8,252,505      $          4.33
                                                                 ===============      ===============
Exercisable at December 31, 2000 ...........................           3,980,548      $          1.89
                                                                 ===============      ===============

The weighted average fair values of options granted during the years ended
December 31, 1998, 1999 and 2000 were $1.25, $1.26 and $4.40, respectively. As
of December 31, 2000, 2,630,946 shares of common stock were available for grant
under the Company's stock option plans.

                                      F-12
   45

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information about stock options outstanding at
December 31, 2000:

- ---------------------------------------------------------------------------------------------------------------------
                             OPTIONS OUTSTANDING                                          OPTIONS EXERCISABLE
- -------------------------------------------------------------------------------    ----------------------------------
                                               WEIGHTED
                        OUTSTANDING AS          AVERAGE            WEIGHTED         EXERCISABLE AS        WEIGHTED
                              OF               REMAINING            AVERAGE               OF              AVERAGE
     RANGE OF            DECEMBER 31,         CONTRACTUAL          EXERCISE          DECEMBER 31,         EXERCISE
  EXERCISE PRICE             2000           LIFE (IN YEARS)          PRICE               2000              PRICE
- -------------------    -----------------    ----------------     --------------    -----------------    -------------
                                                                                         
   $0.0003 - $0.22           1,106,339             4.6              $ 0.08               1,106,339            $ 0.08
      0.22 -  1.67             663,810             6.1                1.67                 618,562              1.67
      1.67 -  2.50           5,555,306             8.4                2.50               2,209,899              2.50
      2.50 - 19.80             656,000             9.5               16.63                  45,748             19.35
     19.80 - 38.50             271,050             9.7               35.99                      --                --
                       ---------------                                             ---------------
                             8,252,505                              $ 4.33               3,980,548            $ 1.89
                       ===============                                             ===============

Warrants: In connection with certain note purchase agreements in August 1997
(see Note 4), Lexicon issued two warrants to purchase 13,500 shares and 135,000
shares of common stock at an exercise price of $2.50 per share. Management
estimated the value of these warrants at $24,750 and recorded them as deferred
financing costs and additional paid-in capital. The warrant values were
estimated by management taking into consideration the term of the warrant, the
exercise price that was greater than the estimated fair value of the common
stock at issuance and a rate of return of eight percent. Amortization of these
costs is reflected as additional interest expense in the accompanying financial
statements. Both of these warrants were exercised in 2000.

On May 7, 1998, Lexicon issued to the placement agent for the Series A Preferred
Stock private placement a warrant to purchase 605,001 shares of common stock at
an exercise price of $2.50 per share, the warrant may be exercised for cash or
by way of a "cashless" exercise based upon the difference between fair market
value and exercise price. The warrant expires on the fifth anniversary of the
date of issuance. Management estimated the value of this warrant at
approximately $498,000. The warrant values were estimated by management taking
in to consideration the term of the warrant, the exercise price that equaled the
estimated fair value of the common stock at issuance and a rate of return of
eight percent. Upon consummation of the private placement, this amount was
recorded as a reduction of the Series A Preferred Stock balance and an increase
to additional paid-in capital. The value of the warrant, along with the offering
costs associated with the private placement, were accreted back to the Series A
Preferred Stock through the conversion date of the Series A Preferred Stock.

In July 1998, Lexicon issued a warrant to purchase 249,999 shares of common
stock at an exercise price of $2.50 per share, in connection with the grant to
Lexicon of an option to lease additional real property. The warrant expires on
April 15, 2003. Management estimated the value of this warrant at approximately
$196,000. The warrant values were estimated by management taking in to
consideration the term of the warrant, the exercise price that equaled the
estimated fair value of the common stock at issuance and a rate of return of
eight percent. As this warrant has been treated as consideration for the option
to lease certain real property (lease option), Lexicon has recorded the
warrant's value as a long-term asset and additional paid-in capital.
Amortization of the lease option, $17,180 and $41,232 during 1998 and 1999,
respectively, has been recorded as additional lease expense in the accompanying
financial statements. The remaining balance on the lease option was expensed
during 2000 upon Lexicon's completion of a synthetic lease agreement under which
the lessor purchased the optioned real property under an arrangement whereby it
will be leased to Lexicon (see Note 10).

                                      F-13
   46

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. BENEFIT PLANS

Lexicon has established an Annual Profit Sharing Incentive Plan (the Profit
Sharing Plan). The purpose of the Profit Sharing Plan is to provide for the
payment of incentive compensation out of the profits of Lexicon to certain of
its employees. Participants in the Profit Sharing Plan are entitled to an annual
cash bonus equal to their proportionate share (based on salary) of 15 percent of
Lexicon's annual pretax income, if any.

Lexicon maintains a defined-contribution savings plan under Section 401(k) of
the Internal Revenue Code. The plan covers substantially all full-time
employees. Participating employees may defer a portion of their pretax earnings,
up to the Internal Revenue Service annual contribution limit. Beginning in 2000,
the Company is required to match employee contributions according to a specified
formula. The matching contributions totaled approximately $160,000 in 2000.
Company contributions vest to employees ratably over four years.

9. COLLABORATION AND LICENSE AGREEMENTS

Merck Genome Research Institute: In March 1997, Lexicon entered into an
agreement with Merck Genome Research Institute (MGRI) under which Lexicon
received an initial cash payment of $4.0 million. A portion of this payment was
recognized as revenue as Lexicon performed its obligations related to such
agreement. In September 2000, Lexicon concluded the agreement with MGRI. In
connection with the conclusion of the MGRI agreement, Lexicon recognized $3.1
million of deferred revenues remaining from the $4.0 million cash payment made
by MGRI when the agreement was signed and an additional $1.0 million of revenue
related to a final, non-refundable cash payment that Lexicon received from MGRI.

Millennium Pharmaceuticals, Inc.: Lexicon established a multi-year functional
genomics agreement in July 1999 for the creation of gene-targeted knockout mice
for use by Millennium in the validation of potential drug targets identified and
selected by Millennium. Lexicon had a separate agreement with Millennium for
access to Lexicon's human gene sequence database that expired in April 2000.
Lexicon substantially expanded its functional genomics agreement with Millennium
in June 2000, increasing the number of knockout mice that it will generate for
Millennium over the remaining term of the agreement, which extends through June
2002.

Bristol-Myers Squibb Company: Lexicon established a LexVision collaboration with
Bristol-Myers Squibb in September 2000, under which Bristol-Myers Squibb has
access to Lexicon's LexVision database and OmniBank library for the discovery of
small molecule drugs. Lexicon could receive between $15 million and $25 million
in access and delivery fees under this agreement, in addition to milestone
payments and royalties on products Bristol-Myers Squibb develops using Lexicon's
technology. The agreement has a term of five years, although either party may
terminate the agreement after three years. During the year ended December 31,
2000, Lexicon recognized $1.0 million of revenue related to $1.25 million due
for the first installment of gene function information provided prior to
December 31, 2000.

10. COMMITMENTS AND CONTINGENCIES

Lease Obligations: Lexicon leases certain equipment under operating leases.
Additionally, in October 2000, the Company entered into a synthetic lease
agreement under which the lessor purchased current laboratory and office space
and animal facility (existing facilities), and agreed to fund the construction
of additional laboratory and office space and a second animal facility (new
facilities). Including the purchase price for the existing facilities, the
synthetic lease provides for funding of up to $45.0 million in property and
improvements. The term of the agreement is six years, which includes the
construction period for the new facilities and a lease period. The Company's
lease payments for the existing facilities began in November 2000 and lease
payments for the new facilities will begin upon completion of construction,
which is expected in the fourth quarter of 2001. At the end of the lease term,
the lease may be extended for one-year terms, up to seven terms, or the Company
may purchase the properties for a price including the outstanding lease balance.
If the Company elects not to renew the lease or purchase the properties, the
Company must arrange the sale of the properties to a third party. Under the sale
option, the Company has guaranteed a percentage of the total original cost as
the residual fair value of the properties. As of

                                      F-14
   47

                          LEXICON GENETICS INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 2000, Lexicon had no operating lease for the new facilities;
however, the Company will enter into lease arrangements at construction
completion. Rent expense for all operating leases was approximately $673,000,
$1,111,000 and $1,518,000 for the years ended December 31, 1998, 1999 and 2000,
respectively. Future rental expense under the synthetic lease is subject to
fluctuation based on LIBOR rates. The table below includes future lease payments
for the existing facilities and the anticipated lease payments related to the
new facilities based on a year-end LIBOR rate of 6.4%.

                                                                              -------------------
                                                                              FOR THE YEAR ENDING
                                                                               DECEMBER 31, 2000
                                                                              -------------------
                                                                             
2001 ......................................................................     $       795,000
2002 ......................................................................           3,014,000
2003 ......................................................................           3,014,000
2004 ......................................................................           3,014,000
2005 ......................................................................           3,014,000
Thereafter ................................................................           2,512,000
                                                                                ---------------
           Total ..........................................................     $    15,363,000
                                                                                ===============

Employment Agreements: In December 1998, October 1999, January 2000 and February
2000, Lexicon entered into employment agreements with certain of its corporate
officers. Under the agreements, each officer receives a base salary, subject to
adjustment, with an annual discretionary bonus based upon specific objectives to
be determined by the compensation committee. The employment agreements are
at-will and contain non-competition agreements. The agreements also provide for
a termination clause, which requires either a six or 12-month payment based on
the officer's salary, in the event of termination or change in corporate
control.

                                      F-15
   48

                                INDEX TO EXHIBITS

           EXHIBIT
            NUMBER                              DESCRIPTION
           -------                              -----------

               3.1     ---    Restated Certificate of Incorporation (filed as
                              Exhibit 3.1 to the Company's Registration
                              Statement on Form S-1 (Registration No. 333-96469)
                              and incorporated by reference herein).

               3.2     ---    Restated Bylaws (filed as Exhibit 3.2 to the
                              Company's Registration Statement on Form S-1
                              (Registration No. 333-96469) and incorporated by
                              reference herein).

              10.1     ---    Employment Agreement with Arthur T. Sands, M.D.,
                              Ph.D. (filed as Exhibit 10.1 to the Company's
                              Registration Statement on Form S-1 (Registration
                              No. 333-96469) and incorporated by reference
                              herein).

              10.2     ---    Employment Agreement with James R. Piggott, Ph.D.
                              (filed as Exhibit 10.2 to the Company's
                              Registration Statement on Form S-1 (Registration
                              No. 333-96469) and incorporated by reference
                              herein).

              10.3     ---    Employment Agreement with Jeffrey L. Wade, J.D.
                              (filed as Exhibit 10.3 to the Company's
                              Registration Statement on Form S-1 (Registration
                              No. 333-96469) and incorporated by reference
                              herein).

              10.4     ---    Employment Agreement with Brian P. Zambrowicz,
                              Ph.D. (filed as Exhibit 10.4 to the Company's
                              Registration Statement on Form S-1 (Registration
                              No. 333-96469) and incorporated by reference
                              herein).

              10.5     ---    Employment Agreement with Julia P. Gregory (filed
                              as Exhibit 10.5 to the Company's Registration
                              Statement on Form S-1 (Registration No. 333-96469)
                              and incorporated by reference herein).

              10.6     ---    Employment Agreement with Randall B. Riggs (filed
                              as Exhibit 10.6 to the Company's Registration
                              Statement on Form S-1 (Registration No. 333-96469)
                              and incorporated by reference herein).

              10.7     ---    Form of Indemnification Agreement with Officers
                              and Directors (filed as Exhibit 10.7 to the
                              Company's Registration Statement on Form S-1
                              (Registration No. 333-96469) and incorporated by
                              reference herein).

              10.8     ---    2000 Equity Incentive Plan (filed as Exhibit 10.8
                              to the Company's Registration Statement on Form
                              S-1 (Registration No. 333-96469) and incorporated
                              by reference herein).

              10.9     ---    2000 Non-Employee Directors' Stock Option Plan
                              (filed as Exhibit 10.9 to the Company's
                              Registration Statement on Form S-1 (Registration
                              No. 333-96469) and incorporated by reference
                              herein).

            +10.10     ---    LexVision Database and Collaboration Agreement
                              with Bristol-Myers Squibb, dated September 26,
                              2000 between Lexicon Genetics Incorporated and
                              Bristol-Myers Squibb Company (filed as Exhibit
                              16.1 to the Company's Current Report on Form 8-K
                              dated September 26, 2000 and incorporated by
                              reference herein).

             10.11     ---    Master Loan and Security Agreement dated May 21,
                              1999, with FINOVA Capital Corporation (filed as
                              Exhibit 10.12 to the Company's Registration
                              Statement on Form S-1 (Registration No.
                              333-964969) and incorporated by reference
                              herein.).

            *10.12     ---    Synthetic Lease Financing Facility with First
                              Security Bank, National Association, the Lenders
                              and Holders named therein, and Bank of America,
                              N.A.

             *23.1     ---    Consent of Arthur Andersen LLP

              24.1     ---    Power of Attorney (contained in signature page)

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

* Filed herewith.

+ Confidential treatment has been requested for a portion of this exhibit. The
confidential portions of this exhibit have been omitted and filed separately
with the Securities and Exchange Commission.

                                      E-1

   1
                                                                   EXHIBIT 10.12

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

                             PARTICIPATION AGREEMENT

                          Dated as of October 19, 2000

                                      among

                         LEXICON GENETICS INCORPORATED,
                  as the Construction Agent and as the Lessee,

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                      not individually, except as expressly
                 stated herein, but solely as the Owner Trustee
                          under the Lexi Trust 2000-1,

       THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES
                    HERETO FROM TIME TO TIME, as the Holders,

       THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES
                    HERETO FROM TIME TO TIME, as the Lenders,

                                       and

                              BANK OF AMERICA, N.A.
                          as the Agent for the Lenders
                     and, respecting the Security Documents,
                      as the Agent for the Secured Parties

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

   2

                                TABLE OF CONTENTS

                                                                          PAGE
                                                                          ----

SECTION 1A.  INITIAL LENDER AND INITIAL HOLDER...............................1

SECTION 1.  THE LOANS........................................................1

SECTION 2.  HOLDER ADVANCES..................................................2

SECTION 3.  SUMMARY OF TRANSACTIONS..........................................2
      3.1.  Operative Agreements.............................................2
      3.2.  Property Purchase................................................2
      3.3.  Construction of Improvements; Commencement of Basic Rent.........3

SECTION 4.  THE CLOSINGS.....................................................3
      4.1.  Initial Closing Date.............................................3
      4.2.  Initial Closing Date; Property Closing Dates; Acquisition
              Advances; Construction Advances................................3

SECTION 5.  FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING
            REQUIREMENTS ON COMPLETION DATE;  THE LESSEE'S DELIVERY OF
            NOTICES; RESTRICTIONS ON LIENS...................................3
      5.1.  General..........................................................3
      5.2.  Procedures for Funding...........................................4
      5.3.  Conditions Precedent for  the Lessor, the Agent, the Lenders and
              the Holders Relating to the Initial Closing Date and the
              Advance of Funds for the Acquisition of a Property.............6
      5.4.  Conditions Precedent for the Lessor, the Agent, the Lenders and
              the Holders Relating to the Advance of Funds after the
              Acquisition Advance............................................12
      5.5.  Additional Reporting and Delivery Requirements on Completion Date
              and on Punch List Completion Date..............................14
      5.6.  The Construction Agent Delivery of Construction Budget
              Modifications..................................................14
      5.7.  Restrictions on Liens............................................15
      5.8.  Payments.........................................................15
      5.9.  Unilateral Right to Increase the Holder Commitments and the
              Lender Commitments.............................................15
      5.10  Collateral Account...............................................16
      5.11  Funding of Escrow Account for Punch List Items...................16
      5.12  Delayed Delivery of Construction Contracts and Plans and
              Specifications.................................................17
      5.13  Extension of Construction Period Termination Date................18
      5.14  Purchase and Sale Rights and Obligations to relinquish Interest
              in Properties..................................................18
      5.15  Limited Obligations regarding the Purchase Agreements............18
      5.16  Limitation on CD Collateral......................................19

SECTION 6.  REPRESENTATIONS AND WARRANTIES...................................19
      6.1.  Representations and Warranties of the Borrower...................19

                                       i
   3

                                                                         
      6.2.  Representations and Warranties of the Construction Agent and the
              Lessee.........................................................21

SECTION 7. PAYMENT OF CERTAIN EXPENSES.......................................29
      7.1.  Transaction Expenses.............................................29
      7.2.  Brokers' Fees....................................................30
      7.3.  Certain Fees and Expenses........................................30
      7.4.  Unused Fee.......................................................31
      7.5.  Administrative Fee...............................................31
      7.6.  Other Fees.......................................................31
      7.7.  Clarification regarding the Lessor's Payment Obligations Pursuant
              to Section 7...................................................31

SECTION 8.  OTHER COVENANTS AND AGREEMENTS...................................31
      8.1.  Cooperation with the Construction Agent or the Lessee............31
      8.2.  Covenants of the Owner Trustee and the Holders...................32
      8.3.  The Lessee Covenants, Consent and Acknowledgment.................33
      8.3A  Additional Affirmative Covenants of Lessee.......................37
      8.3B  Additional Negative Covenants of Lessee..........................41
      8.4.  Sharing of Certain Payments......................................44
      8.5.  Grant of Easements, etc..........................................44
      8.6.  Appointment by the Agent, the Lenders, the Holders and the Owner
              Trustee........................................................45
      8.7.  Collection and Allocation of Payments and Other Amounts..........45
      8.8.  Release of Properties, etc.......................................49

SECTION 9.  CREDIT AGREEMENT AND TRUST AGREEMENT.............................49
      9.1.  The Construction Agent's and the Lessee's Credit Agreement Rights49
      9.2.  The Construction Agent's and the Lessee's Trust Agreement Rights.50

SECTION 10.  TRANSFER OF INTEREST............................................51
      10.1. Restrictions on Transfer.........................................51
      10.2. Effect of Transfer...............................................51

SECTION 11.  INDEMNIFICATION.................................................52
      11.1. General Indemnity................................................52
      11.2. General Tax Indemnity............................................54
      11.3. Increased Costs, Illegality, etc.................................59
      11.4. Funding/Contribution Indemnity...................................60
      11.5. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
              LIABILITY, ETC.................................................61
      11.6. Additional Provisions Regarding Environmental Indemnification....61
      11.7. Additional Provisions Regarding Indemnification..................62
      11.8. Indemnifications Provided by the Owner Trustee in Favor of the
              Other Indemnified Persons......................................62

SECTION 12.  MISCELLANEOUS...................................................63
      12.1. Survival of Agreements...........................................63
      12.2. Notices..........................................................63
      12.3. Counterparts.....................................................64

                                       ii
   4

                                                                         
      12.4. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters..65
      12.5. Headings, etc....................................................67
      12.6. Parties in Interest..............................................67
      12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
              VENUE..........................................................67
      12.8. Severability.....................................................68
      12.9. Liability Limited................................................68
      12.10.Rights of the Lessee.............................................69
      12.11.Further Assurances...............................................69
      12.12.Calculations under Operative Agreements..........................70
      12.13.Confidentiality..................................................70
      12.14.Financial Reporting/Tax Characterization.........................70
      12.15.Set-off..........................................................70

SCHEDULES

Schedule 6.1(z) --  Brokers' Fees
Schedule 8.3B(a)(ii) --  Indebtedness

EXHIBITS

A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4

B - [reserved]

C - Form of Officer's Certificate - Section 5.3(z)

D- Form of Secretary's Certificate - Section 5.3(aa)

E - Form of Officer's Certificate - Section 5.3(bb)

F - Form of Secretary's Certificate - Section 5.3(cc)

G - [reserved]

H - [reserved]

I - Form of Officer's Certificate - Section 5.5

J - Description of Material Litigation - Section 6.2(d)

K - Interest Rate/Holder Yield Selection Notice - Section 8.3(r)

L - Form of Officer's Certificate as to Borrowing Base - Section 5.10(c)

                                      iii
   5

M - Form of Officer's Certificate as to Financial Covenant - Section
    8.3A(a)(iii)

Appendix A - Rules of Usage and Definitions

                                       iv

   6
                             PARTICIPATION AGREEMENT

        THIS PARTICIPATION AGREEMENT dated as of October 19, 2000 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Agreement") is by and among LEXICON GENETICS INCORPORATED, a Delaware
corporation (the "Lessee" or the "Construction Agent"); FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, not individually (in its
individual capacity, the "Trust Company"), except as expressly stated herein,
but solely as the Owner Trustee under the Lexi Trust 2000-1 (the "Owner
Trustee", the "Borrower" or the "Lessor"); the various banks and other lending
institutions which are parties hereto from time to time as holders of
certificates issued with respect to the Lexi Trust 2000-1 (subject to the
definition of Holders in Appendix A hereto, individually, a "Holder" and
collectively, the "Holders"); the various banks and other lending institutions
which are parties hereto from time to time as lenders (subject to the definition
of Lenders in Appendix A hereto, individually, a "Lender" and collectively, the
"Lenders"); and BANK OF AMERICA, N.A., a national banking association, as the
agent for the Lenders and respecting the Security Documents, as the agent for
the Secured Parties (in such capacity, the "Agent"). Capitalized terms used but
not otherwise defined in this Agreement shall have the meanings set forth in
Appendix A hereto.

        In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:

                 SECTION 1A. INITIAL LENDER AND INITIAL HOLDER.

        Notwithstanding the various references in the Operative Agreements to
multiple Lenders and multiple Holders, Bank of America, N.A. is the only Lender
and the only Holder as of the date of this Agreement. Additional Lenders and
additional Holders may become parties to the Operative Agreements subsequent to
the date hereof pursuant to the assignment provisions set forth in the
applicable Operative Agreements.

                              SECTION 1. THE LOANS.

        Subject to the terms and conditions of this Agreement and the other
Operative Agreements and in reliance on the representations and warranties of
each of the parties hereto contained herein or made pursuant hereto, the Lenders
have agreed to make Loans to the Lessor from time to time in an aggregate
principal amount of up to the aggregate amount of the Commitments of the Lenders
in order for the Lessor to acquire the Properties and certain Improvements, to
develop and construct certain Improvements in accordance with the Agency
Agreement and the terms and provisions hereof and for the other purposes
described herein, and in consideration of the receipt of proceeds of the Loans,
the Lessor will issue the Notes. The Loans shall be made and the Notes shall be
issued pursuant to the Credit Agreement. Pursuant to Section 5 of this Agreement
and Section 2 of the Credit Agreement, the Loans will be made to the Lessor from
time to time at the request of the Construction Agent in consideration for the

   7

Construction Agent agreeing, for the benefit of the Lessor, pursuant to the
Agency Agreement, to acquire the Properties, to acquire the Equipment, to
construct certain Improvements and to cause the Lessee to lease the Properties,
each in accordance with the Agency Agreement and the other Operative Agreements.
The Loans and the obligations of the Lessor under the Credit Agreement shall be
secured by the Collateral.

                           SECTION 2. HOLDER ADVANCES.

        Subject to the terms and conditions of this Agreement and the other
Operative Agreements and in reliance on the representations and warranties of
each of the parties hereto contained herein or made pursuant hereto, on each
date Advances are requested to be made in accordance with Section 5 hereof, each
Holder shall make a Holder Advance on a pro rata basis to the Lessor with
respect to the Lexi Trust 2000-1 based on its Holder Commitment in an amount in
immediately available funds such that the aggregate of all Holder Advances on
such date shall be four and one-half percent (4.5%) of the amount of the
Requested Funds on such date; provided, that no Holder shall be obligated for
any Holder Advance in excess of its pro rata share of the Available Holder
Commitment. The aggregate amount of Holder Advances shall be up to the aggregate
amount of the Holder Commitments. No prepayment or any other payment with
respect to any Advance shall be permitted such that the Holder Advance with
respect to such Advance is less than four and one-half percent (4.5%) of the
outstanding amount of such Advance, except in connection with termination or
expiration of the Term or in connection with the exercise of remedies relating
to the occurrence of a Lease Event of Default. The representations, warranties,
covenants and agreements of the Holders herein and in the other Operative
Agreements are several, and not joint or joint and several. The Holder Advances
and the obligations of the Lessor under the Trust Agreement shall be secured by
the Collateral.

                       SECTION 3. SUMMARY OF TRANSACTIONS.

        3.1.   OPERATIVE AGREEMENTS.

        On the date hereof, each of the respective parties hereto and thereto
shall execute and deliver this Agreement, the Lease, each applicable Ground
Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust
Agreement, the Certificates, the Security Agreement, the Collateral Agreement,
the Control Agreement, each applicable Mortgage Instrument and such other
documents, instruments, certificates and opinions of counsel as agreed to by the
parties hereto.

        3.2.   PROPERTY PURCHASE.

        On each Property Closing Date and subject to the terms and conditions of
this Agreement (a) the Holders will each make a Holder Advance in accordance
with Sections 2 and 5 of this Agreement and the terms and provisions of the
Trust Agreement, (b) the Lenders will each make Loans in accordance with
Sections 1 and 5 of this Agreement and the terms and provisions of the Credit
Agreement, (c) the Lessor will purchase and acquire good and indefeasible title
to or ground lease pursuant to a Ground Lease, the applicable Property, each to
be within an Approved

                                       2
   8

State, identified by the Construction Agent, in each case pursuant to a Deed,
Bill of Sale or Ground Lease, as the case may be, and grant the Agent a lien on
such Property by execution of the required Security Documents, (d) the Agent,
the Lessee and the Lessor shall execute and deliver a Lease Supplement relating
to such Property and (e) the Basic Term shall commence with respect to such
Property.

        3.3.   CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT.

        Construction Advances will be made with respect to particular
Improvements to be constructed and with respect to ongoing Work regarding the
Equipment and construction of particular Improvements, in each case, pursuant to
the terms and conditions of this Agreement and the Agency Agreement. The
Construction Agent will act as a construction agent on behalf of the Lessor
respecting the Work regarding the Equipment, the construction of such
Improvements and the expenditures of the Construction Advances related to the
foregoing. The Construction Agent shall promptly notify the Lessor upon
Completion of the Improvements and the Lessee shall commence to pay Basic Rent
as of the Rent Commencement Date.

                            SECTION 4. THE CLOSINGS.

        4.1.   INITIAL CLOSING DATE.

        All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC,
Charlotte, North Carolina, or at such other location as may be determined by the
Lessor, the Agent and the Lessee; provided, however, the Construction Agent and
the Lessee reserve the right to close in escrow rather than physically attending
a closing outside of the State of Texas.

        4.2.   INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION
               ADVANCES; CONSTRUCTION ADVANCES.

        The Construction Agent shall deliver to the Agent a requisition (a
"Requisition"), in the form attached hereto as Exhibit A or in such other form
as is satisfactory to the Agent, in its reasonable discretion, in connection
with (a) the Transaction Expenses and other fees, expenses and disbursements
payable, pursuant to Section 7.1, by the Lessor and (b) each Acquisition Advance
pursuant to Section 5.3 and (c) each Construction Advance pursuant to Section
5.4

              SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT;
                   REPORTING REQUIREMENTS ON COMPLETION DATE;
            THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS.

        5.1.   GENERAL.

               (a)     To the extent funds have been advanced to the Lessor as
        Loans by the Lenders and to the Lessor as Holder Advances by the
        Holders, the Lessor will use such funds from time to time in accordance
        with the terms and conditions of this Agreement

                                       3
   9
        and the other Operative Agreements (i) at the direction of the
        Construction Agent to acquire the Properties in accordance with the
        terms of this Agreement, the Agency Agreement and the other Operative
        Agreements, (ii) to make Advances to the Construction Agent to permit
        the acquisition, testing, engineering, installation, development,
        construction, modification, design, and renovation, as applicable,
        of the Improvements (or components thereof) in accordance with the terms
        of the Agency Agreement and the other Operative Agreements, and (iii) to
        pay the Lessor Funding Obligations.

               (b)     In lieu of the payment of interest on the Loans and
        Holder Yield on the Holder Advances on any Scheduled Interest Payment
        Date with respect to any Property during the period prior to the Rent
        Commencement Date with respect to such Property and subject to Section
        5.9 and until such time as a Default or an Event of Default shall have
        occurred and be continuing, (i) each Lender's Loan shall automatically
        be increased by the amount of interest accrued and unpaid on such Loan
        for such period (except to the extent that at any time such increase
        would cause such Lender's Loan to exceed such Lender's Available
        Commitment, in which case the Lessee shall pay such excess amount to
        such Lender in immediately available funds on the date such Lender's
        Available Commitment was exceeded), and (ii) each Holder's Holder
        Advance shall automatically be increased by the amount of Holder Yield
        accrued and unpaid on such Holder Advance for such period (except to the
        extent that at any time such increase would cause the Holder Advance of
        such Holder to exceed such Holder's Available Holder Commitment, in
        which case the Lessee shall pay such excess amount to such Holder in
        immediately available funds on the date the Available Holder Commitment
        of such Holder was exceeded). Such increases in a Lender's Loan and a
        Holder's Holder Advance shall occur without any disbursement of funds by
        any Person.

        5.2.   PROCEDURES FOR FUNDING.

               (a)     The Construction Agent shall designate the date for
        Advances hereunder in accordance with the terms and provisions hereof;
        provided, however, it is understood and agreed that no more than two (2)
        Advances (excluding any conversion and/or continuation of any Loan or
        Holder Advance) may be requested during any calendar month and no such
        designation from the Construction Agent is required for funding of any
        Lessor Funding Obligation payable in favor of or for the benefit of one
        or more Financing Parties. Not less than (i) three (3) Business Days
        prior to the date that the first Advance is requested hereunder and (ii)
        three (3) Business Days prior to the date on which any subsequent
        Acquisition Advance or Construction Advance is to be made, the
        Construction Agent shall deliver to the Agent, (A) with respect to the
        date that the first Advance is requested hereunder and each subsequent
        Acquisition Advance, a Requisition as described in Section 4.2 hereof
        (including without limitation a legal description of the Land, if any, a
        schedule of the Improvements, if any, and a schedule of the Equipment,
        if any, acquired or to be acquired on such date, and a schedule of the
        Work, if any, to be performed, each of the foregoing in a form
        reasonably acceptable to the Agent) and (B) with respect to each
        Construction Advance, a Requisition identifying (among other things) the
        Property to which such Construction Advance relates.

                                       4
   10

               (b)     Each Requisition shall: (i) be irrevocable, (ii) request
        funds in an amount that is not in excess of the total aggregate of the
        Available Commitments plus the Available Holder Commitments at such
        time, and (iii) request that the Holders make Holder Advances and that
        the Lenders make Loans to the Lessor for the payment of Transaction
        Expenses, Property Acquisition Costs (in the case of an Acquisition
        Advance) or other Property Costs (in the case of a Construction Advance)
        that have previously been incurred or are to be incurred on the date of
        such Advance to the extent such were not subject to a prior Requisition,
        in each case as specified in the Requisition; provided, notwithstanding
        the foregoing, the anticipated final Requisition with regard to each
        Property shall be submitted for the purposes described in Section 5.11.

               (c)     Subject to the satisfaction of the conditions precedent
        set forth in Sections 5.3 or 5.4 (except that satisfaction of such
        conditions precedent shall not be required to fund any Lessor Funding
        Obligation payable in favor of or for the benefit of one or more
        Financing Parties or Persons, excluding the Lessee and the Construction
        Agent, working on behalf of one or more Financing Parties), as
        applicable, on each Property Closing Date or the date on which the
        Construction Advance is to be made, as applicable, (i) the Lenders shall
        make Loans based on their respective Lender Commitments to the Lessor in
        an aggregate amount equal to (A) ninety-five and one-half percent
        (95.5%) of (B)(1) the Requested Funds specified in any Requisition plus
        (2) any portion of the Lessor Funding Obligations not otherwise included
        in such Requisition, unless any such funding of any Lessor Funding
        Obligation not otherwise included in such Requisition is declined in
        writing by the Majority Secured Parties (such decision to be in the sole
        discretion of the Majority Secured Parties) ratably between the Tranche
        A Lenders and the Tranche B Lenders with the Tranche A Lenders funding
        eighty-six and thirty-one one hundredths percent (86.31%) of the sum of
        the Requested Funds plus such portion of the Lessor Funding Obligations
        not otherwise included in the applicable Requisition and the Tranche B
        Lenders funding nine and nineteen one-hundredths percent (9.19%) of the
        Requested Funds plus such portion of the Lessor Funding Obligations not
        otherwise included in the applicable Requisition), up to an aggregate
        principal amount equal to the aggregate of the Available Commitments,
        (ii) the Holders shall make Holder Advances based on their respective
        Holder Commitments in an aggregate amount equal to (A) four and one-half
        percent (4.5%) of (B)(1) the Requested Funds specified in such
        Requisition plus (2) any portion of the Lessor Funding Obligations not
        otherwise included in such Requisition, unless any such funding of any
        Lessor Funding Obligation not otherwise included in such Requisition is
        declined in writing by the Majority Secured Parties (such decision to be
        in the sole discretion of the Majority Secured Parties), up to the
        aggregate advanced amount equal to the aggregate of the Available Holder
        Commitments and (iii) the total amount of such Loans and Holder Advances
        made on such date shall (x) be used by the Lessor to pay Property Costs
        including Transaction Expenses within three (3) Business Days of the
        receipt by the Lessor of such Advance or (y) be advanced by the Lessor
        on the date of such Advance to the Construction Agent or the Lessee to
        pay Property Costs, as applicable. Notwithstanding that the Operative
        Agreements state that Advances shall be directed to the Lessor, each
        Advance shall in fact be directed to the Construction Agent (for the
        benefit of the Lessor) and applied by the Construction Agent

                                       5
   11

        (for the benefit of the Lessor) pursuant to the Operative Agreements.

               (d)     With respect to an Advance obtained by the Lessor to pay
        for Property Costs (including, without limitation, the Lessor Funding
        Obligations) and not expended by the Lessor for such purpose on the date
        of such Advance, such amounts shall be held by the Agent until the
        applicable closing date or payment date or, if such closing date or
        payment date does not occur within three (3) Business Days of the date
        of the Agent's receipt of such Advance, shall be applied regarding the
        applicable Advance to repay the Lenders and the Holders and, subject to
        the terms hereof, and of the Credit Agreement and the Trust Agreement,
        shall remain available for future Advances; provided, the foregoing is
        subject to the provisions of Section 5.11. Any such amounts held by the
        Agent (including amounts described in Section 5.11) shall be subject to
        the lien of the Security Agreement and shall accrue interest and Holder
        Yield from the date any such amount is advanced to the Agent.

               (e)     All Operative Agreements which are to be delivered to the
        Lessor, the Agent, the Lenders or the Holders shall be delivered to the
        Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders,
        and such items (except for Notes, Certificates, Bills of Sale, the
        Ground Leases and chattel paper originals, with respect to which in each
        case there shall be only one original) shall be delivered with originals
        sufficient for the Lessor, the Agent, each Lender and each Holder. All
        other items which are to be delivered to the Lessor, the Agent, the
        Lenders or the Holders shall be delivered to the Agent, on behalf of the
        Lessor, the Agent, the Lenders or the Holders, and such other items
        shall be held by the Agent. To the extent any such other items are
        requested in writing from time to time by the Lessor, any Lender or any
        Holder, the Agent shall provide a copy of such item to the party
        requesting it.

               (f)     Notwithstanding the completion of any closing under this
        Agreement pursuant to Sections 5.3 or 5.4, but subject to Section 5.12,
        each condition precedent in connection with any such closing may be
        subsequently enforced by the Agent (unless such has been expressly
        waived in writing by the Agent).

        5.3.   CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
               THE HOLDERS RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE
               OF FUNDS FOR THE ACQUISITION OF A PROPERTY.

        The obligations (i) on the Initial Closing Date of the Lessor, the
Agent, the Lenders and the Holders to enter into the transactions contemplated
by this Agreement, including without limitation the obligation to execute and
deliver the applicable Operative Agreements to which each is a party on the
Initial Closing Date, (ii) on the Initial Closing Date of the Holders to make
Holder Advances, and of the Lenders to make Loans in order to pay the Lessor
Funding Obligations payable on the Initial Closing Date and (iii) on a Property
Closing Date for the purpose of providing funds to the Lessor necessary to pay
the Lessor Funding Obligations and to acquire or ground lease a Property payable
on such Property Closing Date (an "Acquisition Advance"), in each case (with
regard to the foregoing Sections 5.3(i), (ii) and (iii)) are subject to the
satisfaction or waiver of the following conditions precedent on or prior to the
Initial Closing

                                       6
   12

Date or the applicable Property Closing Date, as the case may be (except that
satisfaction of such conditions precedent shall not be required to fund any
Lessor Funding Obligation payable in favor of or for the benefit of one or more
Financing Parties or Persons, excluding the Lessee and the Construction Agent,
working on behalf of one or more Financing Parties; provided, notwithstanding
the foregoing, the Majority Secured Parties may elect, in the sole discretion of
the Majority Secured Parties, not to fund any Lessor Funding Obligation if and
to the extent all conditions precedent are not satisfied for such funding);
provided that, to the extent such conditions precedent require the delivery of
any agreement, certificate, instrument, memorandum, legal or other opinion,
appraisal, commitment, title insurance commitment, lien report or any other
document of any kind or type, such shall be in form and substance satisfactory
to the Agent, in its reasonable discretion; and provided further that,
notwithstanding the foregoing, the obligations of each party shall not be
subject to any conditions contained in this Section 5.3 which are required to be
performed by such party:

               (a)     the correctness of the representations and warranties of
        the parties to this Agreement contained herein, in each of the other
        Operative Agreements and each certificate delivered pursuant to any
        Operative Agreement on each such date;

               (b)     the performance by the parties to this Agreement of their
        respective agreements contained herein and in the other Operative
        Agreements to be performed by them on or prior to each such date;

               (c)    the Agent shall have received a fully executed counterpart
        copy of the applicable Requisition, appropriately completed;

               (d)    title to each such Property shall conform to the
        representations and warranties set forth in Section 6.2(l) hereof;

               (e)     the Construction Agent shall have delivered to the Agent
        a good standing certificate for the Construction Agent in the state
        where each such Property is located, the Deed with respect to the Land
        and existing Improvements (if any), a copy of the Ground Lease (if any),
        and a copy of the Bill of Sale with respect to the Equipment (if any),
        respecting such of the foregoing as are being acquired or ground leased
        on each such date with the proceeds of the Loans and Holder Advances or
        which have been previously acquired or ground leased with the proceeds
        of the Loans and Holder Advances and such Land, existing Improvements
        (if any) and Equipment (if any) shall be located in an Approved State;

               (f)     there shall not have occurred and be continuing any
        Default or Event of Default under any of the Operative Agreements and no
        Default or Event of Default under any of the Operative Agreements will
        have occurred after giving effect to the Advance requested by each such
        Requisition;

               (g)     as of the Property Closing Date for each Property, the
        Construction Agent shall have delivered to the Agent title insurance
        commitments to issue policies respecting each such Property in an amount
        at least equal to (i) the maximum total Property Cost

                                       7
   13

        indicated by the Construction Budget referenced in Section 5.3(r) or
        (ii) with respect to any Existing Structure or Property for which
        construction is complete as of such date, the amount of the Acquisition
        Advance requested therefor in the applicable Requisition, in each case
        with such endorsements as the Agent deems necessary, provided same are
        obtainable in the applicable state, in favor of the Lessor and the Agent
        from a title insurance company reasonably acceptable to the Agent, but
        only with such title exceptions thereto as are acceptable to the Agent;

               (h)     the Construction Agent shall have delivered to the Agent
        an environmental site assessment respecting each such Property prepared
        by an independent recognized professional acceptable to the Agent and
        evidencing no pre-existing environmental condition with respect to which
        there is more than a remote risk of loss;

               (i)     the Construction Agent shall have delivered to the Agent
        a survey (with a flood hazard certification) respecting each such
        Property prepared (i) by an independent recognized professional
        acceptable to the Agent and (ii) in a manner and including such
        information as is reasonably required by the Agent;

               (j)     unless such an opinion has previously been delivered with
        respect to a particular state, the Construction Agent shall have caused
        to be delivered to the Agent a legal opinion in such form as is
        acceptable to the Agent with respect to local law real property issues
        respecting the state in which each such Property is located addressed to
        the Lessor, the Agent, the Lenders and the Holders, from counsel located
        in the state where each such Property is located, prepared by counsel
        acceptable to the Agent and a separate flood hazard certificate
        respecting each such Property prepared by an independent recognized
        professional acceptable to the Agent;

               (k)     the Agent shall be satisfied that the acquisition, ground
        leasing and/or holding of each such Property and the execution of the
        Mortgage Instrument and the other Security Documents will not result in
        a Material Adverse Effect;

               (l)     the Construction Agent shall have delivered to the Agent
        invoices (or copies thereof) for, or other reasonably satisfactory
        evidence of, the various Transaction Expenses and other fees, expenses
        and disbursements referenced in Section 7 of this Agreement, as
        appropriate;

               (m)     the Construction Agent shall have caused to be delivered
        to the Agent a Mortgage Instrument (in such form as is acceptable to the
        Agent, with revisions as necessary to conform to applicable state law),
        Lessor Financing Statements and Lender Financing Statements respecting
        each such Property, all fully executed and in recordable form;

               (n)     the Lessee shall have delivered to the Agent with respect
        to each such Property a Lease Supplement and a memorandum (or short form
        lease) regarding the Lease and such Lease Supplement (such memorandum or
        short form lease to be in the form attached to the Lease as Exhibit B or
        in such other form as is acceptable to the

                                       8
   14

        Agent, with modifications as necessary to conform to applicable state
        law, and in form suitable for recording);

               (o)     with respect to each Acquisition Advance, the sum of the
        Available Commitment plus the Available Holder Commitment (after
        deducting the Unfunded Amount, if any, and after giving effect to the
        Acquisition Advance) will be sufficient to pay all amounts payable
        therefrom;

               (p)     if any such Property is subject to a Ground Lease, the
        Construction Agent shall have caused a lease memorandum (or short form
        lease) to be delivered to the Agent for such Ground Lease and, if
        requested by the Agent, a landlord waiver and a mortgagee waiver (in
        each case, in such form as is acceptable to the Agent);

               (q)     counsel (acceptable to the Agent) for the ground lessor
        of each such Property subject to a Ground Lease shall have issued to the
        Lessor, the Agent, the Lenders and the Holders, its opinion;

               (r)     the Construction Agent shall have delivered to the Agent
        a preliminary Construction Budget for each such Property, if applicable;

               (s)     the Construction Agent shall have provided evidence to
        the Agent of insurance with respect to each such Property as provided in
        the Lease;

               (t)     as of the Property Closing Date regarding each Property,
        the Construction Agent shall have caused an Appraisal or Appraisals, as
        the case may be, regarding each such Property (showing an aggregate "as
        built" appraised value for each such Property equal to at least 80% of
        the budgeted Property Cost for such Property) to be provided to the
        Agent from an appraiser selected by the Agent;

               (u)     the Construction Agent shall cause (i) Uniform Commercial
        Code lien searches, tax lien searches and judgment lien searches
        regarding the Lessee to be conducted (and copies thereof to be delivered
        to the Agent) in such jurisdictions as determined by the Agent by a
        nationally recognized search company acceptable to the Agent and (ii)
        the liens referenced in such lien searches which are objectionable to
        the Agent to be either removed or otherwise handled in a manner
        satisfactory to the Agent;

               (v)     all taxes, fees and other charges in connection with the
        execution, delivery, recording, filing and registration of the Operative
        Agreements and/or documents related thereto shall have been paid or
        provisions for such payment shall have been made to the satisfaction of
        the Agent;

               (w)     in the opinion of the Agent and its respective counsel,
        the transactions contemplated by the Operative Agreements do not and
        will not subject the Lessor, the Lenders, the Agent or the Holders to
        any adverse regulatory prohibitions, constraints, penalties or fines;

                                       9
   15

               (x)     each of the Operative Agreements to be entered into on
        such date shall have been duly authorized, executed and delivered by the
        parties thereto, and shall be in full force and effect, and the Agent
        shall have received a fully executed copy of each of the Operative
        Agreements;

               (y)     since the date of the most recent audited financial
        statements of the Lessee, (as delivered pursuant to the requirements of
        (i) with respect to the Initial Closing Date, Section 5.3(gg) and (ii)
        with respect to any subsequent date, Section 8.3A(a)(i), there shall not
        have occurred any event, condition or state of facts which shall have or
        could reasonably be expected to have a Material Adverse Effect, other
        than as specifically contemplated by the Operative Agreements;

               (z)     as of the Initial Closing Date only, the Agent shall have
        received an Officer's Certificate, dated as of the Initial Closing Date,
        of the Lessee in the form attached hereto as Exhibit C or in such other
        form as is acceptable to the Agent stating that (i) each and every
        representation and warranty of the Lessee contained in the Operative
        Agreements to which it is a party is true and correct on and as of the
        Initial Closing Date; (ii) no Default or Event of Default has occurred
        and is continuing under any Operative Agreement; (iii) each Operative
        Agreement to which the Lessee is a party is in full force and effect
        with respect to it; and (iv) the Lessee has duly performed and complied
        with all covenants, agreements and conditions contained herein or in any
        Operative Agreement required to be performed or complied with by it on
        or prior to the Initial Closing Date;

               (aa)    as of the Initial Closing Date only, the Agent shall have
        received (i) a certificate of the Secretary or an Assistant Secretary of
        the Lessee, dated as of the Initial Closing Date, in the form attached
        hereto as Exhibit D or in such other form as is acceptable to the Agent
        attaching and certifying as to (1) the resolutions of its Board of
        Directors duly authorizing the execution, delivery and performance by
        the Lessee of each of the Operative Agreements to which it is or will be
        a party, (2) its articles of incorporation certified as of a recent date
        by the Secretary of State of its state of incorporation and its by-laws
        and (3) the incumbency and signature of persons authorized to execute
        and deliver on its behalf the Operative Agreements to which it is or
        will be a party and (ii) a good standing certificate (or local
        equivalent) from the appropriate office of the respective states where
        the Lessee is incorporated and where the principal place of business of
        the Lessee is located as to its good standing in each such state. To the
        extent the Lessee is a partnership, a limited liability company or is
        otherwise organized, such Person shall deliver to the Agent (in form and
        substance satisfactory to the Agent) as of the Initial Closing Date (A)
        a certificate regarding such Person and any corporate general partners
        covering the matters described in Exhibit D and (B) a good standing
        certificate, a certificate of limited partnership or a local equivalent
        of either of the foregoing, as applicable;

               (bb)    as of the Initial Closing Date only, the Agent shall have
        received an Officer's Certificate of the Lessor dated as of the Initial
        Closing Date in the form attached hereto as Exhibit E or in such other
        form as is acceptable to the Agent, stating

                                       10
   16

        that (i) each and every representation and warranty of the Lessor
        contained in the Operative Agreements to which it is a party is true and
        correct on and as of the Initial Closing Date, (ii) each Operative
        Agreement to which the Lessor is a party is in full force and effect
        with respect to it and (iii) the Lessor has duly performed and complied
        with all covenants, agreements and conditions contained herein or in any
        Operative Agreement required to be performed or complied with by it on
        or prior to the Initial Closing Date;

               (cc)    as of the Initial Closing Date only, the Agent shall have
        received (i) a certificate of the Secretary, an Assistant Secretary,
        Trust Officer or Vice President of the Trust Company in the form
        attached hereto as Exhibit F or in such other form as is acceptable to
        the Agent, attaching and certifying as to (A) the signing resolutions
        duly authorizing the execution, delivery and performance by the Lessor
        of each of the Operative Agreements to which it is or will be a party,
        (B) its articles of association or other equivalent charter documents
        and its by-laws, as the case may be, certified as of a recent date by an
        appropriate officer of the Trust Company and (C) the incumbency and
        signature of persons authorized to execute and deliver on its behalf the
        Operative Agreements to which it is a party and (ii) a good standing
        certificate from the Office of the Comptroller of the Currency;

               (dd)    as of the Initial Closing Date only, counsel for the
        Lessor acceptable to the Agent shall have issued to the Lessee, the
        Holders, the Lenders and the Agent its opinion in such form as is
        reasonably acceptable to the Agent;

               (ee)    as of the Initial Closing Date only, the Construction
        Agent shall have caused to be delivered to the Agent a legal opinion in
        such form as is acceptable to the Agent, addressed to the Lessor, the
        Agent, the Lenders and the Holders, from counsel acceptable to the
        Agent;

               (ff)    the Construction Agent shall have deposited Securities
        Collateral into the Collateral Account in a sufficient amount so that
        after giving effect to the requested Advance the Construction Agent is
        in compliance with Section 5.10 hereof;

               (gg)    as of the Initial Closing Date only, the Lessee shall
        have delivered the financial statements referred to in Section
        8.3A(a)(ii) as of the most recently ended fiscal quarter of the Lessee
        and preceding the Initial Closing date; and

               (hh)    as of the Property Closing Date regarding each Property
        for which Completion has not occurred as of the Property Closing Date
        therefor, the Construction Agent shall have caused to be delivered to
        the Agent (subject to Section 5.12) the Construction Contract with
        respect to such Property and such Construction Contract shall be a
        guaranteed maximum price contract with a contractor (i) presenting a
        payment and performance bond in an amount equal to the Construction
        Budget for such Property and (ii) otherwise reasonably acceptable to the
        Agent, the Lenders and the Holders in their sole discretion.

                                       11
   17

        5.4.   CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
               THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE
               ACQUISITION ADVANCE.

        The obligations of the Holders to make Holder Advances, and the Lenders
to make Loans in connection with all requests for Advances subsequent to the
acquisition of a Property and to pay the Lessor Funding Obligations, in each
case payable on such date, are subject to the satisfaction or waiver of the
following conditions precedent on the applicable date (except that satisfaction
of such conditions precedent shall not be required to fund any Lessor Funding
Obligation payable in favor of or for the benefit of one or more Financing
Parties or Persons, excluding the Lessee and the Construction Agent, working on
behalf of one or more Financing Parties; provided that, notwithstanding the
foregoing, the Majority Secured parties may elect, in the sole discretion of the
Majority Secured Parties, not to fund any Lessor Funding Obligation if and to
the extent all conditions precedent are not satisfied for such funding);
provided that, to the extent such conditions precedent require the delivery of
any agreement, certificate, instrument, memorandum, legal or other opinion,
appraisal, commitment, title insurance commitment, lien report or any other
document of any kind or type, such shall be in form and substance satisfactory
to the Agent, in its reasonable discretion; and provided further that,
notwithstanding the foregoing, the obligations of each party shall not be
subject to any conditions contained in this Section 5.4 which are required to be
performed by such party:

               (a)     the correctness on such date of the representations and
        warranties of the parties to this Agreement contained herein, in each of
        the other Operative Agreements and in each certificate delivered
        pursuant to any Operative Agreement;

               (b)     the performance by the parties to this Agreement of their
        respective agreements contained herein and in the other Operative
        Agreements to be performed by them on or prior to each such date;

               (c)     the Agent shall have received a fully executed
        counterpart of the Requisition, appropriately completed;

               (d)     based upon the applicable Construction Budget which shall
        satisfy the requirements of this Agreement and the Agency Agreement, the
        Available Commitments and the Available Holder Commitment (after
        deducting the Unfunded Amount) will be sufficient to complete the
        Improvements;

               (e)     there shall not have occurred and be continuing any
        Default or Event of Default under any of the Operative Agreements and no
        Default or Event of Default under any of the Operative Agreements will
        have occurred after giving effect to the Construction Advance requested
        by the applicable Requisition;

               (f)     the title insurance policy delivered in connection with
        the requirements of Section 5.3(g) shall provide for (or shall be
        endorsed to provide for) insurance in an amount at least equal to (i)
        the maximum total Property Cost indicated by the Construction Budget
        referred to in subparagraph (d) above or (ii) with respect to an
        Existing Structure or Property for which construction is complete as of
        such date, the

                                       12
   18

        amount provided therefor in Section 5.3(g), and there shall be no change
        in record title or the exceptions thereto objectionable to the Agent;

               (g)     subject to Section 5.12, the Construction Agent shall
        have delivered to the Agent copies of the Plans and Specifications for
        the applicable Improvements;

               (h)     the Construction Agent shall have delivered to the Agent
        invoices (or copies thereof) for, or other reasonably satisfactory
        evidence of, any Lessor Funding Obligations that the Construction Agent
        desires to be paid with the Advance;

               (i)     the Construction Agent shall have delivered, or caused to
        be delivered to the Agent, invoices, Bills of Sale or other documents
        acceptable to the Agent, in each case with regard to any Equipment or
        other components of such Property then being acquired with the proceeds
        of the Loans and Holder Advances and naming the Lessor as purchaser and
        transferee;

               (j)     all taxes, fees and other charges in connection with the
        execution, delivery, recording, filing and registration of the Operative
        Agreements shall have been paid or provisions for such payment shall
        have been made to the satisfaction of the Agent;

               (k)     since the date of the most recent audited financial
        statements of the Lessee (as delivered pursuant to the requirements of
        Section 8.3A(a)(i)), there shall not have occurred any event, condition
        or state of facts which shall have or could reasonably be expected to
        have a Material Adverse Effect, other than as specifically contemplated
        by the Operative Agreements; and

               (l)     in the opinion of the Agent and its counsel, the
        transactions contemplated by the Operative Agreements do not and will
        not subject the Lessor, the Lenders, the Agent or the Holders to any
        adverse regulatory prohibitions, constraints, penalties or fines.

               (m)     the Construction Agent shall have deposited Securities
        Collateral into the Collateral Account in a sufficient amount so that
        after giving effect to the requested Advance the Construction Agent is
        in compliance with Section 5.10 hereof.

               (n)     prior to any Construction Advance for a Property for
        which Completion has not occurred as of the Property Closing Date
        therefor, the Construction Agent shall have caused to be delivered to
        the Agent (subject to Section 5.12) the Construction Contract with
        respect to such Property and such Construction Contract shall be a
        guaranteed maximum price contract with a contractor (i) presenting a
        payment and performance bond in an amount equal to the Construction
        Budget for such Property and (ii) otherwise reasonably acceptable to the
        Agent, the Lenders and the Holders in their sole discretion.

                                       13
   19

        5.5.   ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE
               AND ON PUNCH LIST COMPLETION DATE.

               (a)     On or prior to the Completion Date for each Property, the
        Construction Agent shall deliver to the Agent an Officer's Certificate
        in the form attached hereto as Exhibit I-1 or in such other form as is
        acceptable to the Agent specifying (i) the address for such Property,
        (ii) the Completion Date for such Property, (iii) the aggregate Property
        Cost for such Property, (iv) detailed, itemized documentation supporting
        the asserted Property Cost figures and (v) that all representations and
        warranties of the Construction Agent and Lessee in each of the Operative
        Agreements and each certificate delivered pursuant thereto are true and
        correct as of the Completion Date. The Agent shall have the right to
        contest the information contained in such Officer's Certificate.

               (b)     On or prior to the Punch List Completion Date for each
        Property, the Construction Agent shall deliver to the Agent an Officer's
        Certificate in the form attached hereto as Exhibit I-2 or in such other
        form as is acceptable to the Agent specifying (i) the address for such
        Property, (ii) the Punch List Completion Date for such Property, (iii)
        the aggregate Property Cost for such Property, (iv) detailed, itemized
        documentation supporting the asserted Property Cost figures (regarding
        such components of Property Cost not previously referenced in the
        Officer's Certificate delivered pursuant to Section 5.5(a)) and (v) that
        all representations and warranties of the Construction Agent and Lessee
        in each of the Operative Agreements and each certificate delivered
        pursuant thereto are true and correct as of the Punch List Completion
        Date. The Agent shall have the right to contest the information
        contained in such Officer's Certificate. Furthermore, on or prior to the
        Punch List Completion Date for each Property, the Construction Agent
        shall deliver or cause to be delivered to the Agent (unless previously
        delivered to the Agent) originals of the following, each of which shall
        be in form and substance acceptable to the Agent, in its reasonable
        discretion: (w) to the extent obtainable in the state where such
        Property is located, a title insurance endorsement regarding the title
        insurance policy delivered in connection with the requirements of
        Section 5.3(g), but only to the extent such endorsement is necessary to
        provide for insurance in an amount at least equal to eighty percent
        (80%) of the maximum total Property Cost and, if endorsed, the
        endorsement shall not include a title change or exception objectionable
        to the Agent in its reasonable discretion; (x) an as-built survey for
        such Property, (y) insurance certificates respecting such Property as
        required hereunder and under the Lease Agreement, and (z) if requested
        by the Agent, amendments to the Lessor Financing Statements executed by
        the appropriate parties. In addition, on the Punch List Completion Date
        for such Property the Construction Agent covenants and agrees that the
        recording fees, documentary stamp taxes or similar amounts required to
        be paid in connection with the related Mortgage Instrument shall be paid
        in an amount required by applicable law, subject, however, to the
        obligations of the Lenders and the Holders to fund such costs to the
        extent required pursuant to Section 7.1.

        5.6.   THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET
               MODIFICATIONS.

        The Construction Agent covenants and agrees to deliver to the Agent each
month

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notification of any modification to any Construction Budget regarding any
Property if such modification, when aggregated with all other modifications to
such Construction Budget, evidences a cost increase of $100,000 or more or with
respect to which the Available Commitments and the Available Holder Commitments
(after deducting the Unfunded Amount) will be insufficient to complete the
Improvements in accordance with the terms of the Agency Agreement); provided no
Construction Budget may be increased unless (a) the title insurance policies
referenced in Section 5.3(g) are also modified or endorsed, if necessary, to
provide for insurance in an amount that satisfies the requirements of Section
5.4(f) of this Agreement and (b) after giving effect to any such amendment, the
Construction Budget remains in compliance with the requirements of Section
5.4(d) of this Agreement.

        5.7.   RESTRICTIONS ON LIENS.

        On each Property Closing Date, the Construction Agent shall cause each
Property acquired by the Lessor on such date to be free and clear of all Liens
except those referenced in Sections 6.2(r)(i) and 6.2(r)(ii). On each date a
Property is either sold to a third party in accordance with the terms of the
Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement,
retained by the Lessor, the Lessee shall cause such Property to be free and
clear of all Liens (other than Lessor Liens, such other Liens that are expressly
set forth as title exceptions on the title commitment issued under Section
5.3(g) with respect to such Property, to the extent such title commitment has
been approved by the Agent, Liens incurred in accordance with Section 8.5 and
inchoate tax Liens subject to pro ration where the Lessee is responsible for
such tax Liens prior to the date of such sale to a third party or retention by
the Lessor).

        5.8.   PAYMENTS.

        All payments of principal, interest, Holder Advances, Holder Yield and
other amounts to be made by the Construction Agent or the Lessee under this
Agreement or any other Operative Agreements (excluding Excepted Payments which
shall be paid directly to the party to whom such payments are owed) shall be
made to the Agent at the office designated by the Agent from time to time in
Dollars and in immediately available funds, without setoff, deduction, or
counterclaim. Subject to the definition of "Interest Period" in Appendix A
attached hereto, whenever any payment under this Agreement or any other
Operative Agreements shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of interest,
Holder Yield and fees payable pursuant to the Operative Agreements, as
applicable and as the case may be.

        5.9.   UNILATERAL RIGHT TO INCREASE THE HOLDER COMMITMENTS AND THE
               LENDER COMMITMENTS.

        Notwithstanding any other provision of any Operative Agreement or any
objection by any Person (including without limitation any objection by the
Lessee), (a) after an increase in the Holder Commitments has been approved by
the Majority Secured Parties, each Holder, in its sole discretion, may
unilaterally elect to increase its Holder Commitment in order to fund the Lessor
Funding Obligations and (b) after an increase in the Lender Commitments has been
approved by

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the Majority Secured Parties, each Lender, in its sole discretion, may
unilaterally elect to increase its Lender Commitment in order to fund the Lessor
Funding Obligations.

        5.10   COLLATERAL ACCOUNT.

               (a)     General. On the date of each Advance, the Lessee shall
        pledge to the Agent as security for the obligations of the Lessee and
        the Construction Agent under the Operative Agreements, by delivery to
        the Securities Intermediary or by otherwise depositing into the
        Collateral Account, Securities Collateral in an amount such that the
        Margin Base after such pledge or deposit on such date is equal to or
        greater than the aggregate Property Cost for all Properties.

                (b)    Maintenance of Borrowing Base. On and as of the last day
        of each fiscal quarter of the Lessee, the Lessee shall maintain Class A
        Collateral represented by U.S. dollar denominated certificates of
        deposit of Bank of America, N.A. in accordance with the standard
        described in subsection (ii) below and shall furnish to the Agent an
        Officer's Certificate in the form of Exhibit L: (i) setting forth (A)
        the Lessee's calculation, in reasonable detail, of the Borrowing Base as
        of such date and (B) the Class A Collateral Percentage as of such date
        and (ii) confirming that, as of such date, (A) prior to the Construction
        Period Termination Date, the amount of Class A Collateral represented by
        U.S. dollar denominated certificates of deposit of Bank of America, N.A.
        is not in excess of the Property Cost of all the Properties for which
        the Rent Commencement Date has occurred at such time and (B) after the
        Construction Period Termination Date, the amount of Class A Collateral
        represented by U.S. dollar denominated certificates of deposit of Bank
        of America, N.A. is greater than or equal to $5,000,000.

               (c)     Maintenance of Margin Base.

                       (i)     On each Business Day, the Agent shall calculate
               the Margin Base, and shall inform the Lessee if, on any such
               day, the Margin Base is less than the aggregate Property Cost
               for all Properties.

                       (ii)    If, on any date referred to in paragraph (i) of
               this subsection (c), the Agent shall inform the Lessee that the
               Margin Base is less than the aggregate Property Cost for all
               Properties, then the Lessee shall, within five Business Days,
               pledge to the Agent, by delivery to the Securities Intermediary
               or by otherwise depositing into the Collateral Account,
               additional Securities Collateral in an amount such that the
               Margin Base after such pledge or deposit on such date is equal to
               or greater than the aggregate Property Cost for all Properties.

        5.11   FUNDING OF ESCROW ACCOUNT FOR PUNCH LIST ITEMS.

        Prior to the submission by the Construction Agent of the Officer's
Certificate referenced in Section 5.5(a) regarding Completion of a given
Property, the Construction Agent shall submit a Requisition for a Construction
Advance to cover all anticipated punch list items necessary for Final Completion
of the applicable Property. To the extent the conditions precedent set forth in

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Section 5.4 are satisfied or waived and prior to the termination of the Lender
Commitments and the Holder Commitments for the applicable Property, the
above-described Construction Advance shall be funded in accordance with the
terms of the Operative Agreements into an escrow account in the name of and
under the control of the Agent. Neither the Lessor, the Construction Agent nor
the Lessee shall have any interest in the escrow account, its contents or any
proceeds therefrom.

        Thereafter, the Construction Agent shall request funding for punch list
items regarding the applicable Property pursuant to Requisitions describing the
punch list items and the amounts payable therefor. The Agent shall advance
amounts from the escrow account regarding such funding requests to the extent
the conditions precedent set forth in Section 5.4 are satisfied or waived at
that time.

        All amounts deposited in the escrow account from time to time shall
constitute Advances for purposes of determining the Property Cost of the
applicable Property (the "Prior Property") identified in the relevant
Requisition from the date of such Advance by the Lenders and the Holders for
deposit into the escrow account; provided, amounts deposited in the escrow
account may be thereafter counted as Property Cost of another Property if (a)
the Prior Property reaches Final Completion in accordance with the terms of the
Operative Agreements, (b) there remains a positive balance in the escrow account
regarding the Prior Property and (c) prior to the occurrence and continuation of
any Default or Event of Default, the Construction Agent notifies the Agent in
writing to re-allocate such positive balance in the escrow account from the
Prior Property to a different Property which has not reached Completion at such
time.

        Upon the Payment Date immediately following the termination or
expiration of the Lender Commitments, the remaining balance in the escrow
account shall be allocated by the Agent in accordance with Section 8.7(b)(iv)
and returned to the Lenders and the Holders in accordance with Section 2.6(c) of
the Credit Agreement and Section 3.3 of the Trust Agreement, respectively, and
the amounts so returned shall reduce, in each case regarding the last Property
to reach Final Completion, the Property Cost, the outstanding balance of Loans
and the outstanding balance of Holder Amounts.

        5.12   DELAYED DELIVERY OF CONSTRUCTION CONTRACTS AND PLANS AND
               SPECIFICATIONS.

        Respecting the Planned Office Building, the Planned Vivarium and the
Planned Parking Facility, none of the Financing Parties will require
satisfaction of the conditions precedent set forth in (a) Section 5.3(hh) prior
to the Acquisition Advance for any such Structure as a Property or (b) Section
5.4(g) prior to the initial Construction Advances for site preparation only for
any such Property; provided that, notwithstanding the foregoing, such
Construction Advances in accordance with this Section 5.12 shall be limited in
the aggregate for all Properties to $750,000 and the provisions of this Section
5.12 shall not preclude the Agent from subsequently enforcing the provisions of
Sections 5.3(hh) and 5.4(g) regarding the Planned Office Building, the Planned
Vivarium and the Planned Parking Facility to the extent such Structures become
Properties.

                                       17
   23

        5.13   EXTENSION OF CONSTRUCTION PERIOD TERMINATION DATE.

        Unless a Default or an Event of Default shall have occurred or be
continuing, the Construction Agent may in its discretion extend the Construction
Period Termination Date for up to an additional twelve (12) months by giving
written notice of such extension to the Lessor and the Agent.

        5.14   PURCHASE AND SALE RIGHTS AND OBLIGATIONS TO RELINQUISH INTEREST
               IN PROPERTIES.

        Notwithstanding anything to the contrary contained in the Operative
Agreements, each purchase and sale right or obligation to relinquish any right,
title or interest pursuant to the Operative Agreements (including without
limitation pursuant to Sections 17.2 through 17.11 and Articles XVI, XIX, XX and
XXII of the Lease and Sections 2.1 and 5.3 of the Agency Agreement), in each
case of the Lessee, the Construction Agent, Lexicon or any of their designees
regarding one or more Properties shall be exercised or imposed with respect to
all, but not less than all, the Properties. If any such right is not so
exercised or any such obligation to relinquish is not so satisfied (in each case
with respect to all, but not less than all, the Properties) then such attempt to
purchase or sale fewer than all the Properties and such attempt to relinquish
its right, title and interest with respect to fewer than all the Properties
shall be null and void, and Lexicon shall be deemed to have agreed to purchase
all, but not less than all, the Properties for the aggregate Termination Value
on a Business Day specified by the Agent that is not earlier than fifteen (15)
or later than sixty (60) days after delivery of notice from the Agent to Lexicon
regarding this matter.

        5.15   LIMITED OBLIGATIONS REGARDING THE PURCHASE AGREEMENTS.

        The Construction Agent and the Lessee covenant and agree that after the
Property Closing Date regarding the Property referenced in either of the
Purchase Agreements (a) notwithstanding the submission of any Requisition or
other request by the Construction Agent or the Lessee to the contrary, the
Financing Parties shall have no obligation to make any payment pursuant to or in
connection with either of the Purchase Agreements or any documents related
thereto and (b) the only obligations of, or limitations imposed on, any
Financing Party pursuant to or in connection with either of the Purchase
Agreements or any documents related thereto shall be the obligations or
limitations set forth in Sections 2.01 and 2.02 of the Larger Tract Purchase
Agreement or in Sections 2.01, 2.03, 2.04, 3.02, 3.03(a) and (only to the extent
Section 3.04 relates to Section 3.03(a)) 3.04 of the Smaller Tract Purchase
Agreement. The Construction Agent and the Lessee further covenant and agree that
(x) the Lessee shall perform any and all other obligations and be responsible
for any and all other liabilities in connection with either of the Purchase
Agreements and any documents related thereto except for the obligations
referenced in the foregoing subsection (b) of this Section 5.15 and (y) neither
the Construction Agent nor the Lessee shall cause or permit any amendment or
modification of either of the Purchase Agreements or any documents related
thereto without the prior written consent of the Lessor and the Agent.

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   24

        5.16   LIMITATION ON CD COLLATERAL.

        Prior to the Construction Period Termination Date, the Lessee shall not
permit the CD Collateral to be in an amount in excess of the aggregate Property
Cost regarding Properties for which the Rent Commencement Date has occurred at
such time.

                   SECTION 6. REPRESENTATIONS AND WARRANTIES.

        6.1.   REPRESENTATIONS AND WARRANTIES OF THE BORROWER.

        Effective as of the Initial Closing Date, the date of each Advance, the
Rent Commencement Date and the Punch List Completion Date, the Trust Company in
its individual capacity and as the Borrower, as indicated, represents and
warrants to each of the other parties hereto as follows, provided, that the
representations in the following paragraphs (h), (j) and (k) are made solely in
its capacity as the Borrower:

               (a)     It is a national banking association and is duly
        organized and validly existing and in good standing under the laws of
        the United States of America and has the power and authority to enter
        into and perform its obligations under the Trust Agreement and (assuming
        due authorization, execution and delivery of the Trust Agreement by the
        Holders) has the corporate and trust power and authority to act as the
        Owner Trustee and to enter into and perform the obligations under each
        of the other Operative Agreements to which the Trust Company or the
        Owner Trustee, as the case may be, is or will be a party and each other
        agreement, instrument and document to be executed and delivered by it on
        or before such date in connection with or as contemplated by each such
        Operative Agreement to which the Trust Company or the Owner Trustee, as
        the case may be, is or will be a party;

               (b)     The execution, delivery and performance of each Operative
        Agreement to which it is or will be a party, either in its individual
        capacity or (assuming due authorization, execution and delivery of the
        Trust Agreement by the Holders) as the Owner Trustee, as the case may
        be, has been duly authorized by all necessary action on its part and
        neither the execution and delivery thereof, nor the consummation of the
        transactions contemplated thereby, nor compliance by it with any of the
        terms and provisions thereof (i) does or will require any approval or
        consent of any trustee or holders of any of its indebtedness or
        obligations, (ii) does or will contravene any Legal Requirement relating
        to its banking or trust powers, (iii) does or will contravene or result
        in any breach of or constitute any default under, or result in the
        creation of any Lien upon any of its property under, (A) its charter or
        by-laws, or (B) any indenture, mortgage, chattel mortgage, deed of
        trust, conditional sales contract, bank loan or credit agreement or
        other agreement or instrument to which it is a party or by which it or
        its properties may be bound or affected, which contravention, breach,
        default or Lien under clause (B) would materially and adversely affect
        its ability, in its individual capacity or as the Owner Trustee, to
        perform its obligations under the Operative Agreements to which it is a
        party or (iv) does or will require any Governmental Action by any
        Governmental

                                       19
   25

        Authority regulating its banking or trust powers;

               (c)     The Trust Agreement and, assuming the Trust Agreement is
        the legal, valid and binding obligation of the Holders, each other
        Operative Agreement to which the Trust Company or the Owner Trustee, as
        the case may be, is or will be a party have been, or on or before such
        Closing Date will be, duly executed and delivered by the Trust Company
        or the Owner Trustee, as the case may be, and the Trust Agreement and
        each such other Operative Agreement to which the Trust Company or the
        Owner Trustee, as the case may be, is a party constitutes, or upon
        execution and delivery will constitute, a legal, valid and binding
        obligation enforceable against the Trust Company or the Owner Trustee,
        as the case may be, in accordance with the terms thereof;

               (d)     There is no action or proceeding pending or, to its
        knowledge, threatened to which it is or will be a party, either in its
        individual capacity or as the Owner Trustee, before any Governmental
        Authority that, if adversely determined, would materially and adversely
        affect its ability, in its individual capacity or as the Owner Trustee,
        to perform its obligations under the Operative Agreements to which it is
        a party or would question the validity or enforceability of any of the
        Operative Agreements to which it is or will become a party;

               (e)     It, either in its individual capacity or as the Owner
        Trustee, has not assigned or transferred any of its right, title or
        interest in or under the Lease, the Agency Agreement or its interest in
        any Property or any portion thereof, except in accordance with the
        Operative Agreements;

               (f)     No Default or Event of Default under the Operative
        Agreements attributable to it has occurred and is continuing;

               (g)     Except as otherwise contemplated in the Operative
        Agreements, the proceeds of the Loans and Holder Advances shall not be
        applied by the Owner Trustee, either in its individual capacity or as
        the Owner Trustee, for any purpose other than the purchase and/or lease
        of the Properties, the acquisition, installation and testing of the
        Equipment, the construction of Improvements and the payment of the
        Lessor Funding Obligations, in each case which accrue prior to the Rent
        Commencement Date with respect to a particular Property;

               (h)     Neither the Owner Trustee nor any Person authorized by
        the Owner Trustee to act on its behalf has offered or sold any interest
        in the Trust Estate or the Notes except as permitted under the Operative
        Agreements, or in any similar security relating to a Property, or in any
        security the offering of which for the purposes of the Securities Act
        would be deemed to be part of the same offering as the offering of the
        aforementioned securities to, or solicited any offer to acquire any of
        the same from, any Person other than, in the case of the Notes, the
        Agent, and neither the Owner Trustee nor any Person authorized by the
        Owner Trustee to act on its behalf will take any action which would
        subject, as a direct result of such action alone, the issuance or sale
        of any interest in the Trust Estate or the Notes to the provisions of
        Section 5 of the Securities Act or require

                                       20
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        the qualification of any Operative Agreement under the Trust Indenture
        Act of 1939, as amended;

               (i)     The Owner Trustee's principal place of business, chief
        executive office and office where the documents, accounts and records
        relating to the transactions contemplated by this Agreement and each
        other Operative Agreement are kept are located at 79 South Main Street,
        Salt Lake City, Utah 84111;

               (j)     The Owner Trustee is not engaged principally in, and does
        not have as one (1) of its important activities, the business of
        extending credit for the purpose of purchasing or carrying any margin
        stock (within the meaning of Regulation U of the Board of Governors of
        the Federal Reserve System of the United States), and no part of the
        proceeds of the Loans or the Holder Advances will be used by it to
        purchase or carry any margin stock or to extend credit to others for the
        purpose of purchasing or carrying any such margin stock or for any
        purpose that violates, or is inconsistent with, the provisions of
        Regulations T, U, or X of the Board of Governors of the Federal Reserve
        System of the United States;

               (k)     The Owner Trustee is not an "investment company" or a
        company controlled by an "investment company" within the meaning of the
        Investment Company Act;

               (l)     Each Property is free and clear of all Lessor Liens
        attributable to the Owner Trustee, either in its individual capacity or
        as the Owner Trustee; and

               (m)     The Owner Trustee, in its trust capacity, is not a party
        to any documents, instruments or agreements other than the Operative
        Agreements executed by the Owner Trustee, in its trust capacity.

        6.2.   REPRESENTATIONS AND WARRANTIES OF THE CONSTRUCTION AGENT AND THE
               LESSEE.

        Effective as of the Initial Closing Date, the date of each Advance, the
Rent Commencement Date and the Punch List Completion Date, the Construction
Agent and the Lessee represent and warrant to each of the other parties hereto
that:

               (a)     [reserved];

               (b)     (i)     Each of the Construction Agent and the Lessee is
        a corporation duly organized and validly existing and in good standing
        under the laws of the State of Delaware and has the power and authority
        to enter into and perform its obligations under the Operative Agreements
        to which it is a party and has the corporate power and authority to act
        as the Construction Agent or the Lessee, as the case may be, and to
        enter into and perform the obligations under each of the other Operative
        Agreements to which it is a party or will be a party and each other
        agreement, instrument and document to be executed and delivered by it on
        or before such date in connection with or as contemplated by each such
        Operative Agreement to which it is a party or will be a party;

                                       21
   27

                       (ii)    The execution and delivery by each of the
        Construction Agent and the Lessee of this Agreement and the other
        applicable Operative Agreements as of such date and the performance by
        each of the Construction Agent and the Lessee of its respective
        obligations under this Agreement and the other applicable Operative
        Agreements are within the corporate, partnership or limited liability
        company (as the case may be) powers of each of the Construction Agent
        and the Lessee, have been duly authorized by all necessary corporate,
        partnership or limited liability company (as the case may be) action on
        the part of each of the Construction Agent and the Lessee (including
        without limitation any necessary shareholder action), have been duly
        executed and delivered, have received all necessary governmental
        approval, and do not and will not (A) violate any Legal Requirement
        which is binding on the Construction Agent, the Lessee or any of their
        Subsidiaries, (B) contravene or conflict with, or result in a breach of,
        any provision of the Articles of Incorporation, By-Laws or other
        organizational documents of any of the Construction Agent, the Lessee or
        any of their Subsidiaries or of any agreement, indenture, instrument or
        other document which is binding on any of the Construction Agent, the
        Lessee or any of their Subsidiaries or (C) result in, or require, the
        creation or imposition of any Lien (other than pursuant to the terms of
        the Operative Agreements) on any asset of any of the Construction Agent,
        the Lessee or any of their Subsidiaries;

               (c)     This Agreement and the other applicable Operative
        Agreements to which the Construction Agent or the Lessee are parties,
        executed prior to and as of such date, constitute the legal, valid and
        binding obligation of the Construction Agent or the Lessee, as
        applicable, enforceable against the Construction Agent or the Lessee, as
        applicable, in accordance with their terms. The Construction Agent and
        the Lessee have each executed the various Operative Agreements required
        to be executed as of such date;

               (d)     There are no material actions, suits or proceedings
        pending or, to our knowledge, threatened against either the Construction
        Agent or the Lessee in any court or before any Governmental Authority
        (nor shall any order, judgment or decree have been issued or proposed to
        be issued by any Governmental Authority to set aside, restrain, enjoin
        or prevent the full performance of any Operative Agreement or any
        transaction contemplated thereby) that (i) concern any Property or the
        Lessee's interest therein, (ii) question the validity or enforceability
        of any Operative Agreement or any transaction described in the Operative
        Agreements or (iii) shall have or could reasonably be expected to have a
        Material Adverse Effect; provided, for purposes of disclosure, the
        Construction Agent and the Lessee have described the litigation set
        forth on Exhibit J;

               (e)     No Governmental Action by any Governmental Authority or
        other authorization, registration, consent, approval, waiver, notice or
        other action by, to or of any other Person pursuant to any Legal
        Requirement, contract, indenture, instrument or agreement or for any
        other reason is required to authorize or is required in connection with
        (i) the execution, delivery or performance of any Operative Agreement,
        (ii) the legality, validity, binding effect or enforceability of any
        Operative Agreement, (iii) the

                                       22
   28

        acquisition, ownership, construction, completion, occupancy, operation,
        leasing or subleasing of any Property or (iv) any Advance, in each case,
        except those which have been obtained and are in full force and effect;

               (f)     Upon the execution and delivery of each Lease Supplement
        to the Lease, (i) the Lessee will have unconditionally accepted the
        Property subject to the Lease Supplement and will have a valid and
        subsisting leasehold interest in such Property, subject only to the
        Permitted Liens, and (ii) no offset will exist with respect to any Rent
        or other sums payable under the Lease;

               (g)     Except as otherwise contemplated by the Operative
        Agreements, the Construction Agent shall not use the proceeds of any
        Holder Advance or Loan for any purpose other than the purchase and/or
        lease of the Properties, the acquisition, installation and testing of
        the Equipment, the construction of Improvements and the payment of
        amounts referenced in Sections 7.1(a), 7.1(b) and 11.8 of this
        Agreement, in each case which accrue prior to the Rent Commencement Date
        with respect to a particular Property;

               (h)     All information heretofore or contemporaneously herewith
        furnished by either the Construction Agent or the Lessee or any of their
        Subsidiaries to the Agent, the Owner Trustee, any Lender or any Holder
        for purposes of or in connection with this Agreement and the
        transactions contemplated hereby is, and all information hereafter
        furnished by or on behalf of the Construction Agent, the Lessee or any
        of their Subsidiaries to the Agent, the Owner Trustee, any Lender or any
        Holder pursuant hereto or in connection herewith will be, taken as a
        whole, true and accurate in every material respect on the date as of
        which such information is dated or certified, and such information,
        taken as a whole, does not and will not omit to state any material fact
        necessary to make such information, taken as a whole, not misleading;

               (i)     The principal place of business, chief executive office
        and office of the Construction Agent and the Lessee where the documents,
        accounts and records relating to the transactions contemplated by this
        Agreement and each other Operative Agreement are kept are located at (i)
        4000 Research Forest Drive, The Woodlands, Montgomery County, Texas,
        77381 until Completion of the Planned Office Building and notice thereof
        to the Agent and (ii) Technology Forest Drive, The Woodlands, Montgomery
        County, Texas, 77381 after Completion of the Planned Office Building and
        notice thereof to the Agent;

               (j)     The representations and warranties of the Construction
        Agent and the Lessee set forth in any of the Operative Agreements are
        true and correct in all material respects on and as of each such date as
        if made on and as of such date. The Construction Agent and the Lessee
        are in all material respects in compliance with their respective
        obligations under the Operative Agreements and there exists no Default
        or Event of Default under any of the Operative Agreements which is
        continuing and which has not been cured within any cure period expressly
        granted under the terms of the applicable Operative Agreement or
        otherwise waived in accordance with the applicable Operative Agreement.
        No Default or Event of Default will occur under any of the Operative
        Agreements as a result of, or after giving effect to, the Advance
        requested by the

                                       23
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        Requisition on the date of each Advance;

               (k)     As of each Property Closing Date, the date of each
        subsequent Advance and the Rent Commencement Date only, each Property
        then being financed consists of (i) unimproved Land or (ii) Land and
        existing Improvements thereon which Improvements are either suitable for
        occupancy at the time of acquisition or ground leasing or will be
        renovated and/or modified in accordance with the terms of this
        Agreement. Each Property then being financed is located at the location
        set forth on the applicable Requisition, each of which is in one (1) of
        the Approved States;

               (l)     As of each Property Closing Date, the date of each
        subsequent Advance and the Rent Commencement Date only, the Lessor has
        good and indefeasible fee simple title to each Property, or, if any
        Property is the subject of a Ground Lease, the Lessor will have a valid
        ground leasehold interest enforceable against the ground lessor of such
        Property in accordance with the terms of such Ground Lease, subject only
        to (i) such Liens referenced in Sections 6.2(r)(i) and 6.2(r)(ii) on the
        applicable Property Closing Date and (ii) subject to Section 5.7,
        Permitted Liens after the applicable Property Closing Date;

               (m)     As of each Property Closing Date, the date of each
        subsequent Advance and the Rent Commencement Date only, no portion of
        any Property is located in an area identified as a special flood hazard
        area by the Federal Emergency Management Agency or other applicable
        agency, or if any such Property is located in an area identified as a
        special flood hazard area by the Federal Emergency Management Agency or
        other applicable agency, then flood insurance has been obtained for such
        Property in accordance with Section 14.2(b) of the Lease and in
        accordance with the National Flood Insurance Act of 1968, as amended;

               (n)     As of each Property Closing Date, the date of each
        subsequent Advance and the Rent Commencement Date only, each Property
        complies with all Insurance Requirements and all standards of Lessee
        with respect to similar properties owned by Lessee;

               (o)     As of each Property Closing Date, the date of each
        subsequent Advance and the Rent Commencement Date only, each Property
        complies with all Legal Requirements as of such date (including without
        limitation all zoning and land use laws and Environmental Laws), except
        to the extent that failure to comply therewith, individually or in the
        aggregate, shall not have and could not reasonably be expected to have a
        Material Adverse Effect;

               (p)     As of each Property Closing Date, the date of each
        subsequent Advance and the Rent Commencement Date only, all utility
        services and facilities necessary for the construction and operation of
        the Improvements and the installation and operation of the Equipment
        regarding each Property (including without limitation gas, electrical,
        water and sewage services and facilities) are available at the
        applicable Land or will be constructed prior to the Completion Date for
        such Property;

                                       24
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               (q)     As of each Property Closing Date, the date of each
        subsequent Advance and the Rent Commencement Date only, acquisition,
        installation and testing of the Equipment (if any) and construction of
        the Improvements (if any) to such date shall have been performed in a
        good and workmanlike manner, substantially in accordance with the
        applicable Plans and Specifications;

               (r)     (i) The Security Documents create, as security for the
               Obligations (as such term is defined in the Security Agreement),
               valid and enforceable security interests in, and Liens on, all of
               the Collateral (including, without limitation, the Collateral
               Account), in favor of the Agent, for the ratable benefit of the
               Secured Parties, as their respective interests appear in the
               Operative Agreements, and such security interests and Liens are
               subject to no Liens other than (A) as of the applicable Property
               Closing Date, Liens that are expressly set forth as title
               exceptions on the title commitment issued under Section 5.3(g)
               with respect to the applicable Property to the extent such title
               commitment has been approved by the Agent and (B) thereafter, (x)
               those Liens referred to in clause (A) above to the extent the
               Lessor previously accepted title for the applicable Property or
               received a leasehold estate pursuant to a Ground Lease with
               respect thereto and (y) Permitted Liens. Upon recordation of the
               Mortgage Instrument in the real estate recording office in the
               applicable Approved State identified by the Construction Agent or
               the Lessee, the Lien created by the Mortgage Instrument in the
               real property described therein shall be a perfected first
               priority mortgage Lien on such real property (or, in the case of
               a Ground Lease, on the leasehold estate under such Ground Lease)
               in favor of the Agent, for the ratable benefit of the Secured
               Parties, as their respective interests appear in the Operative
               Agreements. To the extent that the security interests in the
               portion of the Collateral comprised of personal property can be
               perfected by filing in the filing offices in the applicable
               Approved States or elsewhere identified by the Construction Agent
               or the Lessee, upon filing of the Lender Financing Statements in
               such filing offices, the security interests created by the
               Security Agreement shall be perfected first priority security
               interests in such personal property in favor of the Agent, for
               the ratable benefit of the Secured Parties, as their respective
               interests appear in the Operative Agreements;

                       (ii)    The Lease Agreement creates, as security for the
               obligations of the Lessee under the Lease Agreement, valid and
               enforceable security interests in, and Liens on, each Property
               leased thereunder, in favor of the Lessor, and such security
               interests and Liens are subject to no other Liens other than (A)
               as of the applicable Property Closing Date, Liens that are
               expressly set forth as title exceptions on the title commitment
               issued under Section 5.3(g) with respect to the applicable
               Property to the extent such title commitment has been approved by
               the Agent and (B) thereafter, (x) those Liens as described in
               clause (A) above to the extent the Lessor previously accepted
               title for the applicable Property or received a leasehold estate
               pursuant to a Ground Lease with respect thereto and (y) Permitted
               Liens. Upon recordation of the memorandum of the Lease Agreement

                                       25
   31

               and the memorandum of a Ground Lease (or, in either case, a short
               form lease) in the real estate recording office in the applicable
               Approved State identified by the Construction Agent or the
               Lessee, the Lien created by the Lease Agreement in the real
               property described therein shall be a perfected first priority
               mortgage Lien (subject to the Lien of the Mortgage Instrument
               referenced in Section 6.2(r)(i)) on such real property (or, in
               the case of a Ground Lease, the leasehold estate under such
               Ground Lease) in favor of the Agent, for the ratable benefit of
               the Secured Parties, as their respective interests appear in the
               Operative Agreements. To the extent that the security interests
               in the portion of any Property comprised of personal property can
               be perfected by the filing in the filing offices in the
               applicable Approved State or elsewhere identified by the
               Construction Agent or the Lessee upon filing of the Lessor
               Financing Statements in such filing offices, a security interest
               created by the Lease Agreement shall be perfected first priority
               security interests in such personal property in favor of the
               Lessor, which rights pursuant to the Lessor Financing Statements
               are assigned to the Agent, for the ratable benefit of the Secured
               Parties, as their respective interests appear in the Operative
               Agreements;

               (s)     The Plans and Specifications for each Property will be
        prepared prior to the commencement of construction in accordance with
        all applicable Legal Requirements (including without limitation all
        applicable Environmental Laws and building, planning, zoning and fire
        codes), except to the extent the failure to comply therewith,
        individually or in the aggregate, shall not have and could not
        reasonably be expected to have a Material Adverse Effect. Upon
        completion of the Improvements for each Property in accordance with the
        applicable Plans and Specifications, such Improvements will be within
        any building restriction lines and will not encroach in any manner onto
        any adjoining land (except as permitted by express written easements and
        shown by the survey referenced in Section 5.3(i), which have been
        approved by the Agent);

               (t)     As of the Rent Commencement Date only, each Property
        shall be improved in accordance with the applicable Plans and
        Specifications in a good and workmanlike manner and shall be
        operational;

               (u)     As of each Property Closing Date only, each Property has
        been acquired or ground leased pursuant to a Ground Lease at a price
        that is not in excess of fair market value or fair market rental value,
        as the case may be; and

               (v)     The consolidated balance sheet and income statement of
        the Lessee and its Consolidated Subsidiaries as of December 31, 1999,
        together with related consolidated statements of operations and retained
        earnings and of cash flows as of December 31, 1999 and the consolidated
        balance sheet and income statement of the Lessee and its Consolidated
        Subsidiaries as of June 30, 2000, together with related consolidated
        statements of operations and retained earnings and of cash flows as of
        June 30, 2000, fairly present in all material respects the consolidated
        financial condition of the Lessee and its Consolidated Subsidiaries as
        at such dates and the consolidated results of the operations of the
        Lessee and its Consolidated Subsidiaries for the periods ended on such
        dates, all in accordance with GAAP, subject with respect to the June 30,
        2000 financial

                                       26
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        statements, to changes resulting from audit and normal year-end audit
        adjustments.

               (w)     No Default or Event of Default has occurred and is
               continuing.

               (x)     Except as would not reasonably be expected to have a
                       Material Adverse Effect:

                       (i)     During the five-year period prior to the date on
               which this representation is made or deemed made: (A) no ERISA
               Event has occurred, and, to the best knowledge of Lessee, no
               event or condition has occurred or exists as a result of which
               any ERISA Event could reasonably be expected to occur, with
               respect to any Plan; (B) no "accumulated funding deficiency," as
               such term is defined in Section 302 of ERISA and Section 412 of
               the Code, whether or not waived, has occurred with respect to any
               Plan; (C) each Plan has been maintained, operated, and funded in
               compliance with its own terms and in material compliance with the
               provisions of ERISA, the Code, and any other applicable federal
               or state laws; and (D) no lien in favor of the PBGC or a Plan has
               arisen or is reasonably likely to arise on account of any Plan.

                       (ii)    The actuarial present value of all "benefit
               liabilities" (as defined in Section 4001(a)(16) of ERISA),
               whether or not vested, under each Single Employer Plan, as of the
               last annual valuation date prior to the date on which this
               representation is made or deemed made (determined, in each case,
               in accordance with Financial Accounting Standards Board Statement
               87, utilizing the actuarial assumptions used in such Plan's most
               recent actuarial valuation report), did not exceed as of such
               valuation date the fair market value of the assets of such Plan.

                       (iii)   No member of the Consolidated Group nor any ERISA
               Affiliate has incurred, or, to the best knowledge of Lessee,
               could be reasonably expected to incur, any withdrawal liability
               under ERISA to any Multiemployer Plan or Multiple Employer Plan.
               No member of the Consolidated Group nor any ERISA Affiliate would
               become subject to any withdrawal liability under ERISA if any
               member of the Consolidated Group or any ERISA Affiliate were to
               withdraw completely from all Multiemployer Plans and Multiple
               Employer Plans as of the valuation date most closely preceding
               the date on which this representation is made or deemed made. No
               member of the Consolidated Group nor any ERISA Affiliate has
               received any notification that any Multiemployer Plan is in
               reorganization (within the meaning of Section 4241 of ERISA), is
               insolvent (within the meaning of Section 4245 of ERISA), or has
               been terminated (within the meaning of Title IV of ERISA), and no
               Multiemployer Plan is, to the best knowledge of Lessee,
               reasonably expected to be in reorganization, insolvent, or
               terminated.

                      (iv)     No prohibited transaction (within the meaning of
               Section 406 of ERISA or Section 4975 of the Code) or breach of
               fiduciary responsibility has occurred with respect to a Plan
               which has subjected or may subject any member of the Consolidated
               Group or any ERISA Affiliate to any liability under Sections 406,
               409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or
               under any

                                       27
   33

               agreement or other instrument pursuant to which any member of the
               Consolidated Group or any ERISA Affiliate has agreed or is
               required to indemnify any person against any such liability.

                       (v)     No member of the Consolidated Group nor any ERISA
               Affiliates has any material liability with respect to "expected
               post-retirement benefit obligations" within the meaning of the
               Financial Accounting Standards Board Statement 106. Each Plan
               which is a welfare plan (as defined in Section 3(1) of ERISA) to
               which Sections 601-609 of ERISA and Section 4980B of the Code
               apply has been administered in compliance in all material
               respects of such sections.

               (y)     Except as would not reasonably be expected to have a
        Material Adverse Effect:

                       (i)     Each of the facilities and properties owned,
               leased or operated by the members of the Consolidated Group (the
               "Subject Properties") and all operations at the Subject
               Properties are in compliance with all applicable Environmental
               Laws, and there is no Environmental Violation with respect to the
               Subject Properties or the businesses operated by the members of
               the Consolidated Group (the "Businesses"), and there are no
               conditions relating to the Businesses or Subject Properties that
               could give rise to liability under any applicable Environmental
               Laws.

                       (ii)    None of the Subject Properties contains, or (to
               the knowledge of the Construction Agent or the Lessee) has
               previously contained, any Hazardous Substances at, on or under
               the Subject Properties in amounts or concentrations that
               constitute or constituted an Environmental Violation or could
               give rise to liability under Environmental Laws.

                       (iii)   None of the members of the Consolidated Group has
               received any written or verbal notice of, or inquiry from any
               Governmental Authority regarding, any alleged or actual
               Environmental Violation or any non-compliance, liability or
               potential liability regarding environmental matters or compliance
               with Environmental Laws with regard to any of the Subject
               Properties or the Businesses, nor does any member of the
               Consolidated Group have knowledge or reason to believe that any
               such notice will be received or is being threatened.

                       (iv)    Hazardous Substances have not been transported or
               disposed of from the Subject Properties, or generated, treated,
               stored or disposed of at, on or under any of the Subject
               Properties or any other location, in each case by or on behalf
               any members of the Consolidated Group in violation of, or in a
               manner that would be reasonably likely to give rise to liability
               under, any applicable Environmental Law.

                       (v)     No judicial proceeding or governmental or
               administrative action is pending or, to the best knowledge of
               Lessee, threatened, under any Environmental Law to which any
               member of the Consolidated Group is or will be named as a party,
               nor are there any consent decrees or other decrees, consent
               orders, administrative

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   34

               orders or other orders, or other administrative or judicial
               requirements outstanding under any Environmental Law with respect
               to any member of the Consolidated Group, the Subject Properties
               or the Businesses.

                       (vi)    There has been no release or, threat of release
               of Hazardous Substances at or from the Subject Properties, or
               arising from or related to the operations (including, without
               limitation, disposal) of any member of the Consolidated Group in
               connection with the Subject Properties or otherwise in connection
               with the Businesses, in violation of or in amounts or in a manner
               that could give rise to liability under Environmental Laws.

               (z)     Set forth on Schedule 6.2(z) are all brokers' fees
        incurred in connection with the transactions contemplated by this
        Agreement and the other Operative Agreements on and as of the initial
        Property Closing Date. No other brokers' fees in connection with any
        Property or otherwise with regard to the Operative Agreements have been
        or will be so incurred.

                     SECTION 7. PAYMENT OF CERTAIN EXPENSES.

        7.1.   TRANSACTION EXPENSES.

               (a)     The Lessor agrees on the Initial Closing Date, to pay all
        Transaction Expenses arising from the Initial Closing Date, including
        without limitation all reasonable fees, expenses and disbursements of
        the various legal counsels for the Lessor and the Agent in connection
        with the transactions contemplated by the Operative Agreements and
        incurred in connection with such Initial Closing Date, the initial fees
        and expenses of the Owner Trustee due and payable on such Initial
        Closing Date, all fees, taxes and expenses for the recording,
        registration and filing of documents and all other reasonable fees,
        expenses and disbursements incurred in connection with such Initial
        Closing Date; provided, however, the Lessor shall pay such amounts
        described in this Section 7.1(a) only if funds are made available at the
        appropriate time by the Lenders and the Holders in an amount sufficient
        to allow such payment.

               (b)     Only for the period prior to the Rent Commencement Date,
        the Lessor agrees on each Property Closing Date, on the date of any
        Construction Advance and on the Completion Date to pay, or cause to be
        paid, all Transaction Expenses including without limitation all
        reasonable fees, expenses and disbursements of the various legal
        counsels for the Lessor and the Agent in connection with the
        transactions contemplated by the Operative Agreements and billed in
        connection with such Advance or such Completion Date, all amounts
        described in Section 7.1(a) of this Agreement which have not been
        previously paid, the annual fees and reasonable out-of-pocket expenses
        of the Owner Trustee, all fees, expenses and disbursements incurred with
        respect to the various items referenced in Sections 5.3, 5.4 and/or 5.5
        (including without limitation any premiums for title insurance policies
        and charges for any updates to such policies) and all other reasonable
        fees, expenses and disbursements in connection with such Advance or such
        Completion Date including without limitation all expenses relating to
        and all fees,

                                       29
   35

        taxes and expenses for the recording, registration and filing of
        documents and during the Commitment Period, all fees, expenses and costs
        referenced in Section 7 (other than Section 7.3(b)); provided, however,
        the Lessor shall pay such amounts described in this Section 7.1(b) only
        if funds are made available at the appropriate time by the Lenders and
        the Holders in an amount sufficient to allow such payment.

               (c)     All fees payable pursuant to the Operative Agreements
        shall be calculated on the basis of a year of three hundred sixty (360)
        days for the actual days elapsed.

        7.2.   BROKERS' FEES.

        Only for the period prior to the Rent Commencement Date, the Lessor
agrees to pay or cause to be paid any and all brokers' fees, if any, including
without limitation any interest and penalties thereon, which are payable in
connection with the transactions contemplated by this Agreement and the other
Operative Agreements; provided, however, that the Lessor shall pay such amounts
described in this Section 7.2 only if funds are made available at the
appropriate time by the Lenders and the Holders in an amount sufficient to allow
such payment.

        7.3.   CERTAIN FEES AND EXPENSES.

               (a)     Only for the period prior to the Rent Commencement Date,
        the Lessor agrees to pay or cause to be paid (i) the initial and annual
        Owner Trustee's fee and all reasonable expenses of the Owner Trustee and
        any co-trustees (including without limitation reasonable counsel fees
        and expenses) or any successor owner trustee and/or co-trustee, for
        acting as the owner trustee under the Trust Agreement, (ii) all
        reasonable costs and expenses related to this transaction incurred by
        the Construction Agent, the Lessee, the Agent, the Lenders, the Holders
        or the Lessor in entering into any Lease Supplement and any future
        amendments, modifications, supplements, restatements and/or replacements
        with respect to any of the Operative Agreements, whether or not such
        Lease Supplement, amendments, modifications, supplements, restatements
        and/or replacements are ultimately entered into, or giving or
        withholding of waivers of consents hereto or thereto, which have been
        requested by the Construction Agent, the Lessee, the Agent, the Lenders,
        the Holders or the Lessor; provided, however, that the Lessor shall pay
        such amounts described in this Section 7.3(a) only if funds are made
        available at the appropriate time by the Lenders and the Holders in an
        amount sufficient to allow such payment.

               (b)     The Lessee agrees to pay or cause to be paid in
        connection with any Agency Agreement Event of Default and any Lease
        Event of Default, (i) all reasonable costs and expenses incurred by the
        Construction Agent, the Lessee, the Agent, the Lenders, the Holders or
        the Lessor in connection with any exercise of remedies under any
        Operative Agreement or any purchase of any Property by the Construction
        Agent, the Lessee or any third party in accordance with the Operative
        Agreements and (ii) all reasonable costs and expenses incurred by the
        Construction Agent, the Lessee, the Agent, the Lenders, the Holders or
        the Lessor in connection with any transfer or conveyance of any Property
        in accordance with the Operative Agreements, whether or not such
        transfer

                                       30
   36

        or conveyance is ultimately accomplished.

        7.4.   UNUSED FEE.

        During the Commitment Period, the Lessee, at its option, either (x)
shall cause the Lessor to pay or (y) to the extent such amounts are not
otherwise paid by the Lessor, the Lessee shall timely pay, in either case to the
Agent for the account of (a) the Lenders, respectively, an unused fee (the
"Lender Unused Fee") equal to the product of the average daily Available
Commitment of each Lender during the Commitment Period multiplied by a rate per
annum equal to the then current Applicable Percentage for Unused Fees and (b)
the Holders, respectively, an unused fee (the "Holder Unused Fee") equal to the
product of the average daily Available Holder Commitment of each Holder during
the Commitment Period multiplied by a rate of per annum equal to the then
current Applicable Percentage for Unused Fees. Such Unused Fees shall be payable
quarterly in arrears on each Unused Fee Payment Date. If all or a portion of any
such Unused Fee shall not be paid when due, such overdue amount shall bear
interest, payable by the Lessee on demand, at a rate per annum equal to the ABR
(or in the case of Holder Yield, the ABR plus the Applicable Percentage for
Eurodollar Holder Advances) plus two percent (2%) from the date of such
non-payment until such amount is paid in full (as well as before judgment).

        7.5.   ADMINISTRATIVE FEE.

        The Lessee shall pay or cause to be paid an administrative fee to the
Agent (for its individual account) on the terms and conditions set forth in the
Fee Letter.

        7.6.   OTHER FEES.

        The Lessee shall pay or cause to be paid all such other fees to the
account of such Persons and on the terms and conditions set forth in the Fee
Letter.

        7.7.   CLARIFICATION REGARDING THE LESSOR'S PAYMENT OBLIGATIONS PURSUANT
               TO SECTION 7.

        The Lessor is responsible for satisfying the payment obligations
pursuant to Sections 7.1(a), 7.1(b), 7.2 and 7.3(a) only to the extent funds are
made available by the Lenders and the Holders in amounts and at such times to
allow such payments.

                   SECTION 8. OTHER COVENANTS AND AGREEMENTS.

        8.1.   COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE.

        The Holders, the Lenders, the Lessor (at the direction of the Majority
Secured Parties) and the Agent shall, at the expense of and to the extent
reasonably requested by the Construction Agent or the Lessee (but without
assuming additional liabilities on account thereof and only to the extent such
is reasonably acceptable to the Holders, the Lenders, the Lessor (at the
direction of the Majority Secured Parties) and the Agent in their reasonable
discretion), cooperate with the

                                       31
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Construction Agent or the Lessee in connection with the Construction Agent or
the Lessee satisfying its covenant obligations contained in the Operative
Agreements including without limitation at any time and from time to time,
promptly and duly executing and delivering any and all such further instruments,
documents and financing statements (and continuation statements related
thereto).

        8.2.   COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS.

        Each of the Owner Trustee and the Holders hereby agrees that so long as
this Agreement is in effect:

               (a)     Neither the Owner Trustee (in its trust capacity or in
        its individual capacity) nor any Holder will create or permit to exist
        at any time, and each of them will, at its own cost and expense,
        promptly take such action as may be necessary duly to discharge, or to
        cause to be discharged, all Lessor Liens on the Properties attributable
        to it; provided, however, that the Owner Trustee and the Holders shall
        not be required to so discharge any such Lessor Lien while the same is
        being contested in good faith by appropriate proceedings diligently
        prosecuted so long as such proceedings shall not materially and
        adversely affect the rights of the Lessee under the Lease and the other
        Operative Agreements or involve any material danger of impairment of the
        Liens of the Security Documents or of the sale, forfeiture or loss of,
        and shall not interfere with the use or disposition of, any Property or
        title thereto or any interest therein or the payment of Rent;

               (b)     Without prejudice to any right under the Trust Agreement
        of the Owner Trustee to resign (subject to the requirement set forth in
        the Trust Agreement that such resignation shall not be effective until a
        successor shall have agreed to accept such appointment), or the Holders'
        rights under the Trust Agreement to remove the institution acting as the
        Owner Trustee (after consent to such removal by the Agent as provided in
        the Trust Agreement), each of the Owner Trustee and the Holders hereby
        agrees with the Lessee and the Agent (i) not to terminate or revoke the
        trust created by the Trust Agreement except as permitted by Article VIII
        of the Trust Agreement, (ii) not to amend, supplement, terminate or
        revoke or otherwise modify any provision of the Trust Agreement in such
        a manner as to adversely affect the rights of any such party without the
        prior written consent of such party and (iii) to comply with all of the
        terms of the Trust Agreement;

               (c)     The Owner Trustee or any successor may resign or be
        removed by the Holders as the Owner Trustee, a successor Owner Trustee
        may be appointed and a corporation may become the Owner Trustee under
        the Trust Agreement, only in accordance with the provisions of Article
        IX of the Trust Agreement and, with respect to such appointment, with
        the consent of the Lessee (so long as there shall be no Lease Event of
        Default that shall have occurred and be continuing), which consent shall
        not be unreasonably withheld or delayed;

               (d)     The Owner Trustee, in its capacity as the Owner Trustee
        under the Trust

                                       32
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        Agreement, and not in its individual capacity, shall not contract for,
        create, incur or assume any Indebtedness, or enter into any business or
        other activity or enter into any contracts or agreements, other than
        pursuant to or under the Operative Agreements;

               (e)     The Holders will not instruct the Owner Trustee to take
        any action in violation of the terms of any Operative Agreement;

               (f)     Neither any Holder nor the Owner Trustee shall (i)
        commence any case, proceeding or other action with respect to the Owner
        Trustee under any existing or future law of any jurisdiction, domestic
        or foreign, relating to bankruptcy, insolvency, reorganization,
        arrangement, winding-up, liquidation, dissolution, composition or other
        relief with respect to it or its debts, or (ii) seek appointment of a
        receiver, trustee, custodian or other similar official with respect to
        the Owner Trustee or for all or any substantial benefit of the creditors
        of the Owner Trustee; and neither any Holder nor the Owner Trustee shall
        take any action in furtherance of, or indicating its consent to,
        approval of, or acquiescence in, any of the acts set forth in this
        paragraph;

               (g)     The Owner Trustee shall give prompt notice to the Lessee,
        the Holders and the Agent if the Owner Trustee's principal place of
        business or chief executive office, or the office where the records
        concerning the accounts or contract rights relating to any Property are
        kept, shall cease to be located at 79 South Main Street, Salt Lake City,
        Utah 84111, or if it shall change its name; and

               (h)     The Owner Trustee shall take or refrain from taking such
        actions and grant or refrain from granting such approvals with respect
        to the Operative Agreements and/or relating to any Property in each case
        as directed in writing by the Agent (until such time as the Loans are
        paid in full, and then by the Majority Holders) or, in connection with
        Sections 8.5 and 9.2 hereof, the Lessee; provided, however, that
        notwithstanding the foregoing provisions of this subparagraph (h) the
        Owner Trustee, the Agent, the Lenders and the Holders each acknowledge,
        covenant and agree that neither the Owner Trustee nor the Agent shall
        act or refrain from acting, regarding each Unanimous Vote Matter, until
        such party has received the approval of each Lender and each Holder
        affected by such matter.

        8.3.   THE LESSEE COVENANTS, CONSENT AND ACKNOWLEDGMENT.

               (a)     The Lessee acknowledges and agrees that the Owner
        Trustee, pursuant to the terms and conditions of the Security Agreement
        and the Mortgage Instruments, shall create Liens respecting the various
        personal property, fixtures and real property described therein in favor
        of the Agent. The Lessee hereby irrevocably consents to the creation,
        perfection and maintenance of such Liens. Each of the Construction Agent
        and the Lessee shall, to the extent reasonably requested by any of the
        other parties hereto, cooperate with the other parties in connection
        with their covenants herein or in the other Operative Agreements and
        shall from time to time duly execute and deliver any and all such future
        instruments, documents and financing statements (and continuation
        statements related thereto) as any other party hereto may reasonably
        request.

                                       33
   39

               (b)     The Lessor hereby instructs the Lessee, and the Lessee
        hereby acknowledges and agrees, that until such time as the Loans and
        the Holder Advances are paid in full and the Liens evidenced by the
        Security Agreement and the Mortgage Instruments have been released (i)
        any and all Rent (excluding Excepted Payments which shall be payable to
        each Holder or other Person as appropriate) and any and all other
        amounts of any kind or type under any of the Operative Agreements due
        and owing or payable to any Person shall instead be paid directly to the
        Agent (excluding Excepted Payments which shall be payable to each Holder
        or other Person as appropriate) or as the Agent may direct from time to
        time for allocation and distribution in accordance with the procedures
        set forth in Section 8.7 hereof, (ii) all rights of the Lessor under the
        Lease shall be exercised by the Agent and (iii) the Lessee shall cause
        all notices, certificates, financial statements, communications and
        other information which are delivered, or are required to be delivered,
        to the Lessor, to also be delivered at the same time to the Agent.

               (c)     The Lessee shall not consent to or permit any amendment,
        supplement or other modification of the terms or provisions of any
        Operative Agreement except in accordance with Section 12.4 of this
        Agreement.

               (d)     The Lessee hereby covenants and agrees to cause an
        Appraisal or reappraisal (in form and substance satisfactory to the
        Agent and from an appraiser selected by the Agent) to be issued
        respecting any Property as requested by the Agent from time to time (i)
        at each and every time as such shall be required to satisfy any
        regulatory requirements imposed on the Agent, the Lessor, the Trust
        Company, any Lender and/or any Holder and (ii) after the occurrence and
        during the continuation of an Event of Default.

               (e)     The Lessee hereby covenants and agrees that, except for
        amounts payable as Basic Rent, any and all payment obligations owing
        from time to time under the Operative Agreements by any Person to the
        Agent, any Lender, any Holder or any other Person shall (without further
        action) be deemed to be Supplemental Rent obligations payable by the
        Lessee. Without limitation, such obligations of the Lessee shall include
        the Supplemental Rent obligations pursuant to this Section 8.3(e),
        Section 3.3 of the Lease, arrangement fees, administrative fees,
        participation fees, commitment fees, unused fees, prepayment penalties,
        breakage costs, indemnities, trustee fees and transaction expenses
        incurred by the parties hereto in connection with the transactions
        contemplated by the Operative Agreements. Prior to the Rent Commencement
        Date regarding a Property, all matters giving rise to Supplemental Rent
        obligations in connection with such Property (other than indemnity
        amounts payable by the Indemnity Provider pursuant to Sections 11.1
        through 11.8 or amounts payable pursuant to Section 2.1 of the Agency
        Agreement) may be funded pursuant to the Operative Agreements to the
        extent the applicable conditions precedent are satisfied.

               (f)     At any time the Lessor or the Agent is entitled under the
        Operative Agreements to possession of a Property or any component
        thereof, each of the Construction Agent and the Lessee hereby covenants
        and agrees, at its own cost and

                                       34
   40

        expense, to assemble and make the same available to the Agent (on behalf
        of the Lessor).

               (g)     The Lessee hereby covenants and agrees that, respecting
        each Property, Non-Integral Equipment financed under the Operative
        Agreements may constitute up to, but shall not exceed, ten percent (10%)
        of the aggregate Advances extended at or prior to such time with respect
        to such Property.

               (h)     The Lessee hereby covenants and agrees that as of
        Completion each Property shall be a Permitted Facility.

               (i)     The Lessee hereby covenants and agrees that it shall give
        prompt notice to the Agent if the Lessee's principal place of business
        or chief executive office, or the office where the records concerning
        the accounts or contract rights relating to any Property are kept, shall
        cease to be located at 4000 Research Forest Drive, The Woodlands, Texas,
        77381 or if it shall change its name.

               (j)     Unless the Agent otherwise agrees in writing, the Lessee
        hereby covenants and agrees that the aggregate Property Cost of
        Non-Integral Equipment purchased for any reason by the Lessee prior to
        the Expiration Date shall not exceed ten percent (10%) of the aggregate
        Property Cost for all Properties funded during the Commitment Period.

               (k)     [reserved]

               (l)     The Lessee hereby covenants and agrees that the rights of
        the Lessee under this Agreement and the Lease shall not impair or in any
        way diminish the obligations of the Construction Agent and/or the rights
        of the Lessor under the Agency Agreement.

               (m)     The Lessee shall promptly notify the Agent, or cause the
        Agent to be promptly notified, upon the Lessee gaining knowledge of the
        occurrence of any Default or Event of Default which is continuing at
        such time, specifying in such notice the nature and existence of such
        Default or Event of Default and what action Lessee proposes to take with
        respect thereto. In any event, such notice shall be provided to the
        Agent within ten (10) days of when the Lessee gains such knowledge.

               (n)     Until all of the obligations under the Operative
        Agreements have been finally and indefeasibly paid and satisfied in full
        and the Commitments and the Holder Commitments terminated unless consent
        has been obtained from the Majority Secured Parties, the Lessee will,
        and will, if applicable, cause each of its Subsidiaries to:

                       (i)     except as a result of or in connection with a
               dissolution, merger or disposition of a Subsidiary permitted
               under Section 8.3B(d), preserve and maintain its separate legal
               existence and all rights, franchises, licenses and privileges
               necessary to the conduct of its business, and qualify and remain
               qualified as a foreign corporation (or partnership, limited
               liability company or other such similar entity, as the case may
               be) and authorized to do business in

                                       35
   41

               each jurisdiction in which the failure to so qualify would have a
               Material Adverse Effect;

                       (ii)    pay and perform all obligations of the Lessee
               under the Operative Agreements and pay and perform (A) all taxes,
               assessments and other governmental charges or levies that may be
               imposed upon or assessed against it, its income or profits, or
               any of its property, before such shall become delinquent, (B) all
               lawful claims (including claims for labor, materials and
               supplies) which, if unpaid, might give rise to a Lien upon any of
               its properties and (C) all other Indebtedness, obligations and
               liabilities as it shall become due; provided that the Lessee may
               contest any item described in this Section 8.3(n)(ii) in good
               faith by appropriate action so long as adequate reserves are
               maintained with respect thereto in accordance with GAAP, unless
               failure to so pay or perform (y) could give rise to an immediate
               right to foreclose on a Lien securing such amounts and such Lien
               has not been stayed or (z) could have a Material Adverse Effect;

                       (iii)   to the extent failure to do so would have a
               Material Adverse Effect: (x) observe and remain in compliance
               with all applicable Laws and maintain in full force and effect
               all Governmental Actions, in each case applicable to the conduct
               of its business; (y) keep in full force and effect all licenses,
               certifications or accreditations necessary for any Property to
               carry on its business; and (z) not permit the termination of any
               insurance reimbursement program available to any Property; and

                       (iv)    provided that the Agent, the Lenders and the
               Holders use reasonable efforts to minimize disruption to the
               business of the Lessee, permit representatives of the Agent or
               any Lender or Holder, or their representatives (including,
               without limitation, independent accountants, agents, attorneys
               and appraisers) from time to time, upon reasonable notice and
               during normal business hours, to visit and inspect its
               properties, facilities and other business assets; inspect, audit
               and make copies of or extracts from its books, records and files,
               including without limitation management letters prepared by
               independent accountants; and to investigate and verify such
               information and to discuss its business, assets, liabilities,
               financial condition, results of operations and business prospects
               with its officers, employees, representatives and independent
               accountants.

               (o)     The Lessee shall perform any and all obligations of
        Lessor under, and cause Lessor to otherwise remain in full compliance
        with, the terms and provisions of each Ground Lease, if any.

               (p)     Promptly after obtaining any required architectural
        approvals by any business park or any other applicable entity with
        oversight responsibility for the applicable Improvements, the
        Construction Agent shall deliver to the Agent copies of the same.

                                       36
   42

               (q)     If any credit facility, loan agreement or other financing
        arrangement in favor of the Lessee or any Affiliate of the Lessee, other
        than pursuant to the Operative Agreements, is ever secured by any
        collateral, the Secured Parties shall share on a pari-passu basis (based
        on the respective amounts outstanding under the Operative Agreements
        relative to the amounts outstanding under any such credit facility, loan
        agreement or other financing arrangement) in all such collateral.

               (r)     The Lessee shall submit the interest rate/Holder Yield
        selection notice in the form set forth in Exhibit K as required from
        time to time pursuant to the Credit Agreement and the Trust Agreement.

               (s)     If the Construction Budget for any Property is ever
        modified to exceed the amount of title insurance therefor (as such title
        insurance is referenced in Section 5.3(g)), then the Construction Agent
        shall immediately cause an additional endorsement to be issued to
        increase the amount of title insurance to at least equal to the amount
        referenced in the modified Construction Budget.

               (t)     Lessee shall promptly notify Lessor in the event it
        receives actual knowledge that a Lien other than a Permitted Lien or
        Lessor Lien has occurred with respect to a Property, the Rent or any
        other such amounts, and Lessee covenants with Lessor that the Liens in
        favor of Lessor and/or the Agent created by the Operative Agreements are
        (and until the Financing Parties under the Operative Agreements have
        been paid in full shall remain) first priority perfected Liens subject
        only to Permitted Liens and Lessor Liens.

               (u)     Lessee shall cause the date of Final Completion for each
        Property to occur no later than 30 days after the Completion Date for
        such Property.

        8.3A   ADDITIONAL AFFIRMATIVE COVENANTS OF LESSEE.

        Lessee hereby covenants and agrees that, so long as any Operative
Agreement is in effect or any amounts payable under any Operative Agreement
shall remain outstanding, and until all of the Commitments and Holder
Commitments shall have terminated:

               (a)     Information Covenants.  Lessee will furnish, or cause to
        be furnished, to the Agent, the Lenders and the Holder:

                       (i)     Annual Financial Statements. As soon as
               available, and in any event within 90 days after the close of
               each fiscal year of the Consolidated Group, a consolidated and,
               if requested by the Agent, consolidating balance sheet and income
               statement of the Consolidated Group as of the end of such fiscal
               year, together with related consolidated and, if requested by the
               Agent, consolidating statements of operations and retained
               earnings and of cash flows for such fiscal year, in each case
               setting forth in comparative form consolidated and, if requested
               by the Agent, consolidating figures for the preceding fiscal
               year, all such financial information described above to be in
               reasonable form and detail and audited by independent

                                       37
   43

               certified public accountants of recognized national standing
               reasonably acceptable to the Agent, and whose opinion shall be to
               the effect that such financial statements have been prepared in
               accordance with GAAP (except for changes with which such
               accountants concur) and shall not be limited as to the scope of
               the audit or qualified as to the status of the Consolidated Group
               as a going concern or any other material qualifications or
               exceptions.

                       (ii)    Quarterly Financial Statements. As soon as
               available, and in any event within 45 days after the close of
               each fiscal quarter of the Consolidated Group (other than the
               fourth fiscal quarter, in which case 90 days after the end
               thereof) a consolidated and, if requested by the Agent,
               consolidating balance sheet and income statement of the
               Consolidated Group as of the end of such fiscal quarter, together
               with related consolidated and, if requested by the Agent,
               consolidating statements of operations and retained earnings and
               of cash flows for such fiscal quarter, in each case setting forth
               in comparative form consolidated and, if requested by the Agent,
               consolidating figures for the corresponding period of the
               preceding fiscal year, all such financial information described
               above to be in reasonable form and detail and reasonably
               acceptable to the Agent, and accompanied by a certificate of a
               Responsible Officer of Lessee to the effect that such quarterly
               financial statements fairly present in all material respects the
               financial condition of the Consolidated Group and have been
               prepared in accordance with GAAP, subject to changes resulting
               from audit and normal year-end audit adjustments.

                       (iii)   Officer's Certificate. At the time of delivery of
               the financial statements provided for in Sections 8.3A(a)(i) and
               8.3A(a)(ii) above, a certificate of a Responsible Officer of
               Lessee substantially in the form of Schedule 8.3A(a)(iii), (A)
               demonstrating compliance with the financial covenant contained in
               Section 8.3A(f) by calculation thereof as of the end of each such
               fiscal period and (B) stating that no Default or Event of Default
               exists, or if any Default or Event of Default does exist,
               specifying the nature and extent thereof and what action Lessee
               proposes to take with respect thereto.

                       (iv)    Annual Budgets.  On or prior to the end of each
               fiscal year of the Consolidated Group, an annual budget of the
               Consolidated Group for the next fiscal year.

                       (v)     [Reserved].

                       (vi)    Reports. Promptly upon transmission or receipt
               thereof, (A) copies of any filings and registrations with, and
               reports to or from, the Securities and Exchange Commission, or
               any successor agency, and copies of all financial statements,
               proxy statements, notices and reports as any member of the
               Consolidated Group shall send to its shareholders or to a holder
               of any Indebtedness owed by any member of the Consolidated Group
               in its capacity as such a holder and (B) upon the request of the
               Agent, all reports and written information to and from the United
               States Environmental Protection Agency, or any state or local
               agency responsible for

                                       38
   44

               environmental matters, the United States Occupational Health and
               Safety Administration, or any state or local agency responsible
               for health and safety matters, or any successor agencies or
               authorities concerning environmental, health or safety matters.

                       (vii)   Notices. In addition to any other notices
               required to be delivered pursuant to any other provisions of any
               Operative Agreement, upon any Responsible Officer of Lessee
               obtaining knowledge thereof, Lessee will give written notice to
               the Agent immediately of the occurrence of any of the following
               with respect to any member of the Consolidated Group: (A) the
               pendency or commencement of any litigation, arbitral or
               governmental proceeding against such Person which if adversely
               determined is likely to have a Material Adverse Effect, or (B)
               the institution of any proceedings against such Person with
               respect to, or the receipt of notice by such Person of potential
               liability or responsibility for violation, or alleged violation
               of any federal, state or local law, rule or regulation, including
               but not limited to, Environmental Laws, the violation of which
               could have a Material Adverse Effect.

                       (viii)  ERISA. Upon any Responsible Officer of Lessee
               obtaining knowledge thereof, Lessee will give written notice to
               the Agent promptly (and in any event within five Business Days)
               of: (A) any event or condition, including, but not limited to,
               any Reportable Event, that constitutes, or might reasonably lead
               to, an ERISA Event; (B) with respect to any Multiemployer Plan,
               the receipt of notice as prescribed in ERISA or otherwise of any
               withdrawal liability assessed against Lessee or any ERISA
               Affiliates, or of a determination that any Multiemployer Plan is
               in reorganization or insolvent (both within the meaning of Title
               IV of ERISA); (C) the failure to make full payment on or before
               the due date (including extensions) thereof of all amounts which
               any member of the Consolidated Group or any ERISA Affiliate is
               required to contribute to each Plan pursuant to its terms and as
               required to meet the minimum funding standard set forth in ERISA
               and the Code with respect thereto; or (D) any change in the
               funding status of any Plan that could have a Material Adverse
               Effect, together with a description of any such event or
               condition or a copy of any such notice and a statement by a
               Responsible Officer of Lessee briefly setting forth the details
               regarding such event, condition, or notice, and the action, if
               any, which has been or is being taken or is proposed to be taken
               by Lessee with respect thereto. Promptly upon request, Lessee
               shall furnish the Agent with such additional information
               concerning any Plan as may be reasonably requested, including,
               but not limited to, copies of each annual report/return (Form
               5500 series), as well as all schedules and attachments thereto
               required to be filed with the Department of Labor and/or the
               Internal Revenue Service pursuant to ERISA and the Code,
               respectively, for each "plan year" (within the meaning of Section
               3(39) of ERISA).

                       (ix)    Environmental.

                               (A)     Upon the reasonable written request of
                       the Agent following

                                       39
   45
                       the occurrence of any event or the discovery of any
                       condition which the Agent reasonably believes has caused
                       (or could be reasonably expected to cause) an
                       Environmental Violation with respect to any Subject
                       Property or the businesses operated by the members of the
                       Consolidated Group or could give rise to liability under
                       any applicable Environmental Laws, Lessee will furnish or
                       cause to be furnished to the Agent, at Lessee' expense, a
                       report of an environmental assessment of reasonable
                       scope, form and depth, (including, where appropriate,
                       invasive soil or groundwater sampling) by a consultant
                       reasonably acceptable to the Agent as to the nature and
                       extent of the presence of any Hazardous Substances on any
                       Subject Property owned by a member of the Consolidated
                       Group and as to the compliance by the members of the
                       Consolidated Group with Environmental Laws at such
                       Subject Property. If Lessee fails to deliver such an
                       environmental report within seventy-five (75) days after
                       receipt of such written request then the Agent may
                       arrange for same, and the members of the Consolidated
                       Group hereby grant to the Agent, and its representatives
                       access to such Subject Property to reasonably undertake
                       such an assessment (including, where appropriate,
                       invasive soil or groundwater sampling). The reasonable
                       cost of any assessment arranged for by the Agent pursuant
                       to this provision will be payable by Lessee on demand.

                               (B)     The members of the Consolidated Group
                       will conduct and complete all investigations, studies,
                       sampling, and testing and all remedial, removal, and
                       other actions necessary to address all Hazardous
                       Substances on, from or affecting any Subject Property to
                       the extent necessary to be in compliance with all
                       Environmental Laws and with the validly issued orders and
                       directives of all Governmental Authorities with
                       jurisdiction over such Subject Property to the extent any
                       failure could have a Material Adverse Effect.

                       (x)     Other Information. With reasonable promptness
               upon any such request, such other information regarding the
               business, properties or financial condition of any member of the
               Consolidated Group as the Agent may reasonably request.

               (b)     Books and Records. Lessee will, and will cause each of
        its Subsidiaries to, keep complete and accurate books and records of its
        transactions in accordance with good accounting practices on the basis
        of GAAP (including the establishment and maintenance of appropriate
        reserves).

               (c)     Insurance. Lessee will, and will cause each of its
        Subsidiaries to, at all times maintain in full force and effect
        insurance (including worker's compensation insurance, liability
        insurance, casualty insurance and business interruption insurance) in
        such amounts, covering such risks and liabilities and with such
        deductibles or self-insurance retentions as are (i) required by this
        Participation Agreement, the Lease or any other Operative Agreement and
        (ii) in accordance with normal industry practice.

                                       40
   46

               (d)     Maintenance of Property. Lessee will, and will cause each
        of its Subsidiaries to, maintain and preserve its properties and
        equipment material to the conduct of its business in good repair,
        working order and condition, normal wear and tear and casualty and
        condemnation excepted, and will make, or cause to be made, in such
        properties and equipment from time to time all repairs, renewals,
        replacements, extensions, additions, betterments and improvements
        thereto as may be needed or proper, to the extent and in the manner
        customary for companies in similar businesses.

               (e)     Performance of Obligations. Lessee will, and will cause
        each of its Subsidiaries to, perform in all material respects all of its
        obligations under the terms of all material contracts, agreements,
        indentures, mortgages, security agreements or other instruments to which
        it is a party or by which it is bound.

               (f)     Financial Covenant. The Consolidated Group shall at all
        times maintain Liquidity in an amount greater than or equal to (a) from
        the Initial Closing Date to the Final Completion Date, $45,000,000 and
        (b) on and after the Final Completion Date, $35,000,000. The
        Consolidated Group shall not permit any amount necessary to satisfy the
        Liquidity requirements of the previous sentence to be subject to any
        Lien or used as security or as a pledge for any obligation.

        8.3B   ADDITIONAL NEGATIVE COVENANTS OF LESSEE.

        Lessee hereby covenants and agrees that, so long as any Operative
Agreement is in effect or any amounts payable under any Operative Agreement
shall remain outstanding, and until all of the Commitments and Holder
Commitments shall have terminated:

               (a)     Indebtedness.

               Lessee will not permit any member of the Consolidated Group to
        contract, create, incur, assume or permit to exist any Indebtedness,
        except:

                       (i)     Indebtedness existing or arising under the
               Operative Agreements;

                       (ii)    Indebtedness set forth on Schedule 8.3B(a)(ii),
               and renewals, refinancings and extensions thereof on terms and
               conditions no less favorable to the members of the Consolidated
               Group than for such existing Indebtedness;

                       (iii)   Indebtedness of any joint venture in which any
               member of the Consolidated Group is a joint venturer (but only to
               the extent to which there is recourse to such member of the
               Consolidated Group for such Indebtedness) in an aggregate amount
               not to exceed $50,000,000 at any time;

                       (iv)    Indebtedness and other obligations owing under
               interest rate, commodities and foreign currency exchange
               protection agreements entered into in the ordinary course of
               business to manage existing or anticipated risks and not for

                                       41
   47

               speculative purposes;

                       (v)     unsecured intercompany Indebtedness owing by any
               member of the Consolidated Group to another member of the
               Consolidated Group (subject, however, to the limitations of
               Section 8.3B(f) in the case of the member of the Consolidated
               Group extending the loan, advance or credit);

                       (vi)    other (A) unsecured Indebtedness of the members
               of the Consolidated Group and (B) obligations under Capitalized
               Leases and other Indebtedness incurred, in each case, to provide
               all or a portion of the purchase price or costs of construction
               of fixed assets, and renewals, refinancings and extensions
               thereof; provided that (1) such Indebtedness referenced in this
               subsection (B) when incurred shall not exceed the purchase price
               or cost of construction of such asset, (2) no such Indebtedness
               referenced in this subsection (B) shall be refinanced for a
               principal amount in excess of the principal balance outstanding
               thereon at the time of such refinancing; provided, further that
               the total aggregate outstanding principal amount of all such
               Indebtedness referenced in the foregoing subsections (A) and (B)
               shall not exceed $35,000,000 unless such Indebtedness is
               otherwise permitted pursuant to Section 8.3B(a)(iii);

                       (vii)   guaranty obligations with respect to Indebtedness
               of the Borrower that is permitted under this Section 8.3B(a); and

                       (viii)  Indebtedness by its terms expressly subordinated
               to the Loans and Holder Advances in an aggregate amount not to
               exceed $100,000,000 and on such other terms and in amounts
               satisfactory to the Agent. (Lessee agrees that any and all
               convertible debentures with respect to which any member of the
               Consolidated Group is obligated shall be expressly subordinated
               to the Loans and Holder Advances and issued on such other terms
               and in amounts satisfactory to the Agent.)

               (b)     Liens. Lessee will not permit any member of the
        Consolidated Group to contract, create, incur, assume or permit to exist
        any Lien with respect to any of its property, whether now owned or after
        acquired, except for Permitted Liens.

               (c)     Nature of Business. Lessee will not permit any member of
        the Consolidated Group to substantively alter the character or conduct
        of the business conducted by such Person as of the Initial Closing Date.

               (d)     Merger and Consolidation, Dissolution and Acquisitions.
        Lessee will not permit any member of the Consolidated Group to merge
        with or into or consolidate or combine with any other Person or sell,
        lease, transfer or assign to any other Person or otherwise dispose of
        (whether in one transaction or a series of transactions) all or
        substantially all its assets (whether now owned or hereafter acquired);
        provided, however, that (i) any Subsidiary (direct or indirect) of
        Lessee may merge into or consolidate or

                                       42
   48

        combine with or dispose of all or substantially all of its assets to
        Lessee, (ii) any Subsidiary (direct or indirect) of Lessee may merge,
        consolidate or combine with another corporation if the surviving
        corporation in such transaction shall be a wholly-owned Subsidiary
        (direct or indirect) of Lessee and (iii) if no Default or Event of
        Default shall have occurred at the time of or immediately after giving
        effect to such transaction, Lessee may merge, consolidate or combine
        with another corporation, if the surviving corporation shall be Lessee
        or such merger, consolidation or combination shall not constitute a
        Lease Event of Default (including without limitation pursuant to Section
        17.1(o) of the Lease).

               (e)     Asset Dispositions. Lessee will not permit any member of
        the Consolidated Group to make any Asset Disposition (including, without
        limitation, any sale/leaseback transaction) other than (i) Asset
        Dispositions with respect to assets which, in the aggregate have a Fair
        Market Sales Value of $10,000,000 or less and (ii) any Asset Disposition
        in connection with a spin-off to any other Person to the extent the Fair
        Market Sales Value of the assets then being sold or otherwise disposed
        of plus the Fair Market Sales Value of all assets which have previously
        been subject to an Asset Disposition is less than 12% of the then
        current Consolidated Tangible Net Worth.

               (f)     Investments. Lessee will not permit any member of the
        Consolidated Group to make or permit to exist Investments in or to any
        Person, except for Eligible Investments.

               (g)     Restricted Payments. Lessee will not permit any member of
        the Consolidated Group to make any Restricted Payment, unless (i) no
        Default or Event of Default shall exist immediately after giving effect
        thereto, and (ii) Lessee shall have delivered to the Agent a certificate
        of a Responsible Officer of Lessee demonstrating compliance with the
        financial covenant set forth in Section 8.3A(f) on a pro forma basis
        after giving effect to the Restricted Payment.

               (h)     Transactions with Affiliates. Lessee will not permit any
        member of the Consolidated Group to enter into or permit to exist any
        transaction or series of transactions with any officer, director,
        shareholder, Subsidiary or Affiliate of such Person other than (i)
        advances of working capital to Lessee, (ii) transfers of cash and assets
        to Lessee, (iii) transactions permitted by Section 8.3B(a), Section
        8.3B(d), Section 8.3B(e), Section 8.3B(f), or Section 8.3B(g), (iv)
        normal compensation and reimbursement of expenses of officers and
        directors and (v) except as otherwise specifically limited in the
        Operative Agreements, other transactions which are entered into in the
        ordinary course of such Person's business on terms and conditions
        substantially as favorable to such Person as would be obtainable by it
        in a comparable transaction at arm's-length with a Person other than an
        officer, director, shareholder, Subsidiary or Affiliate.

               (i)     Limitation on Restricted Actions. Lessee will not permit
        any member of the Consolidated Group to, directly or indirectly, create
        or otherwise cause or suffer to exist or become effective any
        encumbrance or restriction on the ability of any such Person to (i) pay
        dividends or make any other distributions on its capital stock or with
        respect to any other interest or participation in, or measured by, its
        profits, (ii) pay any Indebtedness

                                       43
   49

        or other obligation, (iii) make loans or advances, (iv) sell, lease or
        transfer any of its properties or assets, or (v) act as a guarantor or
        pledge its assets, except for such encumbrances or restrictions existing
        under or by reason of (A) the Operative Agreements or (B) pursuant to
        the terms of any purchase money or sale/leaseback Indebtedness
        (including Capitalized Leases) to the extent permitted under Section
        8.3B(a)(iii) to the extent such limitations relate only to the property
        which is the subject of such financing.

               (j)     Ownership of Subsidiaries. Notwithstanding any other
        provisions of this Agreement to the contrary, Lessee will not permit any
        member of the Consolidated Group to (i) permit any Person (other than
        Lessee or any wholly-owned Subsidiary of Lessee) to own any capital
        stock of any Subsidiary of Lessee, except as a result of or in
        connection with a dissolution, merger, consolidation or disposition of a
        Subsidiary permitted under Section 8.3B(d) or Section 8.3B(e), (ii)
        permit any Subsidiary of Lessee to issue any shares of preferred capital
        stock unless such issuance is in connection with an Eligible Investment
        or (iii) permit, create, incur, assume or suffer to exist any Lien on
        any Capital Stock of any Subsidiary of Lessee, except for Permitted
        Liens.

        8.4.   SHARING OF CERTAIN PAYMENTS.

        Except for Excepted Payments, the parties hereto acknowledge and agree
that all payments due and owing by the Lessee to the Lessor under the Lease or
any of the other Operative Agreements shall be made by the Lessee directly to
the Agent as more particularly provided in Section 8.3 hereof. The Lessor, the
Holders, the Agent, the Lenders and the Lessee acknowledge the terms of Section
8.7 of this Agreement regarding the allocation of payments and other amounts
made or received from time to time under the Operative Agreements and agree,
that all such payments and amounts are to be allocated as provided in Section
8.7 of this Agreement.

        8.5.   GRANT OF EASEMENTS, ETC.

        The Agent, the Lenders and the Holders hereby agree that, so long as no
Event of Default shall have occurred and be continuing, the Owner Trustee shall,
from time to time at the request of the Lessee (and with the prior consent of
the Agent which consent shall not be unreasonably withheld or delayed), in
connection with the transactions contemplated by the Agency Agreement, the Lease
or the other Operative Agreements, (i) grant easements and other rights in the
nature of easements with respect to any Property, (ii) release existing
easements or other rights in the nature of easements which are for the benefit
of any Property, (iii) execute and deliver to any Person any instrument
appropriate to confirm or effect such grants or releases, and (iv) execute and
deliver to any Person such other documents or materials in connection with the
acquisition, development, construction, testing or operation of any Property,
including without limitation reciprocal easement agreements, construction
contracts, operating agreements, development agreements, plats, replats or
subdivision documents; provided, that each of the agreements referred to in this
Section 8.5 shall be on commercially reasonable terms so as not to diminish the
value of any Property in any material respect.

                                       44
   50

        8.6.   APPOINTMENT BY THE AGENT, THE LENDERS, THE HOLDERS AND THE OWNER
               TRUSTEE.

        The Holders hereby appoint the Agent to act as collateral agent for the
Holders in connection with the Lien granted by the Security Documents to secure
the Holder Amount. The Lenders and the Holders acknowledge and agree and direct
that the rights and remedies of the beneficiaries of the Lien of the Security
Documents shall be exercised by the Agent on behalf of the Lenders and the
Holders as directed from time to time by the Majority Secured Parties or,
pursuant to Sections 8.2(h) and 12.4, all of the Lenders and the Holders, as the
case may be; provided, in all cases, the Agent shall allocate payments and other
amounts received in accordance with Section 8.7. The Agent is further appointed
to provide notices under the Operative Agreements on behalf of the Owner Trustee
(as determined by the Agent, in its reasonable discretion), to receive notices
under the Operative Agreements on behalf of the Owner Trustee and (subject to
Sections 8.5 and 9.2) to take such other action under the Operative Agreements
on behalf of the Owner Trustee as the Agent shall determine in its reasonable
discretion from time to time. The Agent hereby accepts such appointments. For
purposes hereof, the provisions of Section 7 of the Credit Agreement, together
with such other terms and provisions of the Credit Agreement and the other
Operative Agreements as required for the full interpretation and operation of
Section 7 of the Credit Agreement are hereby incorporated by reference as if
restated herein for the mutual benefit of the Agent and each Holder as if each
Holder were a Lender thereunder. Further, the Agent shall be entitled to take
such action on behalf of the Owner Trustee as is delegated to the Agent under
any Operative Agreement (whether express or implied) as may be reasonably
incidental thereto. The parties hereto hereby agree to the provisions contained
in this Section 8.6. Any appointment of a successor agent under Section 7.9 of
the Credit Agreement shall also be effective as an appointment of a successor
agent for purposes of this Section 8.6.

        8.7.   COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.

               (a)     The Lessee and the Construction Agent have agreed
        pursuant to Section 5.8 and otherwise in accordance with the terms of
        this Agreement to pay to (i) the Agent any and all Rent (excluding
        Excepted Payments) and any and all other amounts of any kind or type
        under any of the Operative Agreements due and owing or payable to any
        Person and (ii) each Person as appropriate the Excepted Payments.
        Promptly after receipt, the Agent shall apply and allocate, in
        accordance with the terms of this Section 8.7, such amounts received
        from the Lessee or the Construction Agent and all other payments,
        receipts and other consideration of any kind whatsoever received by the
        Agent pursuant to the Security Agreement or otherwise received by the
        Agent, the Holders or any of the Lenders in connection with the
        Collateral, the Security Documents or any of the other Operative
        Agreements. Ratable distributions among the Lenders and the Holders
        under this Section 8.7 shall be made based on, in the case of the
        Lenders, the ratio of the outstanding Loans to the aggregate Property
        Cost and, in the case of the Holders, the ratio of the outstanding
        Holder Advances to the aggregate Property Cost. Ratable distributions
        among the Tranche A Lenders under this Section 8.7 shall be made based
        on the ratio of the individual Tranche A Lender's Commitment for Tranche
        A Loans to the aggregate of all the Tranche A Lenders' Commitments for
        Tranche A Loans. Ratable distributions among the Tranche B Lenders under
        this Section 8.7 shall be made

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        based on the ratio of the individual Tranche B Lender's Commitment for
        Tranche B Loans to the aggregate of all the Tranche B Lenders'
        Commitments for Tranche B Loans. Ratable distributions among the Lenders
        (in situations where the Tranche A Lenders are not differentiated from
        the Tranche B Lenders) shall be made based on the ratio of the
        individual Lender's Commitment to the aggregate of all the Lenders'
        Commitments. Ratable distributions among the Holders under this Section
        8.7 shall be based on the ratio of the individual Holder's Holder
        Commitment to the aggregate of all the Holders' Holder Commitments.

               (b)     Payments and other amounts received by the Agent from
        time to time in accordance with the terms of subparagraph (a) shall be
        applied and allocated as follows (subject in all cases to Section
        8.7(c)):

                       (i)     Any such payment or amount identified as or
               deemed to be Basic Rent shall be applied and allocated by the
               Agent first, ratably to the Lenders and the Holders for
               application and allocation to the payment of interest on the
               Loans and Holder Yield on the Holder Advances, in each case which
               is due and payable on such date; second, ratably to the Lenders
               for application and allocation to the payment of the principal of
               the Loans which is due and payable on such date; third ratably to
               the Holders for application and allocation to the payment of the
               portion of the Holder Advances which is due and payable on such
               date; and fourth, if no Default or Event of Default is in effect,
               any excess shall be paid to such Person or Persons as the Lessee
               may designate; provided, that if a Default or Event of Default is
               in effect, such excess (if any) shall instead be held by the
               Agent until the earlier of (I) the first date thereafter on which
               no Default or Event of Default shall be in effect (in which case
               such payments or returns shall then be made to such other Person
               or Persons as the Lessee may designate) and (II) the Maturity
               Date or the Expiration Date, as the case may be (or, if earlier,
               the date of any Acceleration), in which case such amounts shall
               be applied and allocated in the manner contemplated by Section
               8.7(b)(iv).

                       (ii)    If on any date the Agent or the Lessor shall
               receive any amount in respect of (A) any Casualty or Condemnation
               pursuant to Sections 15.1(a) or 15.1(g) of the Lease (excluding
               any payments in respect thereof which are payable to the Lessee
               in accordance with the Lease), or (B) the Termination Value in
               connection with the delivery of a Termination Notice pursuant to
               Article XVI of the Lease, or (C) the Termination Value in
               connection with the exercise of the Purchase Option under Section
               20.1 of the Lease or the exercise of the option of the Lessor to
               transfer the Properties to the Lessee pursuant to Section 20.3 of
               the Lease, or (D) any payment required to be made or elected to
               be made by the Construction Agent to the Lessor pursuant to the
               terms of the Agency Agreement (other than any payment of the
               Maximum Amount which shall be applied and allocated pursuant to
               Section 8.7(b)(iv)), then in each case, the Lessor shall be
               required to pay such amount received (1) if no Event of Default
               has occurred, (x) to apply and allocate the proceeds respecting
               Sections 8.7(b)(ii)(A) and 8.7(b)(ii)(D) in accordance with
               Section 8.7(b)(iii)(B) first through sixth and (y)

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               to apply and allocate the proceeds respecting Sections
               8.7(b)(ii)(B) and 8.7(b)(ii)(C) to prepay the principal balance
               of the Loans and the Holder Advances, on a pro rata basis, a
               portion of such amount to be distributed to the Lenders and the
               Holders or (2) if an Event of Default has occurred, to apply and
               allocate the proceeds respecting Sections 8.7(b)(ii)(A) through
               8.7(b)(ii)(D) in accordance with Section 8.7(b)(iii) hereof.

               (iii)  (A) In each case, upon the occurrence of an Event of
                      Default and the exercise of remedies pursuant to the
                      Operative Agreements, an amount equal to any proceeds of
                      the sale, lease or other disposition of the Properties or
                      any portion thereof and any other amount payable pursuant
                      to any Casualty or any Condemnation (whether such amounts
                      relate to a period before or after the Construction Period
                      Termination Date) shall be applied and allocated by the
                      Agent first, ratably to the payment of the principal and
                      interest of the Tranche B Loans then outstanding, second,
                      ratably to the payment to the Holders of the outstanding
                      principal balance of all Holder Advances plus all
                      outstanding Holder Yield with respect to such outstanding
                      Holder Advances, third, to the extent such amount exceeds
                      the maximum amount to be returned pursuant to the
                      foregoing provisions of this paragraph (iii), ratably to
                      the payment of the principal and interest of the Tranche A
                      Loans then outstanding, fourth, to any and all other
                      amounts owing under the Operative Agreements to the
                      Lenders under the Tranche B Loans, fifth, to any and all
                      other amounts owing under the Operative Agreements to the
                      Holders, sixth, to any and all other amounts owing under
                      the Operative Agreements to the Lenders under the Tranche
                      A Loans, and seventh, to the extent moneys remain after
                      application and allocation pursuant to clauses first
                      through sixth above, to the Owner Trustee for application
                      and allocation to any and all other amounts owing to the
                      Holders or the Owner Trustee and as the Holders shall
                      determine; provided, where no Event of Default shall exist
                      and be continuing and a prepayment is made for any reason
                      with respect to less than the full amount of the
                      outstanding principal amount of the Loans and the
                      outstanding Holder Advances, the proceeds shall be applied
                      and allocated in accordance with Section 8.7(b)(iii)(B)
                      first through sixth.

                             (B)     Except as otherwise expressly provided
                      pursuant to Section 8.7(b)(iii)(A), all amounts payable
                      with respect to any disposition of the Properties or any
                      portion thereof (including without limitation pursuant to
                      Article XXII of the Lease) and any amount payable in
                      respect of excess wear and tear pursuant to Section 22.3
                      of the Lease (whether such amounts relate to a period
                      before or after the Construction Period Termination Date)
                      shall be applied and allocated by the Agent first, ratably
                      to the payment of the principal and interest of the
                      Tranche B Loans then outstanding, second, to the extent
                      such amount exceeds the maximum amount to be returned
                      pursuant to the foregoing provisions of this paragraph
                      (iii), ratably to the payment of the principal and
                      interest of the

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                      Tranche A Loans then outstanding, third, ratably to the
                      payment to the Holders of the outstanding principal
                      balance of all Holder Advances plus all outstanding Holder
                      Yield with respect to such outstanding Holder Advances,
                      fourth, to any and all other amounts owing under the
                      Operative Agreements to the Lenders under the Tranche B
                      Loans, fifth, to any and all other amounts owing under the
                      Operative Agreements to the Lenders under the Tranche A
                      Loans, sixth, to any and all other amounts owing under the
                      Operative Agreements to the Holders, and seventh, to the
                      extent moneys remain after application and allocation
                      pursuant to clauses first through sixth above, to the
                      Owner Trustee for application and allocation to any and
                      all other amounts owing to the Holders or the Owner
                      Trustee and as the Holders shall determine; provided,
                      where no Event of Default shall exist and be continuing
                      and a prepayment is made for any reason with respect to
                      less than the full amount of the outstanding principal
                      amount of the Loans and the outstanding Holder Advances,
                      the proceeds shall be applied and allocated ratably to the
                      Lenders and to the Holders.

                       (iv)    An amount equal to (A) any such payment
               identified as a payment of the Maximum Amount or any payment
               pursuant to Section 22.1(b) of the Lease (or otherwise) of the
               Maximum Residual Guarantee Amount (and any such lesser amount as
               may be required by Section 22.1(b) of the Lease) in respect of
               the Properties and any such payment which derives from the
               Collateral Account or the escrow account described in Section
               5.11 and (B) any other amount payable upon any exercise of
               remedies after the occurrence of an Event of Default not covered
               by Sections 8.7(b)(i) or 8.7(b)(iii) above (including without
               limitation any amount received in connection with an Acceleration
               which does not represent proceeds from the sale or liquidation of
               the Properties), shall be applied and allocated by the Agent
               first, ratably, to the payment of the principal and interest
               balance of Tranche A Loans then outstanding, second, ratably to
               the payment of the principal and interest balance of the Tranche
               B Loans then outstanding, third, ratably to the payment of the
               principal balance of all Holder Advances plus all outstanding
               Holder Yield with respect to such outstanding Holder Advances,
               fourth, to the payment of any other amounts owing to the Lenders
               hereunder or under any of the other Operative Agreement, and
               fifth, to the extent moneys remain after application and
               allocation pursuant to clauses first through fourth above, to the
               Owner Trustee for application and allocation to Holder Advances
               and Holder Yield and any other amounts owing to the Holders or
               the Owner Trustee as the Holders shall determine.

                       (v)     An amount equal to any such payment identified as
               Supplemental Rent shall be applied and allocated by the Agent to
               the payment of any amounts then owing to the Agent, the Lenders,
               the Holders and the other parties to the Operative Agreements (or
               any of them) (other than any such amounts payable pursuant to the
               preceding provisions of this Section 8.7(b)) as shall be
               determined by the Agent in its reasonable discretion; provided,
               however, that Supplemental Rent received upon the exercise of
               remedies after the occurrence and continuance

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               of an Event of Default in lieu of or in substitution of the
               Maximum Residual Guarantee Amount or as a partial payment thereon
               shall be applied and allocated as set forth in Section
               8.7(b)(iv).

                       (vi)    The Agent in its reasonable judgment shall
               identify the nature of each payment or amount received by the
               Agent and apply and allocate each such amount in the manner
               specified above.

               (c)     Upon the payment in full of the Loans, the Holder
        Advances and all other amounts then due and owing by the Owner Trustee
        hereunder or under any Credit Document and the payment in full of all
        other amounts then due and owing to the Lenders, the Holders, the Agent,
        the Owner Trustee and the other Financing Parties pursuant to the
        Operative Agreements, any moneys remaining with the Agent shall be
        returned to the Lessee. It is agreed that, prior to the application and
        allocation of amounts received by the Agent in the order described in
        Section 8.7(b) above or any distribution of money to the Lessee, any
        such amounts shall first be applied and allocated to the payment of (i)
        any and all sums advanced by the Agent in order to preserve the
        Collateral or to preserve its Lien thereon, (ii) the expenses of
        retaking, holding, preparing for sale or lease, selling or otherwise
        disposing or realizing on the Collateral, or of any exercise by the
        Agent of its rights under the Security Documents, together with
        reasonable attorneys' fees and expenses and court costs and (iii) any
        and all other amounts reasonably owed to the Agent under or in
        connection with the transactions contemplated by the Operative
        Agreements (including without limitation any accrued and unpaid
        administration fees).

        8.8.   RELEASE OF PROPERTIES, ETC.

        If the Lessee shall at any time purchase any Property pursuant to the
Lease, or the Construction Agent shall purchase any Property pursuant to the
Agency Agreement, or if any Property shall be sold in accordance with Article
XXII of the Lease, then, upon satisfaction by the Owner Trustee of its
obligation to prepay the Loans, Holder Advances and all other amounts owing to
the Lenders and the Holders under the Operative Agreements, the Agent is hereby
authorized and directed to release such Property from the liens created by the
Security Documents to the extent of its interest therein. In addition, upon the
termination of the Commitments and the Holder Commitments and the payment in
full of the Loans, the Holder Advances and all other amounts owing by the Owner
Trustee and the Lessee hereunder or under any other Operative Agreement the
Agent is hereby authorized and directed to release all of the Properties from
the Liens created by the Security Documents to the extent of its interest
therein. Upon request of the Owner Trustee following any such release, the Agent
shall, at the sole cost and expense of the Lessee, execute and deliver to the
Owner Trustee and the Lessee such documents as the Owner Trustee or the Lessee
shall reasonably request to evidence such release.

                SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.

        9.1.   THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT
               RIGHTS.

        Notwithstanding anything to the contrary contained in the Credit
Agreement, the Agent,

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the Lenders, the Holders, the Construction Agent, the Lessee and the Owner
Trustee hereby agree that, prior to the occurrence and continuation of any
Default or Event of Default, the Construction Agent or the Lessee, as the case
may be, shall have the following rights:

               (a)     the right to designate an account to which amounts funded
        under the Operative Agreements shall be credited pursuant to Section
        2.3(a) of the Credit Agreement;

               (b)     the right to terminate the Commitments pursuant to
        Section 2.5(a) of the Credit Agreement;

               (c)     the right to exercise the conversion and continuation
        options pursuant to Section 2.7 of the Credit Agreement;

               (d)     the right to receive any notice and any certificate, in
        each case issued pursuant to Section 2.11(a) of the Credit Agreement;

               (e)     the right to replace any Lender pursuant to Section
        2.11(b) of the Credit Agreement;

               (f)     the right to approve any successor agent pursuant to
        Section 7.9 of the Credit Agreement; and

               (g)     the right to consent to any assignment by a Lender to
        which the Lessor has the right to consent pursuant to Section 9.8 of the
        Credit Agreement.

        9.2.   THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT RIGHTS.

        Notwithstanding anything to the contrary contained in the Trust
Agreement, the Construction Agent, the Lessee, the Owner Trustee and the Holders
hereby agree that, prior to the occurrence and continuation of any Default or
Event of Default, the Construction Agent or the Lessee, as the case may be,
shall have the following rights:

               (a)     the right to exercise the conversion and continuation
        options pursuant to Section 3.8 of the Trust Agreement;

               (b)     the right to receive any notice and any certificate, in
        each case issued pursuant to Section 3.9(a) of the Trust Agreement;

               (c)     the right to replace any Holder pursuant to Section
        3.9(b) of the Trust Agreement;

               (d)     the right to exercise the removal options contained in
        Section 9.1 of the Trust Agreement; provided, however, that no removal
        of the Owner Trustee and appointment of a successor Owner Trustee by the
        Holders pursuant to Section 9.1 of the Trust Agreement shall be made
        without the prior written consent (not to be unreasonably

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        withheld or delayed) of the Lessee.

                        SECTION 10. TRANSFER OF INTEREST.

        10.1.  RESTRICTIONS ON TRANSFER.

        Each Lender may participate, assign or transfer all or a portion of its
interest hereunder and under the other Operative Agreements in accordance with
Sections 9.7 and 9.8 of the Credit Agreement; provided, that (a) in the case of
an assignment only, such Lender obtains the prior consent of the Lessee, such
consent not to be unreasonably withheld or delayed and (b) each Lender that
participates, assigns or transfers all or a portion of its interest hereunder
and under the other Operative Agreements shall deliver to the Agent a copy of
each Assignment and Acceptance (as referenced in Section 9.8 of the Credit
Agreement) for purposes of maintaining the Register. The Holders may, directly
or indirectly, assign, convey or otherwise transfer any of their right, title or
interest in or to the Trust Estate or the Trust Agreement with the prior written
consent of the Agent and the Lessee (which consent shall not be unreasonably
withheld or delayed) and in accordance with the terms of Section 11.8(b) of the
Trust Agreement. The Owner Trustee may, subject to the rights of the Lessee
under the Lease and the other Operative Agreements and to the Lien of the
applicable Security Documents but only with the prior written consent of the
Agent (which consent may be withheld by the Agent in its sole discretion) and
(provided, no Default or Event of Default has occurred and is continuing) with
the consent of the Lessee, directly or indirectly, assign, convey, appoint an
agent with respect to enforcement of, or otherwise transfer any of its right,
title or interest in or to any Property, the Lease, the Trust Agreement and the
other Operative Agreements (including without limitation any right to
indemnification thereunder), or any other document relating to a Property or any
interest in a Property as provided in the Trust Agreement and the Lease. The
provisions of the immediately preceding sentence shall not apply to the
obligations of the Owner Trustee to transfer Property to the Lessee or a third
party purchaser pursuant to Article XXII of the Lease upon payment for such
Property in accordance with the terms and conditions of the Lease. Neither the
Lessee nor the Construction Agent may assign any of the Operative Agreements or
any of their respective rights or obligations thereunder or with respect to any
Property in whole or in part to any Person without the prior written consent of
the Agent, the Lenders, the Holders and the Lessor.

        10.2.  EFFECT OF TRANSFER.

        From and after any transfer effected in accordance with this Section 10,
the transferor shall be released, to the extent of such transfer, from its
liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor shall remain liable hereunder and under
such other documents to the extent that the transferee shall not have assumed
the obligations of the transferor thereunder. Upon any transfer by the Owner
Trustee, a Holder or a Lender as above provided, any such transferee shall
assume the obligations of the Owner Trustee, the Holder or the Lender, as the
case may be, and shall be deemed an "Owner Trustee", "Holder", or "Lender", as
the case may be, for all purposes of such documents and each reference herein to
the transferor shall thereafter be deemed a reference to such transferee for all
purposes, except as provided in the preceding sentence. Notwithstanding any
transfer of all or a portion of the

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transferor's interest as provided in this Section 10, the transferor shall be
entitled to all benefits accrued and all rights vested prior to such transfer
including without limitation rights to indemnification under any such document.

                          SECTION 11. INDEMNIFICATION.

        11.1.  GENERAL INDEMNITY.

        Subject to and limited by in all respects the provisions of Sections
11.6 through 11.8 and whether or not any of the transactions contemplated hereby
shall be consummated, the Indemnity Provider hereby assumes liability for and
agrees to defend, indemnify and hold harmless each Indemnified Person on an
After Tax Basis from and against any Claims, which may be imposed on, incurred
by or asserted against an Indemnified Person by any third party, including
without limitation Claims arising from the negligence of an Indemnified Person
(but not to the extent such Claims arise from the gross negligence or willful
misconduct of such Indemnified Person, as determined by a court of competent
jurisdiction or to the extent the subject matter of such Claims arise solely
from events or circumstances arising after the Expiration Date) in any way
relating to or arising or alleged to arise out of the execution, delivery,
performance or enforcement of this Agreement, the Lease or any other Operative
Agreement or on or with respect to any Property or any component thereof,
including without limitation Claims in any way relating to or arising or alleged
to arise out of (a) the financing, refinancing, purchase, acceptance, rejection,
ownership, design, construction, refurbishment, development, delivery,
acceptance, nondelivery, leasing, subleasing, possession, use, occupancy,
operation, maintenance repair, modification, transportation, condition, sale,
return, repossession (whether by summary proceedings or otherwise), or any other
disposition of any Property or any part thereof, including without limitation
the acquisition, holding or disposition of any interest in the Property, lease
or agreement comprising a portion of any thereof; (b) any latent or other
defects in any Property or any portion thereof whether or not discoverable by an
Indemnified Person or the Indemnity Provider; (c) a violation of Environmental
Laws, Environmental Claims or other loss of or damage to any property or the
environment relating to the Property, the Lease, the Agency Agreement or the
Indemnity Provider; (d) the Operative Agreements, or any transaction
contemplated thereby; (e) any breach by the Indemnity Provider of any of its
representations or warranties under the Operative Agreements to which the
Indemnity Provider is a party or failure by the Indemnity Provider to perform or
observe any covenant or agreement to be performed by it under any of the
Operative Agreements; (f) the transactions contemplated hereby or by any other
Operative Agreement, in respect of the application of Parts 4 and 5 of Subtitle
B of Title I of ERISA; (g) personal injury, death or property damage, including
without limitation Claims based on strict or absolute liability in tort; and (h)
any fees, expenses and/or other assessments by any business park or any other
applicable entity with oversight responsibility for the applicable Property.

        If a written Claim is made against any Indemnified Person or if any
proceeding shall be commenced against such Indemnified Person (including without
limitation a written notice of such proceeding), for any Claim for which the
Indemnified Person is entitled to indemnification hereunder, such Indemnified
Person shall promptly notify the Indemnity Provider in writing and

                                       52
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shall not take action with respect to such Claim without the consent of the
Indemnity Provider for thirty (30) days after the receipt of such notice by the
Indemnity Provider; provided, however, that in the case of any such Claim, if
action shall be required by law or regulation to be taken prior to the end of
such period of thirty (30) days, such Indemnified Person shall endeavor to, in
such notice to the Indemnity Provider, inform the Indemnity Provider of such
shorter period, and no action shall be taken with respect to such Claim without
the consent of the Indemnity Provider before seven (7) days before the end of
such shorter period; provided, further, that the failure of such Indemnified
Person to give the notices referred to in this sentence shall not diminish the
Indemnity Provider's obligation hereunder except and only to the extent such
failure precludes in all respects or materially prejudices the Indemnity
Provider in respect of contesting such Claim and, in the case of any such
material prejudice, the Indemnity Provider's obligation hereunder shall be
diminished only to the extent of such material prejudice.

        If, within thirty (30) days of receipt of such notice from the
Indemnified Person (or such shorter period as the Indemnified Person has
notified the Indemnity Provider is required by law or regulation for the
Indemnified Person to respond to such Claim), the Indemnity Provider shall
request in writing that such Indemnified Person respond to such Claim, the
Indemnified Person shall, at the expense of the Indemnity Provider, in good
faith conduct and control such action (including without limitation by pursuit
of appeals) (provided, however, that (A) if such Claim, in the Indemnity
Provider's reasonable discretion, can be pursued by the Indemnity Provider on
behalf of or in the name of such Indemnified Person, the Indemnified Person, at
the Indemnity Provider's request, shall allow the Indemnity Provider to conduct
and control the response to such Claim and (B) in the case of any Claim (and
notwithstanding the provisions of the foregoing subsection (A)), the Indemnified
Person may request the Indemnity Provider to conduct and control the response to
such Claim (with counsel to be selected by the Indemnity Provider and consented
to by such Indemnified Person, such consent not to be unreasonably withheld;
provided, however, that any Indemnified Person may retain separate counsel at
the expense of the Indemnity Provider in the event of a conflict of interest
between such Indemnified Person and the Indemnity Provider)) by, in the sole
discretion of the Person conducting and controlling the response to such Claim
(1) resisting payment thereof, (2) not paying the same except under protest, if
protest is necessary and proper, (3) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings, or (4) taking such other action as is reasonably requested by the
Indemnity Provider from time to time.

        The party controlling the response to any Claim shall consult in good
faith with the non-controlling party and shall keep the non-controlling party
reasonably informed as to the conduct of the response to such Claim; provided,
that all decisions ultimately shall be made in the discretion of the controlling
party. The parties agree that an Indemnified Person may at any time decline to
take further action with respect to the response to such Claim and may settle
such Claim if such Indemnified Person shall waive its rights to any indemnity
from the Indemnity Provider that otherwise would be payable in respect of such
Claim (and any future Claim, the pursuit of which is precluded by reason of such
resolution of such Claim) and shall pay to the Indemnity Provider any amount
previously paid or advanced by the Indemnity Provider pursuant to this Section
11.1 by way of indemnification or advance for the payment of an amount regarding
such Claim.

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        Notwithstanding the foregoing provisions of this Section 11.1, an
Indemnified Person shall not be required to take any action and the Indemnity
Provider shall not be permitted to respond to any Claim in its own name or that
of the Indemnified Person unless (A) the Indemnity Provider shall have agreed to
pay and shall pay to such Indemnified Person on demand and on an After Tax Basis
all reasonable costs, losses and expenses that such Indemnified Person actually
incurs in connection with such Claim, including without limitation all
reasonable legal, accounting and investigatory fees and disbursements and the
Indemnity Provider shall have agreed that the Claim is an indemnifiable Claim
hereunder, (B) the Indemnified Person shall have reasonably determined that the
action to be taken will not result in any material danger of sale, forfeiture or
loss of the Property, or any part thereof or interest therein, will not
interfere with the payment of Rent, and will not result in risk of criminal
liability, (C) if such Claim shall involve the payment of any amount prior to
the resolution of such Claim, the Indemnity Provider shall provide to the
Indemnified Person an interest-free advance in an amount equal to the amount
that the Indemnified Person is required to pay (with no additional net after-tax
cost to such Indemnified Person) prior to the date such payment is due, (D) no
Event of Default shall have occurred and be continuing. In no event shall an
Indemnified Person be required to appeal an adverse judicial determination to
the United States Supreme Court. In addition, an Indemnified Person shall not be
required to contest any Claim in its name (or that of an Affiliate) if the
subject matter thereof shall be of a continuing nature and shall have previously
been decided adversely by a court of competent jurisdiction pursuant to the
contest provisions of this Section 11.1, unless there shall have been a change
in law (or interpretation thereof) and the Indemnified Person shall have
received, at the Indemnity Provider's expense, an opinion of independent counsel
selected by the Indemnity Provider and reasonably acceptable to the Indemnified
Person stating that as a result of such change in law (or interpretation
thereof), it is more likely than not that the Indemnified Person will prevail in
such contest. In no event shall the Indemnity Provider be permitted to adjust or
settle any Claim without the consent of the Indemnified Person to the extent any
such adjustment or settlement involves, or is reasonably likely to involve, any
performance by or adverse admission by or with respect to the Indemnified
Person.

        11.2.  GENERAL TAX INDEMNITY.

               (a)     Subject to and limited by in all respects the provisions
        of Sections 11.6 through 11.8, the Indemnity Provider shall pay and
        assume liability for, and does hereby agree to indemnify, protect and
        defend each Property and all Indemnified Persons, and hold them harmless
        against, all Impositions on an After Tax Basis, and all payments
        pursuant to the Operative Agreements shall be made free and clear of and
        without deduction for any and all present and future Impositions.

               (b)     Notwithstanding anything to the contrary in Section
        11.2(a) hereof, the following shall be excluded from the indemnity
        required by Section 11.2(a) (collectively, the "Excluded Taxes"):

                       (i)     Taxes (other than Taxes that are, or are in the
               nature of, sales, use, rental, value added, transfer or property
               taxes) that are imposed on a Indemnified

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               Person (other than the Lessor, the Owner Trustee and the Trust)
               by the United States federal government that are based on or
               measured by the gross or net income or gross or net receipts
               (including without limitation taxes based on capital gains and
               minimum taxes or taxes measured on, by or in the nature of
               capital net worth, excess profits, items of tax preference,
               capital stock or franchise, business privilege or doing business
               taxes) of such Person; provided, that this clause (i) shall not
               be interpreted to prevent a payment from being made on an After
               Tax Basis if such payment is otherwise required to be so made;

                       (ii)    Taxes (other than Taxes that are, or are in the
               nature of, sales, use, rental, value added, transfer or property
               taxes) that are imposed on any Indemnified Person (other than the
               Lessor, the Owner Trustee and the Trust) by any state or local
               jurisdiction or taxing authority within any state or local
               jurisdiction and that are based upon or measured by the gross or
               net income or gross or net receipts (including without limitation
               taxes based on capital gains and minimum taxes or taxes measured
               on, by or in the nature of capital net worth, excess profits,
               items of tax preference, capital stock or franchise, business
               privilege or doing business taxes) of such Person; provided that
               such Taxes shall not be excluded under this subparagraph (ii) to
               the extent such Taxes would have been imposed had the location,
               possession or use of any Property in, the location or the
               operation of the Lessee in, or the Lessee's making payments under
               the Operative Agreements from, the jurisdiction imposing such
               Taxes been the sole connection between such Indemnified Person
               and the jurisdiction imposing such Taxes; provided, further, that
               this clause (ii) shall not be interpreted to prevent a payment
               from being made on an After Tax Basis if such payment is
               otherwise required to be so made;

                       (iii)   any Tax to the extent it relates to any act,
               event or omission that occurs after the termination of the Lease
               and redelivery or sale of the Property in accordance with the
               terms of the Lease (but not any Tax that relates to such
               termination, redelivery or sale and/or to any period prior to
               such termination, redelivery or sale);

                       (iv)    any Taxes which are imposed on an Indemnified
               Person as a result of the gross negligence or willful misconduct
               of such Indemnified Person itself, as determined by a court of
               competent jurisdiction, but not Taxes imposed as a result of
               ordinary negligence of such Indemnified Person;

                       (v)     Taxes imposed on or payable by a Tax Indemnitee
               to the extent such Taxes would not have been imposed but for a
               breach by the Tax Indemnitee or any Affiliate thereof of any
               representations, warranties or covenants set forth in the
               Operative Agreements (unless such breach was in turn caused by a
               breach by the Lessee of its representations, warranties or
               covenants set forth in the Operative Agreements); and

                       (vi)    Taxes or Impositions imposed on an Indemnified
               Person if, as a

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               direct result of an event giving rise to an indemnity payment,
               such Indemnified Person actually receives a credit (or otherwise
               has a reduction in liability for Taxes) in respect thereof
               against Taxes that are not indemnified under the Operative
               Agreements (but only to the extent such credit is not taken into
               account in calculating the indemnity payment on an After Tax
               Basis).

               (c)     (i)     Subject to the terms of Section 11.2(f), the
               Indemnity Provider shall pay or cause to be paid all Impositions
               directly to the taxing authorities where feasible and otherwise
               to the Indemnified Person, as appropriate, and the Indemnity
               Provider shall at its own expense, upon such Indemnified Person's
               reasonable request, furnish to such Indemnified Person copies of
               official receipts or other satisfactory proof evidencing such
               payment.

                       (ii)    In the case of Impositions for which no contest
               is conducted pursuant to Section 11.2(f) and which the Indemnity
               Provider pays directly to the taxing authorities, the Indemnity
               Provider shall pay such Impositions prior to the latest time
               permitted by the relevant taxing authority for timely payment. In
               the case of Impositions for which the Indemnity Provider
               reimburses an Indemnified Person, the Indemnity Provider shall do
               so within thirty (30) days after receipt by the Indemnity
               Provider of demand by such Indemnified Person describing in
               reasonable detail the nature of the Imposition and the basis for
               the demand (including without limitation the computation of the
               amount payable), accompanied by receipts or other reasonable
               evidence of such demand. In the case of Impositions for which a
               contest is conducted pursuant to Section 11.2(f), the Indemnity
               Provider shall pay such Impositions or reimburse such Indemnified
               Person for such Impositions, to the extent not previously paid or
               reimbursed pursuant to subsection (a), prior to the latest time
               permitted by the relevant taxing authority for timely payment
               after conclusion of all contests under Section 11.2(f).

                       (iii)   At the Indemnity Provider's request, the amount
               of any indemnification payment by the Indemnity Provider pursuant
               to subsection (a) shall be verified and certified by an
               independent public accounting firm mutually acceptable to the
               Indemnity Provider and the Indemnified Person. The fees and
               expenses of such independent public accounting firm shall be paid
               by the Indemnity Provider unless such verification shall result
               in an adjustment in the Indemnity Provider's favor of fifteen
               percent (15%) or more of the payment as computed by the
               Indemnified Person, in which case such fee shall be paid by the
               Indemnified Person.

               (d)     The Indemnity Provider shall be responsible for preparing
        and filing any real and personal property or ad valorem tax returns in
        respect of each Property and any other tax returns required for the
        Owner Trustee respecting the transactions described in the Operative
        Agreements. In case any other report or tax return shall be required to
        be made with respect to any obligations of the Indemnity Provider under
        or arising out of subsection (a) and of which the Indemnity Provider has
        knowledge or should have

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        knowledge, the Indemnity Provider, at its sole cost and expense, shall
        notify the relevant Indemnified Person of such requirement and (except
        if such Indemnified Person notifies the Indemnity Provider that such
        Indemnified Person intends to prepare and file such report or return)
        (A) to the extent required or permitted by and consistent with Legal
        Requirements, make and file in the Indemnity Provider's name such
        return, statement or report; and (B) in the case of any other such
        return, statement or report required to be made in the name of such
        Indemnified Person, advise such Indemnified Person of such fact and
        prepare such return, statement or report for filing by such Indemnified
        Person or, where such return, statement or report shall be required to
        reflect items in addition to any obligations of the Indemnity Provider
        under or arising out of subsection (a), provide such Indemnified Person
        at the Indemnity Provider's expense with information sufficient to
        permit such return, statement or report to be properly made with respect
        to any obligations of the Indemnity Provider under or arising out of
        subsection (a). Such Indemnified Person shall, upon the Indemnity
        Provider's request and at the Indemnity Provider's expense, provide any
        data maintained by such Indemnified Person (and not otherwise available
        to or within the control of the Indemnity Provider) with respect to each
        Property which the Indemnity Provider may reasonably require to prepare
        any required tax returns or reports.

               (e)     As between the Indemnity Provider on one hand, and each
        Financing Party on the other hand, the Indemnity Provider shall be
        responsible for, and the Indemnity Provider shall indemnify and hold
        harmless each Financing Party (without duplication of any
        indemnification required by this Section 11.2 on an After Tax Basis
        against, any obligation for United States or foreign withholding taxes
        or similar levies, imposts, charges, fees, deductions or withholdings
        (collectively, "Withholdings") imposed in respect of the interest
        payable on the Notes, Holder Yield payable on the Certificates or with
        respect to any other payments under the Operative Agreements (all such
        payments being referred to herein as "Exempt Payments" to be made
        without deduction, withholding or set off) (and, if any Financing Party
        receives a demand for such payment from any taxing authority or a
        Withholding is otherwise required with respect to any Exempt Payment,
        the Indemnity Provider shall discharge such demand on behalf of such
        Financing Party); provided, however, that the obligation of the
        Indemnity Provider under this Section 11.2(e) shall not apply to:

                       (i)     Withholdings on any Exempt Payment to any
               Financing Party which is a non-U.S. Person unless such Financing
               Party is, on the date hereof (or on the date it becomes a
               Financing Party hereunder) and on the date of any change in the
               principal place of business or the lending office of such
               Financing Party, entitled to submit a Form 1001 (relating to such
               Financing Party and entitling it to a complete exemption from
               Withholding on such Exempt Payment) or Form 4224 or is otherwise
               subject to exemption from Withholding with respect to such Exempt
               Payment (except where the failure of the exemption results from a
               change in the principal place of business of the Lessee; provided
               if a failure of exemption for any Financing Party results from a
               change in the principal place of business or lending office of
               any other Financing Party, then such other Financing Party shall
               be liable for any Withholding or indemnity with respect thereto),
               or

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                       (ii)    Any U.S. Taxes imposed solely by reason of the
               failure by a non-U.S. Person to comply with applicable
               certification, information, documentation or other reporting
               requirements concerning the nationality, residence, identity or
               connections with the United States of America of such non-U.S.
               Person if such compliance is required by statute or regulation of
               the United States of America as a precondition to relief or
               exemption from such U.S. Taxes.

        For the purposes of this Section 11.2(e), (A) "U.S. Person" shall mean a
        citizen, national or resident of the United States of America, a
        corporation, partnership or other entity created or organized in or
        under any laws of the United States of America or any State thereof, or
        any estate or trust that is subject to Federal income taxation
        regardless of the source of its income, (B) "U.S. Taxes" shall mean any
        present or future tax, assessment or other charge or levy imposed by or
        on behalf of the United States of America or any taxing authority
        thereof or therein, (C) "Form 1001" shall mean Form 1001 (Ownership,
        Exemption, or Reduced Rate Certificate) of the Department of the
        Treasury of the United States of America and (D) "Form 4224" shall mean
        Form 4224(R) (Exemption from Withholding of Tax on Income Effectively
        Connected with the Conduct of a Trade or Business in the United States)
        of the Department of Treasury of the United States of America (or in
        relation to either such Form such successor and related forms as may
        from time to time be adopted by the relevant taxing authorities of the
        United States of America to document a claim to which such Form
        relates). Each of the Forms referred to in the foregoing clauses (C) and
        (D) shall include such successor and related forms as may from time to
        time be adopted by the relevant taxing authorities of the United States
        of America to document a claim to which such Form relates.

               If a Financing Party or an Affiliate with whom such Financing
        Party files a consolidated tax return (or equivalent) subsequently
        receives the benefit in any country of a tax credit or an allowance
        resulting from U.S. Taxes with respect to which it has received a
        payment of an additional amount under this Section 11.2(e), such
        Financing Party will pay to the Indemnity Provider such part of that
        benefit as in the opinion of such Financing Party will leave it (after
        such payment) in a position no more and no less favorable than it would
        have been in if no additional payment had been required to be paid,
        provided always that (i) such Financing Party will be the sole judge of
        the amount of any such benefit and of the date on which it is received,
        (ii) such Financing Party will have the absolute discretion as to the
        order and manner in which it employs or claims tax credits and
        allowances available to it and (iii) such Financing Party will not be
        obliged to disclose to the Indemnity Provider any information regarding
        its tax affairs or tax computations.

               Each non-U.S. Person that shall become a Financing Party after
        the date hereof shall, upon the effectiveness of the related transfer or
        otherwise upon becoming a Financing Party hereunder, be required to
        provide all of the forms and statements referenced above or other
        evidences of exemption from Withholdings.

               (f)     If a written Claim is made against any Indemnified Person
        or if any

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        proceeding shall be commenced against such Indemnified Person (including
        without limitation a written notice of such proceeding), for any
        Impositions, the provisions in Section 11.1 relating to notification and
        rights to contest shall apply; provided, however, that the Indemnity
        Provider shall have the right to conduct and control such contest only
        if such contest involves a Tax other than a Tax on net income of the
        Indemnified Person and can be pursued independently from any other
        proceeding involving a Tax liability of such Indemnified Person.

        11.3.  INCREASED COSTS, ILLEGALITY, ETC.

               (a)     If, due to either (i) the introduction of or any change
        in or in the interpretation of any law or regulation or (ii) the
        compliance with any guideline or request hereafter adopted, promulgated
        or made by any central bank or other governmental authority (whether or
        not having the force of law), there shall be any increase in the cost to
        any Financing Party of agreeing to make or making, funding or
        maintaining Advances, then the Lessee shall from time to time, upon
        demand by such Financing Party (with a copy of such demand to the Agent
        but subject to the terms of Section 2.11 of the Credit Agreement and 3.9
        of the Trust Agreement, as the case may be), pay to the Agent for the
        account of such Financing Party additional amounts sufficient to
        compensate such Financing Party for such increased cost. A certificate
        as to the amount of such increased cost, submitted to the Lessee and the
        Agent by such Financing Party, shall be conclusive and binding for all
        purposes, absent manifest error.

               (b)     Subject to the last sentence of this Section 11.3(b), if
        any Financing Party determines that compliance with any law or
        regulation or any guideline or request from any central bank or other
        governmental authority (whether or not having the force of law, but in
        each case promulgated or made after the date hereof) affects or would
        affect the amount of capital required or expected to be maintained by
        such Financing Party or any corporation controlling such Financing Party
        and that the amount of such capital is increased by or based upon the
        existence of such Financing Party's commitment to make Advances and
        other commitments of this type or upon the Advances, then, upon demand
        by such Financing Party (with a copy of such demand to the Agent but
        subject to the terms of Section 2.11 of the Credit Agreement and 3.9 of
        the Trust Agreement), the Lessee shall pay to the Agent for the account
        of such Financing Party, from time to time as specified by such
        Financing Party, additional amounts sufficient to compensate such
        Financing Party or such corporation in the light of such circumstances,
        to the extent that such Financing Party reasonably determines such
        increase in capital to be allocable to the existence of such Financing
        Party's commitment to make such Advances. A certificate as to such
        amounts submitted to the Lessee and the Agent by such Financing Party
        shall be conclusive and binding for all purposes, absent manifest error.
        Prior to the Construction Period Termination Date for any particular
        Property, this Section 11.3(b) shall only apply to Eurodollar Holder
        Advances and Eurodollar Loans.

               (c)     Without affecting its rights under Sections 11.3(a),
        11.3(b) or any other provision of any Operative Agreement, each
        Financing Party agrees that if there is any increase in any cost to or
        reduction in any amount receivable by such Financing Party

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        with respect to which the Lessee would be obligated to compensate such
        Financing Party pursuant to Sections 11.3(a) or 11.3(b), such Financing
        Party shall use reasonable efforts to select an alternative office for
        Advances which would not result in any such increase in any cost to or
        reduction in any amount receivable by such Financing Party; provided,
        however, that no Financing Party shall be obligated to select an
        alternative office for Advances if such Financing Party determines that
        (i) as a result of such selection such Financing Party would be in
        violation of any applicable law, regulation, treaty, or guideline, or
        would incur additional costs or expenses or (ii) such selection would be
        inadvisable for regulatory reasons or materially inconsistent with the
        interests of such Financing Party.

               (d)     With reference to the obligations of the Lessee set forth
        in Sections 11.3(a) through 11.3(c), the Lessee shall not have any
        obligation to pay to any Financing Party amounts owing under such
        Sections for any period which is more than 270 days prior to the date
        upon which the request for payment therefor is delivered to the Lessee.

               (e)     Notwithstanding any other provision of this Agreement, if
        any Financing Party shall notify the Agent that the introduction of or
        any change in or in the interpretation of any law or regulation makes it
        unlawful, or any central bank or other governmental authority asserts
        that it is unlawful, for any Financing Party to perform its obligations
        hereunder to make or maintain Eurodollar Loans or Eurodollar Holder
        Advances, as the case may be, then (i) each Eurodollar Loan or
        Eurodollar Holder Advance, as the case may be, will automatically, at
        the earlier of the end of the Interest Period for such Eurodollar Loan
        or Eurodollar Holder Advance, as the case may be, or the date required
        by law, convert into an ABR Loan or an ABR Holder Advance, as the case
        may be, and (iii) the obligation of the Financing Parties to make,
        convert or continue Eurodollar Loans or Eurodollar Holder Advances, as
        the case may be, shall be suspended until the Agent shall notify the
        Lessee that such Financing Party has determined that the circumstances
        causing such suspension no longer exist.

        11.4.  FUNDING/CONTRIBUTION INDEMNITY.

        Subject to the provisions of Section 2.11(a) of the Credit Agreement and
3.9(a) of the Trust Agreement, as the case may be, the Lessee agrees to
indemnify each Financing Party and to hold each Financing Party harmless from
any loss or reasonable expense which such Financing Party may sustain or incur
as a consequence of (a) any default in connection with the drawing of funds for
any Advance, (b) any default in making any prepayment after a notice thereof has
been given in accordance with the provisions of the Operative Agreements or (c)
the making of a voluntary or involuntary payment of Eurodollar Loans or
Eurodollar Holder Advances, as the case may be, on a day which is not the last
day of an Interest Period with respect thereto. Such indemnification shall be in
an amount equal to the excess, if any, of (x) the amount of interest or Holder
Yield, as the case may be, which would have accrued on the amount so paid, or
not so borrowed, accepted, converted or continued for the period from the date
of such payment or of such failure to borrow, accept, convert or continue to the
last day of such Interest Period (or, in the case of a failure to borrow,
accept, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable

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Eurodollar Rate plus the Applicable Percentage for such Loan or Holder Advance,
as the case may be, for such Interest Period over (y) the amount of interest (as
determined by such Financing Party in its reasonable discretion) which would
have accrued to such Financing Party on such amount by (i) (in the case of the
Lenders) reemploying such funds in loans of the same type and amount during the
period from the date of payment or failure to borrow to the last day of the then
applicable Interest Period (or, in the case of a failure to borrow, the Interest
Period that would have commenced on the date of such failure) and (ii) (in the
case of the Holders) placing such amount on deposit for a comparable period with
leading banks in the relevant interest rate market. This covenant shall survive
the termination of the Operative Agreements and the payment of all other amounts
payable hereunder.

        11.5.  EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
               LIABILITY, ETC.

        SUBJECT TO AND LIMITED BY IN ALL RESPECTS THE PROVISIONS OF SECTION 11.6
THROUGH 11.8 AND WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION
PROVISIONS OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING
INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER
EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS
FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR
OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY
NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH
BENEFICIARY, AND INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE
AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
CLAIMS, LOSSES, COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT
LIMITATION ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH
BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE
ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE
AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY.

        11.6.  ADDITIONAL PROVISIONS REGARDING ENVIRONMENTAL INDEMNIFICATION.

        Each and every Indemnified Person shall at all times have the rights and
benefits, and the Indemnity Provider shall have the obligations, in each case
provided pursuant to the Operative Agreements with respect to environmental
matters, violations of any Environmental Law, any Environmental Claim or other
loss of or damage to any property or the environment relating to any Property,
the Lease, the Agency Agreement or the Indemnity Provider (including without
limitation the rights and benefits provided pursuant to Section 11.1(c)).

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        11.7.  ADDITIONAL PROVISIONS REGARDING INDEMNIFICATION.

        Notwithstanding the provisions of Sections 11.1, 11.2, 11.3, 11.4 and
11.5 (other than with respect to matters concerning environmental
indemnification referenced in Section 11.6), (a) the Owner Trustee shall be the
only beneficiary of the provisions set forth in Sections 11.1, 11.2, 11.3, 11.4
and 11.5 (again, subject to the immediately preceding parenthetical phrase) with
respect to each Property solely for the period prior to the earlier to occur of
the applicable Completion Date or Construction Period Termination Date for such
Property, as applicable, (b) such limited rights of indemnification referenced
in Section 11.7(a) (to the extent relating to third-party claims) shall be
limited to third-party claims caused by or resulting from the Indemnity
Provider's acts or omissions and/or all other Persons acting by, through or
under the Indemnity Provider. After the earlier to occur of the applicable
Completion Date or Construction Period Termination Date for such Property, as
applicable, each Indemnified Person shall be a beneficiary of the provisions set
forth in Sections 11.1, 11.2, 11.3, 11.4 and 11.5. Lessee shall not be obligated
to indemnify an Indemnified Party for any Claim to the extent such Claim is
directly attributable to the imposition of a Lessor Lien that such Indemnified
Party is responsible for discharging under the Operative Agreements.

        11.8.  INDEMNIFICATIONS PROVIDED BY THE OWNER TRUSTEE IN FAVOR OF THE
               OTHER INDEMNIFIED PERSONS.

        To the extent the Indemnity Provider is not obligated to indemnify each
Indemnified Person with respect to the various matters described in this Section
11.8, the Owner Trustee shall provide such indemnities (but only to the extent
amounts sufficient to pay such indemnity are funded by the Lenders and the
Holders) in favor of each Indemnified Person in accordance with this Section
11.8 and shall pay all such amounts owed with respect to this Section 11.8 with
amounts advanced by the Lenders and the Holders (a) to the extent, but only to
the extent, amounts are available therefor with respect to the Available
Commitments and the Available Holder Commitments (subject to the rights of the
Lenders and the Holders to increase their respective commitment amounts in
accordance with the provisions of Section 5.9) and (b) unless each Lender and
each Holder has declined in writing to fund such amount. Notwithstanding any
other provision in any other Operative Agreement to the contrary, all amounts so
advanced shall be deemed added (ratably, based on the ratio of the Property Cost
for each Property individually to the Aggregate Property Cost of all Properties
at such time) to the Property Cost of all Properties then subject to the terms
of the Operative Agreements.

        Whether or not any of the transactions contemplated hereby shall be
consummated, the Owner Trustee hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person by any third party, including without
limitation Claims arising from the negligence of an Indemnified Person (but not
to the extent such Claims arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction, as opposed to gross negligence or willful misconduct imputed to
such Indemnified Person or breach of such Indemnified Person's obligations under
this Agreement, the Lease or any other Operative Agreement) in any way relating
to or arising or alleged to arise out of the execution, delivery, performance or

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enforcement of this Agreement, the Lease or any other Operative Agreement or on
or with respect to any Property or any component thereof, including without
limitation Claims in any way relating to or arising or alleged to arise out of
the matters set forth in Sections 11.1(a) through 11.1(h).

        The Owner Trustee shall pay and assume liability for, and does hereby
agree to indemnify, protect and defend each Property and all Indemnified
Persons, and hold them harmless against, all Impositions on an After Tax Basis,
and all payments pursuant to the Operative Agreements shall be made free and
clear of and without deduction for any and all present and future Impositions.
Notwithstanding anything to the contrary in this paragraph, the Excluded Taxes
shall be excluded from the indemnity provisions afforded by this paragraph.

        THE INDEMNITY OBLIGATIONS UNDERTAKEN BY THE OWNER TRUSTEE PURSUANT TO
THIS SECTION 11.8 ARE IN ALL RESPECTS SUBJECT TO THE LIMITATIONS ON LIABILITY
REFERENCED IN SECTION 12.9.

                           SECTION 12. MISCELLANEOUS.

        12.1.  SURVIVAL OF AGREEMENTS.

        The representations, warranties, covenants, indemnities and agreements
of the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of the Operative Agreements, the transfer of any Property to the Owner Trustee,
the acquisition of any Property (or any of its components), the construction of
any Improvements, the Completion of any Property, any disposition of any
interest of the Owner Trustee in any Property or any interest of the Holders in
the Trust Estate, the payment of the Notes and any disposition thereof and shall
be and continue in effect notwithstanding any investigation made by any party
and the fact that any party may waive compliance with any of the other terms,
provisions or conditions of any of the Operative Agreements. Except as otherwise
expressly set forth herein or in other Operative Agreements, the indemnities of
the parties provided for in the Operative Agreements shall survive the
expiration or termination of any thereof.

        12.2.  NOTICES.

        All notices required or permitted to be given under any Operative
Agreement shall be in writing. Notices may be served by certified or registered
mail, postage paid with return receipt requested; by private courier, prepaid;
by telex, facsimile, or other telecommunication device capable of transmitting
or creating a written record; or personally. Mailed notices shall be deemed
delivered five (5) days after mailing, properly addressed. Couriered notices
shall be deemed delivered when delivered as addressed, or if the addressee
refuses delivery, when presented for delivery notwithstanding such refusal.
Telex or telecommunicated notices shall be deemed delivered when receipt is
either confirmed by confirming transmission equipment or acknowledged by the
addressee or its office. Personal delivery shall be effective when accomplished.
Unless a party changes its address by giving notice to the other party as
provided

                                       63
   69

herein, notices shall be delivered to the parties at the following addresses:

               If to the Construction Agent or the Lessee, to such entity at the
        following address:

                      Lexicon Genetics Incorporated
                      4000 Research Forest Drive
                      The Woodlands, Texas  77381
                      Attention:    John Dodson
                                    Director of Administration and Finance
                      Telephone:    (281) 364-3222
                      Telecopy:     (281) 414-9125

               If to the Owner Trustee, to it at the following address:

                      First Security Bank, National Association
                      79 South Main Street, Third Floor
                      Salt Lake City, Utah 84111
                      Attention:    Val T. Orton,
                                    Vice President
                      Telephone:    (801) 246-5300
                      Telecopy:     (801) 246-5053

               If to the Holders, to each such Holder at the address set forth
        for such Holder on Schedule I of the Trust Agreement.

               If to the Agent, to it at the following address:

                      Bank of America, N.A.
                      Bank of America Tower
                      515 Congress Avenue
                      Mailcode:  TX9-329-11-01
                      Austin, Texas  78701-3503
                      Attention:    W. Wade Morgan
                      Telephone:    (512) 397-2241
                      Telecopy:     (512) 397-2052

               If to any Lender, to it at the address set forth for such Lender
        in Schedule 2.1 of the Credit Agreement.

               From time to time any party may designate additional parties
        and/or another address for notice purposes by notice to each of the
        other parties hereto. Each notice hereunder shall be effective upon
        receipt or refusal thereof.

        12.3.  COUNTERPARTS.

        This Agreement may be executed by the parties hereto in separate
counterparts, each of

                                       64
   70

which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one (1) and the same instrument.

        12.4.  TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE MATTERS.

        Each Basic Document may be terminated, amended, supplemented, waived or
modified only by an instrument in writing signed by, subject to Article VIII of
the Trust Agreement regarding termination of the Trust Agreement, the Majority
Secured Parties and the Lessee and/or the Construction Agent (to the extent the
Lessee and/or the Construction Agent is a party to such Basic Document);
provided, to the extent no Default or Event of Default shall have occurred and
be continuing, the Majority Secured Parties shall not amend, supplement, waive
or modify any provision of any Basic Document in such a manner as to adversely
affect the rights of the Lessee and/or the Construction Agent without the prior
written consent (not to be unreasonably withheld or delayed) of the Lessee
and/or the Construction Agent; and provided further, that the Lessee shall in no
event have the right to consent to modifications to the terms of (a) the Credit
Agreement required by the Lenders pursuant to Section 2.6(e) of the Credit
Agreement in connection with an extension of the maturity date of the Loans
beyond the Basic Term Expiration Date or (b) the Trust Agreement required by the
Holders pursuant to Section 3.3 of the Trust Agreement in connection with an
extension of the maturity date of the Holder Advances beyond the Basic Term
Expiration Date. Each Operative Agreement which is not a Basic Document may be
terminated, amended, supplemented, waived or modified only by an instrument in
writing signed by the parties thereto and (without the consent of any other
Financing Party) the Agent. In addition, the Unanimous Vote Matters shall
require the consent of each Lender and each Holder affected by such matter.

        Notwithstanding the foregoing, no such termination, amendment,
supplement, waiver or modification shall, without the consent of the Agent and,
to the extent affected thereby, each Lender and each Holder (collectively, the
"Unanimous Vote Matters") (i) reduce the Lender Commitments and/or the Holder
Commitments except as otherwise provided in Section 2.5 of the Credit Agreement
and Section 3.1(e) of the Trust Agreement, extend the scheduled date of maturity
of any Note, extend the scheduled Expiration Date, extend any payment date of
any Note or Certificate, reduce the stated rate of interest payable on any Note,
reduce the stated Holder Yield payable on any Certificate (other than as a
result of waiving the applicability of any post-default increase in interest
rates or Holder Yields), modify the priority of any Lien in favor of the Agent
under any Security Document, subordinate any obligation owed to such Lender or
Holder, reduce any Lender Unused Fees or any Holder Unused Fees payable to such
Lender or Holder (as the case may be) under this Participation Agreement, extend
the scheduled date of payment of any Lender Unused Fees or any Holder Unused
Fees payable to such Lender or Holder (as the case may be), or extend the
expiration date of such Lender's Commitment or the Holder Commitment of such
Holder, or (ii) terminate, amend, supplement, waive or modify any provision of
this Section 12.4 or reduce the percentages specified in the definitions of
Majority Lenders, Majority Holders or Majority Secured Parties, or consent to
the assignment or transfer by the Owner Trustee of any of its rights and
obligations under any Credit Document or release a material portion of the
Collateral (except in accordance with Section 8.8) or release the Lessee from
its obligations under any Operative Agreement or otherwise alter any payment
obligations of the Lessee to the Lessor or any Financing Party under the
Operative Agreements, or (iii)

                                       65
   71

terminate, amend, supplement, waive or modify any provision of Section 7 of the
Credit Agreement (which shall also require the consent of the Agent), or (iv)
eliminate the automatic option under Section 5.3(b) of the Agency Agreement
requiring that the Construction Agent pay certain liquidated damages in exchange
for the conveyance of a Property to the Construction Agent, or (v) permit the
extension of the Construction Period beyond the date that is two (2) years from
the Initial Closing Date. Any such termination, amendment, supplement, waiver or
modification shall apply equally to each of the Lenders and the Holders and
shall be binding upon all the parties to this Agreement. In the case of any
waiver, each party to this Agreement shall be restored to its former position
and rights under the Operative Agreements, and any Default or Event of Default
waived shall be deemed to be cured and not continuing; but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon. The parties to this Agreement agree that any increase
in the aggregate Lender Commitments and/or any increase in the Holder
Commitments shall be a matter decided by the Majority Secured Parties; provided,
the Lender Commitment of any Lender shall not be increased without its consent
(which consent may be given or withheld in the sole discretion of such Lender)
and the Holder Commitment of any Holder shall not be increased without its
consent (which consent may be given or withheld in the sole discretion of such
Holder).

        If at a time when the conditions precedent set forth in the Operative
Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied,
any Lender shall fail to fulfill its obligations to make such Loan (any such
Lender, a "Defaulting Lender") then, for so long as such failure shall continue,
the Defaulting Lender shall (unless the Lessee and the Majority Lenders,
determined as if the Defaulting Lender were not a "Lender", shall otherwise
consent in writing) be deemed for all purposes relating to terminations,
amendments, supplements, waivers or modifications under the Operative Agreements
to have no Loans, shall not be treated as a "Lender" when performing the
computation of Majority Lenders or Majority Secured Parties, and shall have no
rights under this Section 12.4; provided that any action taken pursuant to the
second paragraph of this Section 12.4 shall not be effective as against the
Defaulting Lender. Nothing herein shall relieve the Defaulting Lender from any
of its obligations under the Operative Agreements.

        If at a time when the conditions precedent set forth in the Operative
Agreements to any Holder Advance are, in the opinion of the Majority Holders,
satisfied, any Holder shall fail to fulfill its obligations to make such Holder
Advance (any such Holder, a "Defaulting Holder") then, for so long as such
failure shall continue, the Defaulting Holder shall (unless the Lessee and the
Majority Holders, determined as if the Defaulting Holder were not a "Holder",
shall otherwise consent in writing) be deemed for all purposes relating to
terminations, amendments, supplements, waivers or modifications under the
Operative Agreements to have no Holder Advances, shall not be treated as a
"Holder" when performing the computation of Majority Holders or Majority Secured
Parties, and shall have no rights under this Section 12.4; provided that any
action taken pursuant to the second paragraph of this Section 12.4 shall not be
effective as against the Defaulting Holder. Nothing herein shall relieve the
Defaulting Holder from any of its obligations under the Operative Agreements.

                                       66
   72

        12.5.  HEADINGS, ETC.

        The Table of Contents and headings of the various Articles and Sections
of this Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.

        12.6.  PARTIES IN INTEREST.

        Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.

        12.7.  GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
               VENUE.

               (a)     THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
        PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND
        ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH
        CAROLINA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
        CONFLICTS OF LAW). Any legal action or proceeding with respect to this
        Agreement or any other Operative Agreement may be brought in the courts
        of the State of North Carolina in Mecklenburg County or of the United
        States for the Western District of North Carolina, and, by execution and
        delivery of this Agreement, each of the parties to this Agreement hereby
        irrevocably accepts for itself and in respect of its property, generally
        and unconditionally, the nonexclusive jurisdiction of such courts. Each
        of the parties to this Agreement further irrevocably consents to the
        service of process out of any of the aforementioned courts in any such
        action or proceeding by the mailing of copies thereof by registered or
        certified mail, postage prepaid, to it at the address set out for
        notices pursuant to Section 12.2, such service to become effective three
        (3) days after such mailing. Nothing herein shall affect the right of
        any party to serve process in any other manner permitted by Law or to
        commence legal proceedings or to otherwise proceed against any party in
        any other jurisdiction.

               (b)     EACH OF THE PARTIES HERETO IRREVOCABLY AND
        UNCONDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVES
        TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
        AGREEMENT, ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM
        THEREIN.

               (c)     Each of the parties to this Agreement hereby irrevocably
        waives any objection which it may now or hereafter have to the laying of
        venue of any of the aforesaid actions or proceedings arising out of or
        in connection with this Agreement or any other Operative Agreement
        brought in the courts referred to in subsection (a) above and hereby
        further irrevocably waives and agrees not to plead or claim in any such
        court that any such action or proceeding brought in any such court has
        been brought in an inconvenient forum.

                                       67
   73

        12.8.  SEVERABILITY.

        Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

        12.9.  LIABILITY LIMITED.

               (a)     The Lenders, the Agent, the Lessee, the Owner Trustee and
        the Holders each acknowledge and agree that the Owner Trustee is (except
        as otherwise expressly provided herein or therein) entering into this
        Agreement and the other Operative Agreements to which it is a party
        (other than the Trust Agreement and to the extent otherwise provided in
        Section 6.1 of this Agreement), solely in its capacity as trustee under
        the Trust Agreement and not in its individual capacity and that the
        Trust Company shall not be liable or accountable under any circumstances
        whatsoever in its individual capacity for or on account of any
        statements, representations, warranties, covenants or obligations stated
        to be those of the Owner Trustee, except for its own gross negligence or
        willful misconduct and as otherwise expressly provided herein or in the
        other Operative Agreements.

               (b)     Anything to the contrary contained in this Agreement, the
        Credit Agreement, the Notes or in any other Operative Agreement
        notwithstanding, no Exculpated Person shall be personally liable in any
        respect for any liability or obligation arising hereunder or in any
        other Operative Agreement including without limitation the payment of
        the principal of, or interest on, the Notes, or for monetary damages for
        the breach of performance of any of the covenants contained in the
        Credit Agreement, the Notes, this Agreement, the Security Agreement or
        any of the other Operative Agreements. The Lenders, the Holders and the
        Agent agree that, in the event any remedies under any Operative
        Agreement are pursued, neither the Lenders, the Holders nor the Agent
        shall have any recourse against any Exculpated Person, for any
        deficiency, loss or Claim for monetary damages or otherwise resulting
        therefrom and recourse shall be had solely and exclusively against the
        Trust Estate (excluding Excepted Payments) and the Lessee (with respect
        to the Lessee's obligations under the Operative Agreements); but nothing
        contained herein shall be taken to prevent recourse against or the
        enforcement of remedies against the Trust Estate (excluding Excepted
        Payments) in respect of any and all liabilities, obligations and
        undertakings contained herein and/or in any other Operative Agreement.
        Notwithstanding the provisions of this Section, nothing in any Operative
        Agreement shall: (i) constitute a waiver, release or discharge of any
        indebtedness or obligation evidenced by the Notes and/or the
        Certificates arising under any Operative Agreement or secured by any
        Operative Agreement, but the same shall continue until paid or
        discharged; (ii) relieve any Exculpated Person from liability and
        responsibility for (but only to the extent of the damages arising by
        reason of): active waste knowingly committed by any Exculpated Person
        with respect to any Property, any

                                       68
   74

        fraud, gross negligence or willful misconduct on the part of any
        Exculpated Person; (iii) relieve any Exculpated Person from liability
        and responsibility for (but only to the extent of the moneys
        misappropriated, misapplied or not turned over) (A) except for Excepted
        Payments, misappropriation or misapplication by the Lessor (i.e.,
        application in a manner contrary to any of the Operative Agreements) of
        any insurance proceeds or condemnation award paid or delivered to the
        Lessor by any Person other than the Agent, (B) except for Excepted
        Payments, any deposits or any escrows or amounts owed by the
        Construction Agent under the Agency Agreement held by the Lessor or (C)
        except for Excepted Payments, any rent or other income received by the
        Lessor from the Lessee that is not turned over to the Agent; or (iv)
        affect or in any way limit the Agent's rights and remedies under any
        Operative Agreement with respect to the Rents and rights and powers of
        the Agent under the Operative Agreements or to obtain a judgment against
        the Lessee's interest in the Properties or the Agent's rights and powers
        to obtain a judgment against the Lessor (provided, that no deficiency
        judgment or other money judgment shall be enforced against any
        Exculpated Person except to the extent of the Lessor's interest in the
        Trust Estate (excluding Excepted Payments) or to the extent the Lessor
        may be liable as otherwise contemplated in clauses (ii) and (iii) of
        this Section 12.9(b)).

        12.10. RIGHTS OF THE LESSEE.

        If at any time all obligations (i) of the Owner Trustee under the Credit
Agreement, the Security Documents and the other Operative Agreements and (ii) of
the Lessee under the Operative Agreements have in each case been satisfied or
discharged in full, then the Lessee shall be entitled to (a) terminate the Lease
and (b) receive all amounts then held under the Operative Agreements and all
proceeds with respect to any of the Properties. Upon the termination of the
Lease pursuant to the foregoing clause (a), the Lessor shall transfer to the
Lessee all of its right, title and interest free and clear of the Lien of the
Lease, the Lien of the Security Documents and all Lessor Liens in and to any
Properties then subject to the Lease and any amounts or proceeds referred to in
the foregoing clause (b) shall be paid over to the Lessee.

        12.11. FURTHER ASSURANCES.

        The parties hereto shall promptly cause to be taken, executed,
acknowledged or delivered, at the sole expense of the Lessee, all such further
acts, conveyances, documents and assurances as the other parties may from time
to time reasonably request in order to carry out and effectuate the intent and
purposes of this Participation Agreement, the other Operative Agreements and the
transactions contemplated hereby and thereby (including without limitation the
preparation, execution and filing of any and all Uniform Commercial Code
financing statements, filings of Mortgage Instruments and other filings or
registrations which the parties hereto may from time to time request to be filed
or effected). The Lessee, at its own expense and without need of any prior
request from any other party, shall take such action as may be necessary
(including without limitation any action specified in the preceding sentence),
or (if the Owner Trustee shall so request) as so requested, in order to maintain
and protect all security interests provided for hereunder or under any other
Operative Agreement. In addition, in connection with the sale or other
disposition of any Property or any portion thereof, the Lessee agrees to execute
such instruments of conveyance as may be reasonably required in connection

                                       69
   75

therewith.

        12.12. CALCULATIONS UNDER OPERATIVE AGREEMENTS.

        The parties hereto agree that all calculations and numerical
determinations to be made under the Operative Agreements by the Owner Trustee
shall be made by the Agent and that such calculations and determinations shall
be conclusive and binding on the parties hereto in the absence of manifest
error.

        12.13. CONFIDENTIALITY.

        Each Financing Party agrees to keep confidential any information
furnished or made available to it by the Lessee or any of its Subsidiaries
pursuant to this Agreement that is marked confidential; provided that nothing
herein shall prevent any Financing Party from disclosing such information (a) to
any other Financing Party or any Affiliate of any Financing Party, or any
officer, director, employee, agent, or advisor of any Financing Party or
Affiliate of any Financing Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Financing Party other than as a result of a disclosure
by any Financing Party prohibited by this Agreement, (g) in connection with any
litigation to which such Financing Party or any of its Affiliates may be a party
(if such Financing Party, in its reasonable good faith judgment, believes such
disclosure is necessary, appropriate or beneficial), (h) to the extent necessary
in connection with the exercise of any remedy under this Agreement or any other
Operative Agreement, and (i) subject to provisions substantially similar to
those contained in this Section, to any actual or proposed participant or
assignee.

        12.14. FINANCIAL REPORTING/TAX CHARACTERIZATION.

        Lessee agrees to obtain advice from its own accountants and tax counsel
regarding the financial reporting treatment and the tax characterization of the
transactions described in the Operative Agreements. Lessee further agrees that
Lessee shall not rely upon any statement of any Financing Party or any of their
respective Affiliates and/or Subsidiaries regarding any such financial reporting
treatment and/or tax characterization. Lessee further agrees that no Financing
Party shall have any liability (including without limitation with respect to any
act or omission on the part of any Financing Party) with respect to the
financial reporting treatment and/or the tax characterization of the
transactions described in the Operative Agreements.

        12.15. SET-OFF.

        In addition to any rights now or hereafter granted under applicable Law
and not by way of limitation of any such rights, upon and after the occurrence
of any Event of Default and during the continuance thereof, the Lenders, the
Holders, their respective Affiliates and any assignee or participant of a Lender
or a Holder in accordance with the applicable provisions of the Operative
Agreements are hereby authorized by the Lessee at any time or from time to time
during such

                                       70
   76

period, without notice to the Lessee or to any other Person, any such notice
being hereby expressly waived, to set-off and to appropriate and to apply any
and all deposits (general or special, time or demand, including without
limitation indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by the Lenders,
the Holders, their respective Affiliates or any assignee or participant of a
Lender or a Holder in accordance with the applicable provisions of the Operative
Agreements to or for the credit or the account of the Lessee against and on
account of the obligations of the Lessee under the Operative Agreements
irrespective of whether or not (a) the Lenders or the Holders shall have made
any demand under any Operative Agreement or (b) the Agent shall have declared
any or all of the obligations of the Lessee under the Operative Agreements to be
due and payable and although such obligations shall be contingent or unmatured.
Notwithstanding the foregoing, neither the Agent nor any other Financing Party
shall exercise, or attempt to exercise, any right of setoff, banker's lien, or
the like, against any deposit account or property of the Lessee held by the
Agent or any other Financing Party, without the prior written consent of the
Majority Secured Parties, and any Financing Party violating this provision shall
indemnify the Agent and the other Financing Parties from any and all costs,
expenses, liabilities and damages resulting therefrom. The contractual
restriction on the exercise of setoff rights provided in the foregoing sentence
is solely for the benefit of the Agent and the Financing Parties and may not be
enforced by the Lessee.

                            [signature pages follow]

                                       71
   77

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.

CONSTRUCTION AGENT
AND LESSEE:                         LEXICON GENETICS INCORPORATED, as
                                    the Construction Agent and as the Lessee

                                    By:    /s/ Julia P. Gregory
                                           ------------------------------------
                                    Name:      Julia P. Gregory
                                           ------------------------------------
                                    Title:     EVP & CFO
                                           ------------------------------------

OWNER TRUSTEE
AND LESSOR:                         FIRST SECURITY BANK, NATIONAL
                                    ASSOCIATION, not individually, except as
                                    expressly stated herein, but solely as the
                                    Owner Trustee under the Lexi Trust 2000-1

                                    By:    /s/ C. Scott Nielsen
                                           ------------------------------------
                                    Name:      C. Scott Nielsen
                                           ------------------------------------
                                    Title:     Vice President
                                           ------------------------------------

AGENT AND LENDER:                   BANK OF AMERICA, N.A.,
                                    as a Lender and as the Agent

                                    By:    /s/ Wade Morgan
                                           ------------------------------------
                                    Name:      Wade Morgan
                                           ------------------------------------
                                    Title:     Vice President
                                           ------------------------------------

HOLDER:                             BANK OF AMERICA, N.A., as a Holder

                                    By:    /s/ Wade Morgan
                                           ------------------------------------
                                    Name:      Wade Morgan
                                           ------------------------------------
                                    Title:     Vice President
                                           ------------------------------------

   78
                                 Schedule 6.3(z)

                                  Brokers' Fees

                                     [NONE]

   79

                              Schedule 8.3B(a)(ii)

                                  Indebtedness

                                     [NONE]

   80

                                    EXHIBIT A

                                REQUISITION FORM
   (Pursuant to Sections 4.2, 5.2, 5.3 and 5.4 of the Participation Agreement)

        LEXICON GENETICS INCORPORATED, a Delaware corporation (the "Company")
hereby certifies as true and correct and delivers the following Requisition to
Bank of America, N.A., as the agent for the Lenders (hereinafter defined) and
respecting the Security Documents, as the agent for the Secured Parties (the
"Agent"):

        Reference is made herein to that certain Participation Agreement dated
as of October 19, 2000 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Participation Agreement") among the
Company, in its capacity as the Lessee and as the Construction Agent, First
Security Bank, National Association, as the Owner Trustee, the various banks and
other lending institutions which are parties thereto from time to time, as
holders (the "Holders"), the various banks and other lending institutions which
are parties thereto from time to time, as lenders (the "Lenders"), and the
Agent. Capitalized terms used herein but not otherwise defined herein shall have
the meanings set forth therefor in the Participation Agreement.

List the street address of each Property, if any, for which this Requisition is
submitted:

Check as applicable:

        ____ INITIAL CLOSING DATE: _________________
        (three (3) Business Days prior notice required for Advance)

        ____ PROPERTY CLOSING DATE:_________________
        (three (3) Business Days prior notice required for Advance)

        ____ CONSTRUCTION ADVANCE DATE:_____________
        (three (3) Business Days prior notice required for Advance)

1.      Transaction Expenses and other fees, expenses, disbursements and all
        other amounts contemplated to be financed under the Participation
        Agreement including without limitation any Work, broker's fees, taxes,
        recording fees and the like (with supporting invoices or closing
        statement attached):

                                      A-1
   81

                Party to Whom                            Amount Owed
                Amount is Owed                           (in U.S. Dollars)

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

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

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

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

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

2.      Description of Land (which shall be a legal description of the Land in
        connection with an Advance to pay Property Acquisition Costs): See
        attached Schedule 1

3.      Description of Improvements: See attached Schedule 2

4.      Description of Equipment: See attached Schedule 3

5.      Description of Work: See attached Schedule 4

6.      Aggregate Loans and Holder Advances requested since the Initial Closing
        Date with respect to each Property for which Advances are requested
        under this Requisition (listed on a Property by Property basis),
        including without limitation all amounts requested under this
        Requisition: [IDENTIFY ON A PROPERTY BY PROPERTY BASIS]

                $______________                              [Property]

        In connection with this Requisition, the Company hereby requests that
the Lenders make Loans to the Lessor in the amount of $______________ and that
the Holders make Holder Advances to the Lessor in the amount of
$________________. The Company hereby certifies (i) that the foregoing amounts
requested do not exceed the total aggregate of the Available Commitments plus
the Available Holder Commitments and (ii) each of the provisions of the
Participation Agreement applicable to the Loans and Holder Advances requested
hereunder have been complied with as of the date of this Requisition.

        The Company requests the Loans be allocated as follows:

                                                      
                $                                        Tranche A Loans as ABR Loans
                ----------------------------------
                $                                        Tranche B Loans as ABR Loans
                ----------------------------------
                $                                        Tranche A Loans as Eurodollar Loans/
                ----------------------------------       applicable Interest Period
                Interest Period
                               ----------
                $                                        Tranche B Loans as Eurodollar Loans/
                ----------------------------------       applicable Interest Period
                Interest Period
                               ----------

        The Company requests the Holder Advances be allocated as follows:

                                                      
                $                                        ABR Holder Advances
                ----------------------------------

                $                                        Eurodollar Holder Advances/
                ----------------------------------       applicable Interest Period
                Interest Period
                               ----------

                                      A-2
   82

7.      Each and every representation and warranty of the Company contained in
        the Operative Agreements to which it is a party is true and correct on
        and as of the date hereof.

8.      No Default or Event of Default has occurred and is continuing under any
        Operative Agreement.

9.      Each Operative Agreement to which the Company is a party is in full
        force and effect with respect to it.

10.     The Company has duly performed and complied with all covenants,
        agreements and conditions contained in the Participation Agreement or in
        any Operative Agreement required to be performed or complied with by it
        on or prior to the date hereof.

        The Company has caused this Requisition to be executed by its duly
authorized officer as of this _____ day of __________,_____.

                                                   LEXICON GENETICS INCORPORATED

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

                                      A-3
   83

                                   Schedule 1

                               Description of Land
                     (Legal Description and Street Address)

                                      A-4
   84

                                   Schedule 2

                           Description of Improvements

                                      A-5
   85

                                   Schedule 3

                            Description of Equipment

==================================================================================================================
                                                                                     
         General Description                    Make                    Model                 Serial Number
- ------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

==================================================================================================================

                                      A-6
   86

                                   Schedule 4

                                      Work

        Work Performed for which the Advance is requested:

                                      A-7
   87

                                    EXHIBIT B

                                   [reserved]

                                      B-1
   88

                                    EXHIBIT C

                          LEXICON GENETICS INCORPORATED

                              OFFICER'S CERTIFICATE
           (Pursuant to Section 5.3(z) of the Participation Agreement)

LEXICON GENETICS INCORPORATED, a Delaware corporation (the "Company"), DOES
HEREBY CERTIFY as follows:

        1.      Each and every representation and warranty of the Company
                contained in the Operative Agreements to which it is a party is
                true and correct on and as of the date hereof.

        2.      No Default or Event of Default has occurred and is continuing
                under any Operative Agreement.

        3.      Each Operative Agreement to which the Company is a party is in
                full force and effect with respect to it.

        4.      The Company has duly performed and complied with all covenants,
                agreements and conditions contained in the Participation
                Agreement (hereinafter defined) or in any Operative Agreement
                required to be performed or complied with by it on or prior to
                the date hereof.

Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of October 19, 2000 among the Company, as the Lessee and as
the Construction Agent, First Security Bank, National Association, as the Owner
Trustee, the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders") and Bank of America, N.A., as the agent for the Lenders
and respecting the Security Documents, as the agent for the Secured Parties (the
"Agent").

IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this _____ day of __________, ______.

                                                   LEXICON GENETICS INCORPORATED

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

                                      C-1
   89

                                    EXHIBIT D

                          LEXICON GENETICS INCORPORATED

                             SECRETARY'S CERTIFICATE
          (Pursuant to Section 5.3(aa) of the Participation Agreement)

        LEXICON GENETICS INCORPORATED, a Delaware corporation (the "Company")
DOES HEREBY CERTIFY as follows:

        1.      Attached hereto as Schedule 1 is a true, correct and complete
                copy of the resolutions of the Board of Directors of the Company
                duly adopted by the Board of Directors of the Company on
                __________. Such resolutions have not been amended, modified or
                rescinded since their date of adoption and remain in full force
                and effect as of the date hereof.

        2.      Attached hereto as Schedule 2 is a true, correct and complete
                copy of the Articles of Incorporation of the Company on file in
                the Office of the Secretary of State of Delaware. Such Articles
                of Incorporation have not been amended, modified or rescinded
                since their date of adoption and remain in full force and effect
                as of the date hereof.

        3.      Attached hereto as Schedule 3 is a true, correct and complete
                copy of the Bylaws of the Company. Such Bylaws have not been
                amended, modified or rescinded since their date of adoption and
                remain in full force and effect as of the date hereof.

        4.      The persons named below now hold the offices set forth opposite
                their names, and the signatures opposite their names and titles
                are their true and correct signatures.

                 Name                           Office                              Signature
                                                                       
         -------------------            -----------------------              -------------------------

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

IN WITNESS WHEREOF, the Company has caused this Secretary's Certificate to be
duly executed and delivered as of this _____ day of ___________, ______.

                                                   LEXICON GENETICS INCORPORATED

                                                   By:
                                                       -------------------------
                                                   Name:
                                                         -----------------------
                                                   Title:
                                                          ----------------------
                                      D-1
   90

                                   Schedule 1

                                Board Resolutions

                                      D-2
   91

                                   Schedule 2

                            Articles of Incorporation

                                      D-3
   92

                                   Schedule 3

                                     Bylaws

                                      D-4
   93

                                    EXHIBIT E

                    FIRST SECURITY BANK, NATIONAL ASSOCIATION

                              OFFICER'S CERTIFICATE
          (Pursuant to Section 5.3(bb) of the Participation Agreement)

        FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not individually (except with respect to paragraph 1 below, to the
extent any such representations and warranties are made in its individual
capacity) but solely as the owner trustee under the Lexi Trust 2000-1 (the
"Owner Trustee"), DOES HEREBY CERTIFY as follows:

        1.      Each and every representation and warranty of the Owner Trustee
                contained in the Operative Agreements to which it is a party is
                true and correct on and as of the date hereof.

        2.      Each Operative Agreement to which the Owner Trustee is a party
                is in full force and effect with respect to it.

        3.      The Owner Trustee has duly performed and complied with all
                covenants, agreements and conditions contained in the
                Participation Agreement (hereinafter defined) or in any
                Operative Agreement required to be performed or complied with by
                it on or prior to the date hereof.

Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as October 19, 2000 among Lexicon Genetics Incorporated, as the
Lessee and as the Construction Agent, the Owner Trustee, the various banks and
other lending institutions which are parties thereto from time to time, as
holders (the "Holders"), the various banks and other lending institutions which
are parties thereto from time to time, as lenders (the "Lenders") and Bank of
America, N.A., as the agent for the Lenders and respecting the Security
Documents, as the agent for the Secured Parties (the "Agent").

                                      E-1
   94

IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's Certificate to
be duly executed and delivered as of this _____ day of __________, ______.

                                                   FIRST SECURITY BANK, NATIONAL
                                                   ASSOCIATION, not
                                                   individually, except as
                                                   expressly stated herein, but
                                                   solely as the Owner Trustee
                                                   under the Lexi Trust 2000-1

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

                                      E-2
   95

                                    EXHIBIT F

                    FIRST SECURITY BANK, NATIONAL ASSOCIATION

                             SECRETARY'S CERTIFICATE
          (Pursuant to Section 5.3(cc) of the Participation Agreement)

                       CERTIFICATE OF ASSISTANT SECRETARY

        I, ______________________, duly elected and qualified Assistant
Secretary of the Board of Directors of First Security Bank, National Association
(the "Association"), hereby certify as follows:

        1.      The Association is a National Banking Association duly
organized, validly existing and in good standing under the laws of the United
States. With respect thereto the following is noted:

        A.      Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C.
                1, et seq., the Comptroller of the Currency charters and
                exercises regulatory and supervisory authority over all National
                Banking Associations;

        B.      On December 9, 1881, the First National Bank of Ogden, Utah was
                chartered as a National Banking Association under the laws of
                the United States and under Charter No. 2597;

        C.      On October 2, 1922, in connection with a consolidation of The
                First National Bank of Ogden, Ogden, Utah, and The Utah National
                Bank of Ogden, Ogden, Utah, the title was changed to "The First
                & Utah National Bank of Ogden"; on January 18, 1923, The First &
                Utah National Bank of Ogden changed its title to "First Utah
                National Bank of Ogden"; on January 19, 1926, the title was
                changed to "First National Bank of Ogden"; on February 24, 1934,
                the title was changed to "First Security Bank of Utah, National
                Association"; on June 21, 1996, the title was changed to "First
                Security Bank, National Association"; and

        D.      First Security Bank, National Association, Ogden, Utah,
                continues to hold a valid certificate to do business as a
                National Banking Association.

        2.      The Association's Articles of Association, as amended, are in
full force and effect, and a true, correct and complete copy is attached hereto
as Schedule A and incorporated herein by reference. Said Articles were last
amended October 20, 1975, as required by law on notice at a duly called special
meeting of the shareholders of the Association.

        3.      The Association's By-Laws, as amended, are in full force and
effect; and a true,

                                      F-1
   96

correct and complete copy is attached hereto as Schedule B and incorporated
herein by reference. Said By-Laws, still in full force and effect, were adopted
September 17, 1942, by resolution, after proper notice of consideration and
adoption of By-Laws was given to each and every shareholder, at a regularly
called meeting of the Board of Directors with a quorum present.

        4.      Pursuant to the authority vested in it by an Act of Congress
approved December 23, 1913 and known as the Federal Reserve Act, as amended, the
Federal Reserve Board (now the Board of Governors of the Federal Reserve System)
has granted to the Association now known as "First Security Bank, National
Association" of Ogden, Utah, the right to act, when not in contravention of
State or local law, as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver, committee of estates of
lunatics, or in any other fiduciary capacity in which State banks, trust
companies or other corporations which come into competition with National Banks
are permitted to act under the laws of the State of Utah; and under the
provisions of applicable law, the authority so granted remains in full force and
effect.

        5.      Pursuant to authority vested by Act of Congress (12 U.S.C. 92a
and 12 U.S.C. 481, as amended) the Comptroller of the Currency has issued
Regulation 9, as amended, dealing, in part, with the Fiduciary Powers of
National Banks, said regulation providing in subparagraph 9.7 (a) (1-2):

        (1)     The board of directors is responsible for the proper exercise of
                fiduciary powers by the Bank. All matters pertinent thereto,
                including the determination of policies, the investment and
                disposition of property held in fiduciary capacity, and the
                direction and review of the actions of all officers, employees,
                and committees utilized by the Bank in the exercise of its
                fiduciary powers, are the responsibility of the board. In
                discharging this responsibility, the board of directors may
                assign, by action duly entered in the minutes, the
                administration of such of the Bank's fiduciary powers as it may
                consider proper to assign to such director(s), officer(s),
                employee(s) or committee(s) as it may designate.

        (2)     No fiduciary account shall be accepted without the prior
                approval of the board, or of the director(s), officer(s), or
                committee(s) to whom the board may have designated the
                performance of that responsibility. . . .

        6.      A Resolution relating to Exercise of Fiduciary Powers was
adopted by the Board of Directors at a meeting held July 26, 1994 at which time
there was a quorum present; said resolution is still in full force and effect
and has not been rescinded. Said resolution is attached hereto as Schedule C and
incorporated herein by reference.

        7.      A Resolution relating to the Designation of Officers and
Employees to Exercise Fiduciary Powers was adopted by the Trust Policy Committee
at a meeting held February 7, 1996 at which time a quorum was present; said
resolution is still in full force and effect and has

                                      F-2
   97

not been rescinded. Said resolution is attached hereto as Schedule D and is
incorporated herein by reference.

        8.      Attached hereto as Schedule E and incorporated herein by
reference, is a listing of facsimile signatures of persons authorized (herein
"Authorized Signatory or Signatories") on behalf of the Association and its
Trust Group to act in exercise of its fiduciary powers subject to the
resolutions in Paragraphs 6 and 7, above.

        9.      The principal office of the First Security Bank, National
Association, Trust Group and of its departments, except for the St. George,
Utah, Ogden, Utah, and Provo, Utah, branch offices, is located at 79 South Main
Street, Salt Lake City, Utah 84111 and all records relating to fiduciary
accounts are located at such principal office of the Trust Group or in storage
facilities within Salt Lake County, Utah, except for those of the Ogden, Utah,
St. George, Utah, and Provo, Utah, branch offices, which are located at said
office.

        10.     Each Authorized Signatory (i) is a duly elected or appointed,
duly qualified officer or employee of the Association; (ii) holds the office or
job title set forth below his or her name on the date hereof; (iii) and the
facsimile signature appearing opposite the name of each such officer or employee
is a true replica of his or her signature.

                                      F-3
   98

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Association this __________ day of _________________, ______.

(SEAL)

                                                   -----------------------------
                                                   R. James Steenblik
                                                   Senior Vice President
                                                   Assistant Secretary

                                      F-4
   99

                                   Schedule A

                             Articles of Association

                                      F-5
   100

                                   Schedule B

                                     Bylaws

                                      F-6
   101

                                   Schedule C

                             Resolution Relating to
                          Exercise of Fiduciary Powers

                                      F-7
   102

                                   Schedule D

                           Resolution Relating to the
                      Designation of Officers and Employees
                          To Exercise Fiduciary Powers

                                      F-8
   103

                                   Schedule E

                       Authorized Signatory or Signatories

                                      F-9
   104

                                    EXHIBIT G

                                   [reserved]

                                      G-1
   105

                                    EXHIBIT H

                                   [reserved]

                                      H-1
   106

                                   EXHIBIT I-1

                          LEXICON GENETICS INCORPORATED

                              OFFICER'S CERTIFICATE
            (Pursuant to Section 5.5 of the Participation Agreement)

LEXICON GENETICS INCORPORATED, a Delaware corporation (the "Company") DOES
HEREBY CERTIFY as follows:

1.      The address for the subject Property is ________________________________
        ________________________________.

2.      The Completion Date for the construction of Improvements at the Property
        occurred on ______________.

3.      The aggregate Property Cost for the Property was $___________.

4.      Attached hereto as Schedule 1 is the detailed, itemized documentation
        supporting the asserted Property Cost figures.

5.      All representations and warranties of the Company in each Operative
        Agreement and in each certificate delivered pursuant thereto are true
        and correct as of the Completion Date.

Capitalized terms used in this Officer's Certificate and not otherwise defined
have the respective meanings ascribed thereto in the Participation Agreement
dated as of October 19, 2000 among the Company, as the Lessee and as the
Construction Agent, First Security Bank, National Association, as the Owner
Trustee, the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders"), Bank of America, N.A., as the agent for the Lenders and
respecting the Security Documents, as the agent for the Secured Parties.

         [The remainder of this page has been intentionally left blank.]

                                     I-1-1
   107

IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this ____ day of ______________, ______.

                                                   LEXICON GENETICS INCORPORATED

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

                                     I-1-2
   108

                                   Schedule I

          (Itemized Documentation in Support of Asserted Property Cost)

                                     I-1-3
   109

                                   EXHIBIT I-2

                          LEXICON GENETICS INCORPORATED

                              OFFICER'S CERTIFICATE
            (Pursuant to Section 5.5 of the Participation Agreement)

LEXICON GENETICS INCORPORATED, a Delaware corporation (the "Company") DOES
HEREBY CERTIFY as follows:

1.      The address for the subject Property is _______________________________
        ________________________________.

2.      The Punch List Completion Date for the construction of Improvements at
        the Property occurred on ______________.

3.      The aggregate Property Cost for the Property was $___________.

4.      Attached hereto as Schedule 1 is the detailed, itemized documentation
        supporting the asserted Property Cost figures (regarding such components
        of Property Cost not previously referenced in the Officer's Certificate
        delivered pursuant to Section 5.5(a) of the Participation Agreement).

5.      All representations and warranties of the Company in each Operative
        Agreement and in each certificate delivered pursuant thereto are true
        and correct as of the Punch List Completion Date.

Capitalized terms used in this Officer's Certificate and not otherwise defined
have the respective meanings ascribed thereto in the Participation Agreement
dated as of October 19, 2000 among the Company, as the Lessee and as the
Construction Agent, First Security Bank, National Association, as the Owner
Trustee, the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders"), Bank of America, N.A., as the agent for the Lenders and
respecting the Security Documents, as the agent for the Secured Parties.

         [The remainder of this page has been intentionally left blank.]

                                     I-2-1
   110

IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this ____ day of ______________, ______.

                                                   LEXICON GENETICS INCORPORATED

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

                                     I-2-2
   111

                                   Schedule I

          (Itemized Documentation in Support of Asserted Property Cost)

                                     I-2-3
   112

                                    EXHIBIT J

                      [Description of Material Litigation]
           (Pursuant to Section 6.2(d) of the Participation Agreement)

                                      None

                                      J-1
   113

                                    EXHIBIT K

                   Interest Rate/Holder Yield Selection Notice
           (Pursuant to Section 8.3(r) of the Participation Agreement)

To:     Bank of America, N.A., as Agent
        Bank of America Tower
        515 Congress Avenue
        Mail Code TX9-329-11-01
        Austin, TX 78701-3503
        Attention:  Wade Morgan
        Fax:     (512) 397-2052

        Reference is made hereby to (a) the Credit Agreement dated as of October
19, 2000 (as amended, modified, supplemented, restated and/or replaced from time
to time, the "Agreement") among First Security Bank, National Association, as
Owner Trustee under the Lexi Trust 2000-1 (the "Borrower"), the Lenders (as
defined in the Agreement) and Bank of America, N.A., as agent for the Lenders
(the "Agent"); (b) the Trust Agreement dated as of October 19, 2000 (as amended,
modified, supplemented, restated and/or replaced from time to time, the "Trust
Agreement") among the Holders and the Borrower; and (c) the Participation
Agreement dated as of October 19, 2000 (as amended, modified, supplemented,
restated and/or replaced from time to time, the "Participation Agreement") among
Lexicon Genetics Incorporated, as the lessee and construction agent (the
"Company"), the Borrower, the various banks and other lending institutions which
are parties thereto from time to time, as holders (the "Holders"), the Lenders
and the Agent. Capitalized terms used but not defined herein shall have the
respective meanings therefor set forth or referenced in Appendix A of the
Participation Agreement.

        [PURSUANT TO SECTIONS 9.1(c) AND 9.2(a) OF THE PARTICIPATION AGREEMENT,
THE COMPANY] [THE BORROWER] hereby confirms its prior notice of a selection of
types of Loans and Holder Advances and Interest Periods given to the Agent by
telephone at [_____ _.m] on [______, ____] to the following effect in respect of
the Loans and Holder Advances.

                                                                                         
            Type of Loan and
             Holder Advance
               (Check One)                    Interest Period(1)              Amount               Effective Date(2)

[ ]  Eurodollar Loan
[ ]  Eurodollar Holder Advance
[ ]  ABR Loan
[ ]  ABR Holder Advance

(1) For any Eurodollar Loan or Eurodollar Holder Advance, one, two, three or six
    months.
(2) At least three (3) Business Days after date of telephonic notice.

                                      K-1
   114

        This the _______ day of __________, ______.

                                                   [NAME OF BORROWER/COMPANY, AS
                                                   APPLICABLE]

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

                                      K-2
   115

                                    EXHIBIT L

                          LEXICON GENETICS INCORPORATED

                              OFFICER'S CERTIFICATE
          (Pursuant to Section 5.10(b) of the Participation Agreement)

        I, ______________________, _____________________ of LEXICON GENETICS
INCORPORATED, (the "Lessee") hereby certify that, to the best of my knowledge
and belief, with respect to that certain Participation Agreement dated as of
October 19, 2000 (as amended, modified, restated or supplemented from time to
time, the "Participation Agreement"; all of the defined terms in the
Participation Agreement are incorporated herein by reference) among the Lessee,
the Lessor, the Lenders, the Holders and Bank of America, N. A., as Agent:

        a.      The copies of the investment account statements which accompany
                this Officer's Certificate are true and correct copies of the
                investment account statements relating to the Collateral Account
                received by the Lessee from the Securities Intermediary covering
                the monthly period beginning on _____________, 200__ and ending
                on __________, 200__;

        b.      Since ___________, 200__ (the date of the last similar
                certification, or, if none, the Initial Closing Date) no Default
                or Event of Default has occurred;

        c.      Delivered herewith are detailed calculations demonstrating
                compliance by the Lessee with the provisions of Section 5.10(c)
                of the Participation Agreement, and setting forth (i) the
                Borrowing Base and (ii) the Class A Collateral Percentage, in
                each case pursuant to Section 5.10(b) of the Participation
                Agreement as of the end of the period referred to above; and

        d.      As of the date hereof, the amount of Class A Collateral
                represented by U.S. dollar denominated certificates of deposit
                of Bank of America, N.A. is $__________, which, after the
                Construction Period Termination Date, shall be greater than or
                equal to $5,000,000.

        This ______ day of ___________, ______.

                                                   LEXICON GENETICS INCORPORATED

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

                                      L-1
   116

                       Attachment to Officer's Certificate

                          COMPUTATION OF BORROWING BASE

                (ATTACH COPIES OF COLLATERAL ACCOUNT STATEMENTS)

                                      L-2
   117

                                    EXHIBIT M

                          LEXICON GENETICS INCORPORATED

                              OFFICER'S CERTIFICATE
        (Pursuant to Section 8.3A(a)(iii) of the Participation Agreement)

                This Certificate is delivered in accordance with the provisions
of Section 8.3A(a)(iii) of that certain Participation Agreement dated as of
October 19, 2000 (as amended, modified, extended, supplemented, restated and/or
replaced from time to time, the "Participation Agreement") among Lexicon
Genetics Incorporated, as the Lessee and as the Construction Agent, First
Security Bank, National Association, as the Owner Trustee and Lessor, Bank of
America, N.A., as holder, the various banks and other lending institutions which
are parties thereto from time to time, as lenders and the Agent. Capitalized
terms used herein but not otherwise defined herein shall have the meanings set
forth therefor in Appendix A to the Participation Agreement.

        The undersigned, being a Responsible Officer of Lessee hereby certifies,
in my official capacity and not in my individual capacity, that to the best of
my knowledge and belief, as of the fiscal [quarter/year] ended ___________,
_______:

        (a)     the financial statements accompanying this Certificate have been
prepared in accordance with GAAP and fairly present the financial condition of
the parties covered by such financial statements in all material respects as of
the end of such fiscal [quarter/year];

        (b)     during the fiscal [quarter/year] covered by such financial
statements, Lessee observed or performed all of its covenants and other
agreements in all material respects, and satisfied in all material respects
every material condition, contained in the Operative Agreements to be observed,
performed or satisfied by it;

        (c)     no Default or Event of Default exists; and

        (d)     attached is a statement of the Liquidity of the Consolidated
Group as of the date hereof and the amount of such Liquidity is in compliance
with the financial covenant set out in Section 8.3A(f) of the Participation
Agreement.

        This the _______________ day of ________________________, 200_.

                                                   LEXICON GENETICS INCORPORATED

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

                                      M-1
   118

                       Attachment to Officer's Certificate

                            [STATEMENT OF LIQUIDITY]

                                      M-2
   119
- --------------------------------------------------------------------------------

                                   Appendix A
                         Rules of Usage and Definitions

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

                                I. Rules of Usage

The following rules of usage shall apply to this Appendix A and the Operative
Agreements (and each appendix, schedule, exhibit and annex to the foregoing)
unless otherwise required by the context or unless otherwise defined therein:

        (a)     Except as otherwise expressly provided, any definitions set
forth herein or in any other document shall be equally applicable to the
singular and plural forms of the terms defined.

        (b)     Except as otherwise expressly provided, references in any
document to articles, sections, paragraphs, clauses, annexes, appendices,
schedules or exhibits are references to articles, sections, paragraphs, clauses,
annexes, appendices, schedules or exhibits in or to such document.

        (c)     The headings, subheadings and table of contents used in any
document are solely for convenience of reference and shall not constitute a part
of any such document nor shall they affect the meaning, construction or effect
of any provision thereof.

        (d)     References to any Person shall include such Person, its
successors, permitted assigns and permitted transferees.

        (e)     Except as otherwise expressly provided, reference to any
agreement means such agreement as amended, modified, extended, supplemented,
restated and/or replaced from time to time in accordance with the applicable
provisions thereof.

        (f)     Except as otherwise expressly provided, references to any law
includes any amendment or modification to such law and any rules or regulations
issued thereunder or any law enacted in substitution or replacement therefor.

        (g)     When used in any document, words such as "hereunder", "hereto",
"hereof" and "herein" and other words of like import shall, unless the context
clearly indicates to the contrary, refer to the whole of the applicable document
and not to any particular article, section, subsection, paragraph or clause
thereof.

        (h)     References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof the
rule of ejusdem generis shall not be applicable to limit a general statement,
followed by or referable to an enumeration of specific matters, to matters
similar to those specifically mentioned.

                                  Appendix A-1
   120

        (i)     References herein to "attorney's fees", "legal fees", "costs of
counsel" or other such references shall be deemed to include the allocated cost
of in-house counsel.

        (j)     Each of the parties to the Operative Agreements and their
counsel have reviewed and revised, or requested revisions to, the Operative
Agreements, and the usual rule of construction that any ambiguities are to be
resolved against the drafting party shall be inapplicable in the construction
and interpretation of the Operative Agreements and any amendments or exhibits
thereto.

        (k)     Capitalized terms used in any Operative Agreements which are not
defined in this Appendix A but are defined in another Operative Agreement shall
have the meaning so ascribed to such term in the applicable Operative Agreement.

        (l)     In computing any period of time for purposes of any Operative
Agreement, the mechanics for counting the number of days set forth in Rule 6 of
the Federal Rules of Civil Procedure shall be observed.

                                 II. Definitions

        "ABR" shall mean, for any day, a rate per annum equal to the greater of
(a) the Prime Lending Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus one-half of one percent (0.5%). For
purposes hereof: "Prime Lending Rate" shall mean the rate which the Agent
announces from time to time as its prime lending rate as in effect from time to
time. The Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. Any Lender
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate. The Prime Lending Rate shall change automatically and
without notice from time to time as and when the prime lending rate of the Agent
changes. "Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members or the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
(3) Federal funds brokers of recognized standing selected by it. Any change in
the ABR due to a change in the Prime Lending Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective day of
such change in the Prime Lending Rate or the Federal Funds Effective Rate,
respectively.

        "ABR Holder Advance" shall mean a Holder Advance bearing a Holder Yield
based on the ABR.

        "ABR Loans" shall mean Loans the rate of interest applicable to which is
based upon the ABR.

                                  Appendix A-2
   121

        "Acceleration" shall have the meaning given to such term in Section 6 of
the Credit Agreement.

        "Accounts" shall have the meaning given to such term in Section 1 of the
Security Agreement.

        "Acquisition Advance" shall have the meaning given to such term in
Section 5.3 of the Participation Agreement.

        "Acquisition Loan" shall mean any Loan made in connection with an
Acquisition Advance.

        "Additional Indebtedness" shall mean, with respect to any Person,
without duplication, (a) all obligations of such Person for borrowed money, (b)
all obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers entered into
in the ordinary course of business), (d) all obligations of such Person issued
or assumed as the deferred purchase price of property or services purchased by
such Person (other than trade debt incurred in the ordinary course of business
and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (e) the principal portion of all
obligations of such Person under Capitalized Leases, (f) all Support Obligations
of such Person with respect to Additional Indebtedness of another Person, (g)
the maximum available amount of all standby letters of credit or acceptances
issued or created for the account of such Person, (h) all Additional
Indebtedness of another Person secured by a Lien on any property of such Person,
whether or not such Additional Indebtedness has been assumed, provided that for
purposes hereof the amount of such Additional Indebtedness shall be limited to
the greater of (i) the amount of such Additional Indebtedness as to which there
is recourse to such Person and (ii) the fair market value of the property which
is subject to such Lien, (i) the outstanding attributed principal amount under
any securitization transaction, and (j) the principal balance outstanding under
any synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product to which such Person is a party,
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP. The
Additional Indebtedness of any Person shall include the Additional Indebtedness
of any partnership or joint venture in which such Person is a general partner or
joint venturer, but only to the extent to which there is recourse to such Person
for the payment of such Additional Indebtedness.

        "Advance" shall mean a Construction Advance or an Acquisition Advance.

        "Affiliate" shall mean, with respect to any Person, any Person or group
acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person.

        "After Tax Basis" shall mean, with respect to any payment to be
received, the amount of such payment increased so that, after deduction of the
amount of all taxes required to be paid by

                                  Appendix A-3
   122

the recipient calculated at the then maximum marginal rates generally applicable
to Persons of the same type as the recipients with respect to the receipt by the
recipient of such amounts (less any tax savings realized as a result of the
payment of the indemnified amount), such increased payment (as so reduced) is
equal to the payment otherwise required to be made.

        "Agency Agreement" shall mean the Agency Agreement, dated on or about
the Initial Closing Date between the Construction Agent and the Lessor.

        "Agency Agreement Event of Default" shall mean an "Event of Default" as
defined in Section 5.1 of the Agency Agreement.

        "Agent" shall mean Bank of America, N.A., as agent for the Lenders
pursuant to the Credit Agreement, or any successor agent appointed in accordance
with the terms of the Credit Agreement and respecting the Security Documents, as
agent for the Secured Parties.

        "Applicable Percentage" shall mean for each Eurodollar Loan and each
Eurodollar Holder Advance, the rate per annum set forth below opposite the
corresponding Class A Collateral Percentage determined as of the most recent
Calculation Date:

===============================================================================================
                                      APPLICABLE           APPLICABLE
                                      PERCENTAGE          PERCENTAGE FOR        APPLICABLE
                                         FOR               EURODOLLAR         PERCENTAGE FOR
 CLASS A COLLATERAL PERCENTAGE     EURODOLLAR LOANS      HOLDER ADVANCES       UNUSED FEES
- -----------------------------------------------------------------------------------------------
                                                                         
            >=75%                        .15%                 .90%                 .15%
- -----------------------------------------------------------------------------------------------
        >=50% BUT A75%                   .20%                 .95%                .1875%
- -----------------------------------------------------------------------------------------------
       >=25% BUT A 50%                   .25%                 1.00%               .1875%
- -----------------------------------------------------------------------------------------------
            <=25%                        .30%                 1.05%               .1875%
===============================================================================================

        The Applicable Percentage for Eurodollar Loans and Eurodollar Holder
Advances shall be determined and adjusted quarterly on the date (the
"Calculation Date") by which the Officer's Certificate is required to be
delivered to the Agent in accordance with the provisions of Section 5.10(b) of
the Participation Agreement; provided, however, that (x) the Applicable
Percentage for each Eurodollar Loan and Eurodollar Holder Advance from the
Initial Closing Date until the next occurring Calculation Date shall be
determined based on the Class A Collateral Percentage determined as of the date
of such Advance, (y) if the Lessee fails to provide the Officer's Certificate
referenced in Section 5.10(b) of the Participation Agreement to the Agent on or
before any Calculation Date, the Applicable Percentage for Eurodollar Loans
shall be .30%, the Applicable Percentage for Eurodollar Holder Advances shall be
1.05% from such Calculation Date until such time that the Officer's Certificate
referenced in Section 5.10(b) and the Applicable Percentage for Unused Fees
shall be .1875% of the Participation Agreement is provided to the Agent,
whereupon the Applicable Percentage shall be determined as specified above. Each
Applicable Percentage shall be effective from one Calculation Date until the
next Calculation Date. Any adjustment in the Applicable Percentage shall be
applicable to all existing Eurodollar Loans and Eurodollar Holder Advances, as
well as to any new Eurodollar

                                  Appendix A-4
   123

Loans and Eurodollar Holder Advances made or issued.

        "Appraisal" shall mean, with respect to any Property, an appraisal to be
delivered in connection with the Participation Agreement or in accordance with
the terms of the Lease, in each case prepared by a reputable appraiser
reasonably acceptable to the Agent, which, in the judgment of counsel to the
Agent, complies with all of the provisions of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, the rules and regulations
adopted pursuant thereto, and all other applicable Legal Requirements.

        "Appraisal Procedure" shall have the meaning given such term in Section
22.4 of the Lease.

        "Approved Bank" shall mean any bank whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof.

        "Approved State" shall mean each of the following: the State of Texas
and any other state within the continental United States proposed by the Lessee
and consented to in writing by the Agent.

        "Appurtenant Rights" shall mean (a) all agreements, easements, rights of
way or use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the Land underlying the Improvements or the Improvements, including without
limitation the use of any streets, ways, alleys, vaults or strips of land
adjoining, abutting, adjacent or contiguous to the Land and (b) all permits,
licenses and rights, whether or not of record, appurtenant to such Land or the
Improvements.

        "Asset Disposition" shall mean and include the sale, lease or other
disposition of any property or asset (including the capital stock of a
Subsidiary) by any member of the Consolidated Group, in any event excluding, for
purposes hereof, (a) the sale of inventory in the ordinary course of business,
(b) the sale or disposition of machinery and equipment no longer used or useful
in the conduct of business or (c) a sale, lease, transfer or disposition of
property or assets to any other member of the Consolidated Group.

        "Assignment and Acceptance" shall mean the Assignment and Acceptance in
the form attached to the Credit Agreement as Exhibit B.

        "Available Commitment" shall mean, as to any Lender at any time, an
amount equal to the excess, if any, of (a) the amount of such Lender's
Commitment over (b) the aggregate principal amount of all Loans made by such
Lender as of such date after giving effect to Section 5.2(d) of the
Participation Agreement (but without giving effect to any other repayments or
prepayments of any Loans hereunder).

        "Available Holder Commitments" shall mean an amount equal to the excess,
if any, of (a) the aggregate amount of the Holder Commitments over (b) the
aggregate amount of the Holder Advances made since the Initial Closing Date
after giving effect to Section 5.2(d) of the

                                  Appendix A-5
   124

Participation Agreement (but without giving effect to any other repayments or
prepayments of any Holder Advances).

        "Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled
"Bankruptcy," as now or hereafter in effect or any successor thereto.

        "Base Amount" shall have the meaning given to such term in Section
10.1(e) of the Lease.

        "Basic Documents" shall mean the following: the Participation Agreement,
the Agency Agreement, the Trust Agreement, the Certificates, the Credit
Agreement, the Notes, the Lease and the Security Agreement.

        "Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b) the
Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is
due.

        "Basic Term" shall have the meaning specified in Section 2.2 of the
Lease.

        "Basic Term Commencement Date" shall have the meaning specified in
Section 2.2 of the Lease.

        "Basic Term Expiration Date" shall have the meaning specified in Section
2.2 of the Lease.

        "Benefited Lender" shall have the meaning specified in Section 9.10(a)
of the Credit Agreement.

        "Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and
substance reasonably satisfactory to the Agent.

        "Board" shall mean the Board of Governors of the Federal Reserve System
of the United States (or any successor).

        "Borrower" shall mean the Owner Trustee, not in its individual capacity
but as Borrower under the Credit Agreement.

        "Borrowing Base" shall mean, on any date of determination, the sum of
(i) that Class A Collateral described in clause (a) of the definition of Class A
Collateral; plus (ii) the product of the market value of that Class A Collateral
described in clause (b) of the definition of Class A Collateral multiplied by
90%; plus (iii) the market value of that Class A Collateral described in clause
(c) of the definition of Class A Collateral; plus (iv) the product of the market
value of that Class B Collateral described in clause (a) of the definition of
Class B Collateral multiplied by 80%; plus (v) the product of the market value
of that Class B Collateral described in clause (b) of the definition of Class B
Collateral multiplied by 95%.

        "Borrowing Date" shall mean any Business Day specified in a notice
delivered pursuant

                                  Appendix A-6
   125

to Section 2.3 of the Credit Agreement as a date on which the Lessor requests
the Lenders to make Loans thereunder.

        "Budgeted Total Property Cost" shall mean, at any date of determination
with respect to any Construction Period Property, an amount equal to the
aggregate amount which the Construction Agent in good faith expects to be
expended in order to achieve Completion with respect to such Property.

        "Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Charlotte, North Carolina or any other states
from which the Agent, any Lender or any Holder funds or engages in
administrative activities with respect to the transactions under the Operative
Agreements are authorized or required by law to close; provided, however, that
when used in connection with a Eurodollar Loan, the term "Business Day" shall
also exclude any day on which banks are not open for dealings in dollar deposits
in the London interbank market.

        "Businesses" shall have the meaning assigned to such term in Section
6.2(y) of the Participation Agreement.

        "Capitalized Lease" shall mean, as applied to any Person, any lease of
property (whether real, personal, tangible, intangible or mixed of such Person)
by such Person as the lessee which would be capitalized on a balance sheet of
such Person prepared in accordance with GAAP.

        "Capital Stock" shall mean any nonredeemable capital stock of the Lessee
or any of its Subsidiaries or of any other applicable Person, whether common or
preferred.

        "Cash Equivalents" shall mean (a) securities issued or directly and
fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than twelve
months from the date of acquisition, (b) Dollar denominated certificates of
deposit of (i) any Lender or the Holder, or (ii) any domestic commercial bank of
recognized standing (y) having capital and surplus in excess of $750,000,000 and
(z) whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent thereof
(any such bank being an "Approved Bank"), in each case with maturities of not
more than 270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six
months of the date of acquisition and (d) the common or preferred Capital Stock
of any Person listed on a national securities exchange; provided that all Cash
Equivalents shall be of a type eligible to be held with a Federal Reserve Bank
or the Depository Trust Company.

        "Casualty" shall mean any damage or destruction of all or any portion of
the Property as a result of a fire or other casualty.

        "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and

                                  Appendix A-7
   126

Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986.

        "Certificate" shall mean a Certificate in favor of each Holder regarding
the Holder Commitment of such Holder issued pursuant to the terms and conditions
of the Trust Agreement in favor of each Holder.

        "Chattel Paper" shall have the meaning given to such term in Section 1
of the Security Agreement.

        "Claims" shall mean any and all obligations, liabilities, losses,
actions, suits, penalties, claims, demands, costs and expenses (including
without limitation reasonable attorney's fees and expenses) of any nature
whatsoever arising out of or related to the Operative Agreements, the
transactions contemplated therein or any Property.

        "Class A Collateral" shall mean Securities Collateral consisting of any
of the following types:

                (a)     [reserved];

                (b)     securities issued or directly and fully guaranteed by
        the United States of America having maturities of not more than five (5)
        years from the applicable date of determination; and

                (c)     U.S. dollar denominated certificates of deposit of Bank
        of America, N.A.

        "Class A Collateral Percentage" shall mean, at any time, the ratio
(expressed as a percentage) of the market value of Class A Collateral to the
Borrowing Base.

        "Class B Collateral" shall mean Securities Collateral consisting of any
of the following types:

                (a)     securities issued by an agency or instrumentality of,
        and insured by, the United States of America, in each case having
        maturities of not more than five (5) years from the applicable date of
        determination; and

                (b)     commercial paper issued by any Approved Bank (or by the
        parent company thereof) or by any domestic corporation, which commercial
        paper (i) is rated A-1 (or the equivalent thereof) or better by S&P or
        P-1 (or the equivalent thereof) or better by Moody's and (ii) has a
        maturity of not more than one (1) year.

        "Closing Date" shall mean the Initial Closing Date and each Property
Closing Date.

        "Code" shall mean the Internal Revenue Code of 1986 together with rules
and regulations promulgated thereunder, as amended from time to time, or any
successor statute thereto.

                                  Appendix A-8
   127

        "Collateral" shall mean all assets of the Lessor, the Construction Agent
and the Lessee, now owned or hereafter acquired, upon which a Lien is purported
to be created by one or more of the Security Documents.

        "Collateral Account" shall mean, collectively, the securities collateral
account (including without limitation the Cash Equivalents and other securities
in such account, excluding U.S. dollar denominated certificates of deposit of
Bank of America, N.A. which shall be maintained in the possession, custody and
control of the Agent outside of such securities collateral account) which is the
subject of the Collateral Agreement and held with the Securities Intermediary as
account number 873-758.

        "Collateral Agreement" shall mean the Assignment of Collateral Account
and Security Agreement dated on or about the Initial Closing Date executed by
Lexicon Genetics Incorporated and agreed and accepted by Bank of America, N.A.

        "Collateral Agreement Event of Default" shall have the meaning specified
in Section 3.1 of the Collateral Agreement.

        "Commitment" shall mean, as to any Lender, the Lender Commitment of such
Lender.

        "Commitment Percentage" shall mean, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Loans then outstanding constitutes of the aggregate principal amount of all of
the Loans then outstanding), and such Commitment Percentage shall take into
account both the Lender's Tranche A Commitment and the Lender's Tranche B
Commitment.

        "Commitment Period" shall mean the period from and including the Initial
Closing Date to and including the Construction Period Termination Date, or such
earlier date as the Commitments shall terminate as provided in the Credit
Agreement or the Holder Commitment shall terminate as provided in the Trust
Agreement.

        "Completion" shall mean, with respect to a Property, such time as the
acquisition, construction, installation, testing and substantial completion
(exclusive of punch list items) of the Improvements on such Property has been
achieved in substantial accordance with the Plans and Specifications, the Agency
Agreement and/or the Lease, and in compliance with all Legal Requirements and
Insurance Requirements and, to the extent attainable in accordance with
applicable law, a certificate of occupancy has been issued with respect to such
Property by the appropriate governmental entity or, if such certificate of
occupancy is not so attainable, then an architect's certificate (in form and
substance reasonably satisfactory to the Agent) has been issued with respect to
such Property certifying Substantial Completion (exclusive of punch list items)
of the Improvements on such Property has been achieved in substantial accordance
with the Plans and Specifications (except if non-compliance, individually or in
the aggregate, shall not have and could not reasonably be expected to have a
Material Adverse Effect or if compliance with any of the foregoing is otherwise
waived by the Agent upon instruction from the Majority Secured Parties). If the
Lessor purchases a Property that includes existing Improvements that are

                                  Appendix A-9
   128

to be immediately occupied by the Lessee without any improvements financed
pursuant to the Operative Agreements, the date of Completion for such Property
shall be the Property Closing Date.

        "Completion Date" shall mean, with respect to a Property, the date on
which Completion for such Property has occurred.

        "Condemnation" shall mean any taking or sale of the use, access,
occupancy, easement rights or title to any Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including without limitation an action by a
Governmental Authority to change the grade of, or widen the streets adjacent to,
any Property or alter the pedestrian or vehicular traffic flow to any Property
so as to result in a change in access to such Property, or by or on account of
an eviction by paramount title or any transfer made in lieu of any such
proceeding or action.

        "Consolidated Group" shall mean Lessee and its Consolidated
Subsidiaries.

        "Consolidated Net Worth" shall mean, as of any date with respect to the
Consolidated Group on a consolidated basis, shareholders' equity or net worth,
as determined in accordance with GAAP.

        "Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary
of such Person which under the rules of GAAP consistently applied should have
its financial results consolidated with those of such Person for purposes of
financial accounting statements.

        "Consolidated Tangible Net Worth" shall mean, as of any date with
respect to the Consolidated Group on a consolidated basis, Consolidated Net
Worth minus intangible assets as determined in accordance with GAAP.

        "Construction Advance" shall mean an advance of funds to pay Property
Costs pursuant to Section 5.4 of the Participation Agreement.

        "Construction Agent" shall mean Lexicon Genetics Incorporated, a
Delaware corporation, as the construction agent under the Agency Agreement.

        "Construction Agent Options" shall have the meaning given to such term
in Section 2.1 of the Agency Agreement.

        "Construction Budget" shall mean a budget setting forth the cost of
acquisition, installation, testing, constructing and developing any Property as
determined by the Construction Agent in its reasonable, good faith judgment.

        "Construction Commencement Date" shall mean, with respect to
Improvements, the date on which construction of such Improvements commences
pursuant to the Agency Agreement.

                                 Appendix A-10
   129

        "Construction Contract" shall mean any contract entered into between the
Construction Agent or the Lessee with a Contractor for the construction of
Improvements or any portion thereof on the Property.

        "Construction Failure" shall have the meaning specified in Section 2.1
of the Agency Agreement.

        "Construction Loan" shall mean any Loan made in connection with a
Construction Advance.

        "Construction Loan Property Cost" shall mean with respect to each
Construction Period Property at the date of determination, an amount equal to
(a) the aggregate principal amount of Construction Loans made on or prior to
such date with respect to the Property, as increased pursuant to Section 2.3(b)
of the Credit Agreement, minus (b) the aggregate principal amount of prepayments
or repayments of the Loans allocated to reduce the Construction Loan Property
Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement.

        "Construction Period" shall mean, with respect to a Property, the period
commencing on the Construction Commencement Date for such Property and ending on
the Completion Date for such Property.

        "Construction Period Property" means, at any date of determination, any
Property as to which the Rent Commencement Date has not occurred on or prior to
such date.

        "Construction Period Termination Date" shall mean (a) the earlier of (i)
the date that the Commitments have been terminated in their entirety in
accordance with the terms of Section 2.5(a) of the Credit Agreement, or (ii) the
second anniversary of the Initial Closing Date or (b) such later date as may be
agreed to by the Majority Secured Parties.

        "Contractor" shall mean each entity with whom the Construction Agent or
the Lessee contracts to construct any Improvements or any portion thereof on the
Property.

        "Control Agreement" shall mean that certain Control Agreement, dated on
or about the Initial Closing Date, among the Agent, the Lessee and the
Securities Intermediary.

        "Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Lessee, are treated as a single employer
under Section 414 of the Code.

        "Co-Owner Trustee" shall have the meaning specified in Section 9.2 of
the Trust Agreement.

        "Credit Agreement" shall mean the Credit Agreement, dated on or about
the Initial Closing Date, among the Lessor, the Agent and the Lenders, as
specified therein.

        "Credit Agreement Default" shall mean any event or condition which, with
the lapse of

                                 Appendix A-11
   130

time or the giving of notice, or both, would constitute a Credit Agreement Event
of Default.

        "Credit Agreement Event of Default" shall mean any event or condition
defined as an "Event of Default" in Section 6 of the Credit Agreement.

        "Credit Documents" shall mean the Participation Agreement, the Agency
Agreement, the Credit Agreement, the Notes and the Security Documents.

        "Deed" shall mean a special warranty deed regarding the Land and/or
Improvements in form and substance satisfactory to the Agent.

        "Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.

        "Defaulting Holder" shall have the meaning given to such term in Section
12.4 of the Participation Agreement.

        "Defaulting Lender" shall have the meaning given to such term in Section
12.4 of the Participation Agreement.

        "Deficiency Balance" shall have the meaning given in Section 22.1(b) of
the Lease Agreement.

        "Documents" shall have the meaning given to such term in Section 1 of
the Security Agreement.

        "Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.

        "EBITDA" means, for the four fiscal quarters immediately preceding any
date of calculation, with respect to any Person and its Consolidated
Subsidiaries (as determined in accordance with GAAP), an amount equal to:

                (a)     consolidated net income for such period, as determined
        in accordance with GAAP (excluding the effect of any extraordinary gains
        or losses resulting from the sale of property or non-cash gains or
        losses outside of the ordinary course of business); plus

                (b)     amounts that, in the detemination of consolidated net
        income for such period, have been deducted for:

                        (i)     consolidated interest expense for such period,
                as determined in accordance with GAAP; and

                        (ii)    total federal, state, local, foreign or other
                income or franchise taxes for such period; and

                        (iii)   depreciation and amortization for such period.

                                 Appendix A-12
   131

        "Election Notice" shall have the meaning given to such term in Section
20.1 of the Lease.

        "Eligible Assignee" shall mean (i) a Lender or a Holder, as the case may
be; (ii) an Affiliate of a Lender or a Holder, as the case may be; and (iii) any
other Person approved by the Agent and, unless an Event of Default has occurred
and is continuing at the time any assignment is effected in accordance with the
Operative Agreements, the Lessee or the Construction Agent, such approval not to
be unreasonably withheld or delayed by the Lessee or the Construction Agent and
such approval to be deemed given by the Lessee or the Construction Agent if no
objection is received by the assigning Lender or Holder and the Agent from the
Lessee or the Construction Agent within two Business Days after notice of such
proposed assignment has been provided by the assigning Lender or Holder to the
Lessee or the Construction Agent; provided, however, that neither the Lessee nor
the Construction Agent nor an Affiliate of the Lessee or the Construction Agent
shall qualify as an Eligible Assignee.

        "Eligible Investments" shall mean Investments which are: (a) cash and
Cash Equivalents; (b) accounts receivable created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (c) Investments consisting of capital stock, obligations,
securities or other property received in settlement of accounts receivable
(created in the ordinary course of business) from bankrupt obligors; (d)
Investments in joint ventures to the extent such joint ventures are only engaged
in or pursuing the same lines of business in which the Lessee is engaged as of
the Initial Closing Date; and (e) subject to Section 8.3B(d)(iii) of the
Participation Agreement, Investments in the capital stock of any Person (a
"Merged Person") pursuant to the merger of such Merged Person with and into the
Lessee, provided, that, in connection with any such merger, and when aggregated
with all other such mergers occurring within the twelve month period immediately
preceding such merger, (i) the Lessee shall not have issued, and shall not be or
have become obligated to issue, shares of its Capital Stock in an amount in
excess of 15% of the amount of all shares of its Capital Stock (such percentage
to be determined on a class by class basis for the Capital Stock of the Lessee)
issued and outstanding immediately prior to such merger, (ii) the aggregate
EBITDA for all Merged Persons within such twelve month period shall be greater
than or equal to negative $12.5 million, (iii) the shareholders or board of
directors, or both, of such Merged Person shall have approved such merger
pursuant to, and such merger shall be permitted under, applicable Law and (iv)
such Merged Person shall be engaged in or pursuing the same or similar lines of
business in which the Lessee is engaged as of the Initial Closing Date.

        "Employee Benefit Plan" or "Plan" shall mean an employee benefit plan
(within the meaning of Section 3(3) of ERISA, including without limitation any
Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code
and as interpreted by the Internal Revenue Service and the Department of Labor
in rules, regulations, releases or bulletins in effect on any Closing Date.

        "Environmental Claims" shall mean any investigation, notice, violation,
demand, allegation, action, suit, injunction, judgment, order, consent decree,
penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection with, an actual or
alleged violation of, any Environmental Law, (b) in connection with any
Hazardous Substance, (c) from any abatement, removal, remedial,

                                 Appendix A-13
   132

corrective, or other response action in connection with a Hazardous Substance,
Environmental Law, or other order of a Tribunal or (d) from any actual or
alleged damage, injury, threat, or harm to health, safety, natural resources, or
the environment.

        "Environmental Laws" shall mean any Law, permit, consent, approval,
license, award, or other authorization or requirement of any Tribunal relating
to emissions, discharges, releases, threatened releases of any Hazardous
Substance into ambient air, surface water, ground water, publicly owned
treatment works, septic system, or land, or otherwise relating to the
manufacture, processing, distribution, handling, storage, treatment, generation,
use, transport or disposal of Hazardous Substances, pollution or to the
protection of health or the environment, including without limitation CERCLA,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., and
state statutes analogous thereto.

        "Environmental Violation" shall mean any activity, occurrence or
condition that violates or threatens (if the threat requires remediation under
any Environmental Law and is not remediated during any grace period allowed
under such Environmental Law) to violate or results in or threatens (if the
threat requires remediation under any Environmental Law and is not remediated
during any grace period allowed under such Environmental Law) to result in
noncompliance with any Environmental Law.

        "Equipment" shall mean equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired using the proceeds of the Loans or the Holder Advances by the
Construction Agent, the Lessee or the Lessor and all improvements and
modifications thereto and replacements thereof, whether or not now owned or
hereafter acquired or now or subsequently attached to, contained in or used or
usable in any way in connection with any operation of any Improvements,
including but without limiting the generality of the foregoing, all equipment
described in the Appraisal including without limitation all heating, electrical,
and mechanical equipment, lighting, switchboards, plumbing, ventilation, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and systems,
cleaning systems (including without limitation window cleaning apparatus),
telephones, communication systems (including without limitation satellite dishes
and antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems, motors,
engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and
fixtures of every kind and description.

        "Equipment Schedule" shall mean (a) each Equipment Schedule attached to
the applicable Requisition and (b) each Equipment Schedule attached to the
applicable Lease Supplement.

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections thereto.

        "ERISA Affiliate" shall mean an entity which is under common control
with Lessee within

                                 Appendix A-14
   133

the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which
includes Lessee and which is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code.

        "ERISA Event" shall mean (a) with respect to any Plan, the occurrence of
a Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (b) the withdrawal by Lessee, any
Subsidiary of Lessee or any ERISA Affiliate from a Multiple Employer Plan during
a plan year in which it was a substantial employer (as such term is defined in
Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(c) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (d) the
institution of proceedings to terminate or the actual termination of a Plan by
the PBGC under Section 4042 of ERISA; (e) any event or condition which would
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; (f) the
complete or partial withdrawal of Lessee, any Subsidiary of Lessee or any ERISA
Affiliate from a Multiemployer Plan; (g) the conditions for imposition of a lien
under Section 302(f) of ERISA exist with respect to any Plan; or (h) the
adoption of an amendment to any Plan requiring the provision of security to such
Plan pursuant to Section 307 of ERISA.

        "Eurocurrency Reserve Requirements" shall mean for any day as applied to
a Eurodollar Loan or Eurodollar Holder Advance, the aggregate (without
duplication) of the maximum rates (expressed as a decimal) of reserve
requirements in effect on such day (including without limitation basic,
supplemental, marginal and emergency reserves under any regulations of the Board
or other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed on eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D) maintained by a
member bank of the Federal Reserve System.

        "Eurodollar Holder Advance" shall mean a Holder Advance bearing a Holder
Yield based on the Eurodollar Rate.

        "Eurodollar Loans" shall mean Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.

        "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar
Loan or Eurodollar Holder Advance comprising part of the same borrowing or
advance (including without limitation conversions, extensions and renewals), a
per annum interest rate equal to a fraction (a) expressed as a percentage
(rounded upward to the nearest one-sixteenth (1/16) of one percent (1%)) (i)
with the numerator equal to a per annum interest rate determined by the Agent on
the basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day of such
Interest Period), reported on Telerate page 3750 as of 11:00 a.m. (London time)
two (2) Business Days before the first day of such Interest Period and (ii) the
denominator equal to 100% minus the Eurocurrency Reserve Requirements. In the
event no such offered rates appear on Telerate page 3750, "Eurodollar Rate"
shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder
Advance comprising part of the same borrowing or advance (including without
limitation conversions, extensions and renewals), a per annum interest rate
equal to a fraction (b) expressed as a percentage (rounded upward to the nearest
one-sixteenth (1/16) of one percent (1%)) (i) with the

                                 Appendix A-15
   134

numerator equal to a per annum interest rate determined by the Agent on the
basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day of such
Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) two (2) Business Days before the first day of such Interest Period
(provided that if at least two (2) such offered rates appear on the Reuters
Screen LIBO Page, the rate in respect of such Interest Period will be the
arithmetic mean of such offered rates) and (ii) the denominator equal to 100%
minus the Eurocurrency Reserve Requirements. As used herein, "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor
Money Rates Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of major
banks) ("RMMRS"). In the event the RMMRS is not then quoting such offered rates,
"Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or
Eurodollar Holder Advance comprising part of the same borrowing or advance
(including without limitation conversions, extensions and renewals), a per annum
interest rate equal to a fraction (c) expressed as a percentage (rounded upward
to the nearest one-sixteenth (1/16) of one percent (1%)) (i) with the numerator
equal to the average per annum rate of interest determined by the office of the
Agent (each such determination to be conclusive and binding) as of two (2)
Business Days prior to the first day of such Interest Period, as the effective
rate at which deposits in immediately available funds in U.S. dollars are being,
have been, or would be offered or quoted by the Agent to major banks in the
applicable interbank market for Eurodollar deposits at any time during the
Business Day which is the second Business Day immediately preceding the first
day of such Interest Period, for a term comparable to such Interest Period and
in the amount of the requested Eurodollar Loan and/or Eurodollar Holder Advance
and (ii) the denominator equal to 100% minus the Eurocurrency Reserve
Requirements. If no such offers or quotes are generally available for such
amount, then the Agent shall be entitled to determine the Eurodollar Rate from
another recognized service or interbank quotation, or by estimating in its
reasonable judgment the per annum rate (as described above) that would be
applicable if such quote or offers were generally available.

        "Event of Default" shall mean a Lease Event of Default, an Agency
Agreement Event of Default, a Collateral Agreement Event of Default or a Credit
Agreement Event of Default.

        "Excepted Payments" shall mean: (a) all indemnity payments (including
without limitation indemnity payments made pursuant to Section 11 of the
Participation Agreement), whether made by adjustment to Basic Rent or otherwise,
to which the Owner Trustee, any Holder or any of their respective Affiliates,
agents, officers, directors or employees is entitled;

        (b)     any amounts (other than Basic Rent or Termination Value) payable
under any Operative Agreement to reimburse the Owner Trustee, any Holder or any
of their respective Affiliates (including without limitation the reasonable
expenses of the Owner Trustee, the Trust Company and the Holders incurred in
connection with any such payment) for performing or complying with any of the
obligations of the Lessee under and as permitted by any Operative Agreement;

        (c)     any amount payable to a Holder by any transferee of such
interest of a Holder as the purchase price of such Holder's interest in the
Trust Estate (or a portion thereof);

                                 Appendix A-16
   135

        (d)     any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies other than such
proceeds or payments payable to the Agent or any Lender;

        (e)     any insurance proceeds under policies maintained by the Owner
Trustee or any Holder;

        (f)     Transaction Expenses or other amounts, fees, disbursements or
expenses paid or payable to or for the benefit of the Owner Trustee or any
Holder;

        (g)     any payments in respect of interest to the extent attributable
to payments referred to in clauses (a) through (f) above; and

        (h)     any rights of either the Owner Trustee or the Trust Company to
demand, collect, sue for or otherwise receive and enforce payment of any of the
foregoing amounts, provided that such rights shall not include the right to
terminate the Lease.

        "Excess Proceeds" shall mean the excess, if any, of the aggregate of all
awards, compensation or insurance proceeds payable in connection with a Casualty
or Condemnation over the Termination Value paid by the Lessee pursuant to the
Lease with respect to such Casualty or Condemnation.

        "Excluded Costs" shall mean, with respect to the period prior to the
Completion Date for the applicable Property, (a) indemnity payments for damage
claims (excluding damage claims caused by or resulting from the Lessee's actions
or failure to act and damage claims covered pursuant to Sections 11.3, 11.4,
11.6 and/or 11.7 of the Participation Agreement) brought by parties other than
the Financing Parties and (b) property costs arising from acts outside the
control of any Lessee Related Party.

        "Excluded Taxes" shall have the meaning given to such term in Section
11.2(b) of the Participation Agreement.

        "Exculpated Persons" shall mean the Trust Company (except with respect
to the representations and warranties and the other obligations of the Trust
Company pursuant to the Operative Agreements expressly undertaken in its
individual capacity, including without limitation the representations and
warranties of the Trust Company pursuant to Section 6.1 of the Participation
Agreement, the obligations of the Trust Company pursuant to Section 8.2 of the
Participation Agreement and the obligations of the Trust Company pursuant to the
Trust Agreement), the Holders (except with respect to the obligations of the
Holders pursuant to the Participation Agreement and the Trust Agreement
expressly undertaken in their respective individual capacities), their officers,
directors, shareholders and partners.

        "Exempt Payments" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.

                                 Appendix A-17
   136

        "Existing Blue Building" shall mean that certain office building
containing approximately 35,060 square feet of rentable area located at 4000
Research Forest Boulevard, The Woodlands, Texas.

        "Existing Office Building" shall mean the existing office building
located at 4000 Research Drive, The Woodlands, Texas, 77381, used and operated
by Lexicon as of the Initial Closing Date.

        "Existing Structure" shall mean any of the Existing Blue Building, the
Existing Office Building and the Existing Vivarium.

        "Existing Vivarium" shall mean that certain vivarium containing
approximately 28,865 square feet of rentable area located at 4000 Research
Forest Boulevard, The Woodlands, Texas, used and operated by Lexicon as of the
Initial Closing Date.

        "Expiration Date" shall mean either (a) the Basic Term Expiration Date
or (b) the last day of the applicable Renewal Term; provided, in no event shall
the Expiration Date be later than the annual anniversary of the Initial Closing
Date occurring in the year 2013, unless such later date has been expressly
agreed to in writing by each of the Lessor, the Lessee, the Agent, the Lenders
and the Holders.

        "Extra Budget Costs" shall mean any cost in excess of the sum of the
Available Commitments and the Available Holder Commitments as of the Initial
Closing Date (less any Unfunded Amounts) necessary for Completion of all
Properties (a) in accordance with the original Construction Budget for each
Property (as modified in accordance with the Operative Agreements) and (b) on or
prior to the Construction Period Termination Date.

        "Fair Market Sales Value" shall mean, with respect to any Property or
any other asset, the amount, which in any event, shall not be less than zero
(0), that would be paid in cash in an arms-length transaction between an
informed and willing purchaser and an informed and willing seller, neither of
whom is under any compulsion to purchase or sell, respectively, such Property or
other asset. Fair Market Sales Value of any Property shall be determined based
on the assumption that, except for purposes of Section 17 of the Lease, such
Property is in the condition and state of repair required under Section 10.1 of
the Lease and the Lessee is in compliance with the other requirements of the
Operative Agreements.

        "Federal Funds Effective Rate" shall have the meaning given to such term
in the definition of ABR.

        "Fee Letter" shall mean that certain fee letter, dated as of August 3,
2000, between Banc of America Securities, LLC and Lexicon Genetics Incorporated.

        "Final Completion" shall mean, with respect to a Property, final
completion of the Property which shall include the Completion thereof and the
completion of all punch list items with respect thereto.

                                 Appendix A-18
   137

        "Final Completion Date" shall mean the date on which Final Completion
has occurred with respect to all Properties but in no event later than ninety
(90) days after the Construction Period Termination Date.

        "Final Completion Escrow Balance" shall mean the aggregate balance of
the escrow account referenced in Section 5.11 of the Participation Agreement as
of the Final Completion Date.

        "Financing Parties" shall mean the Lessor, the Owner Trustee, in its
trust capacity, the Trust Company, the Agent, the Holders and the Lenders.

        "Fixtures" shall mean all fixtures relating to the Improvements,
including without limitation all components thereof, located in or on the
Improvements, together with all replacements, modifications, alterations and
additions thereto.

        "Force Majeure Event" shall mean any event beyond the control of any
Lessee Related Party, other than a Casualty or Condemnation, including without
limitation strikes or lockouts (but only when the Construction Agent is legally
prevented from securing replacement labor or materials as a result thereof),
adverse soil conditions, acts of God, adverse weather conditions, inability to
obtain labor or materials after all possible efforts have been expended by the
Construction Agent, governmental activities, civil commotion and enemy action;
but excluding any event, cause or condition that results from the Construction
Agent's financial condition.

        "Form 1001" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.

        "Form 4224" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.

        "GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the accounting principles board of the
American Institute of Certified Public Accountants, and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, that are applicable to the circumstances as of the
date of determination.

        "Governmental Action" shall mean all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions, publications,
filings, notices to and declarations of or with, or required by, any
Governmental Authority, or required by any Legal Requirement, and shall include,
without limitation, all environmental and operating permits and licenses that
are required for the full use, occupancy, zoning and operating of the Property.

        "Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

                                 Appendix A-19
   138

        "Ground Lease" shall mean a ground lease (in form and substance
satisfactory to the Agent) respecting any Property (a) owned by the Lessee (or a
parent corporation or any Subsidiary of the Lessee) and leased to the Lessor
where such lease has at least a ninety-nine (99) year term and payments set at
no more than $1.00 per year, or (b) where such lease is subject to such other
terms and conditions as are satisfactory to the Agent.

        "Hard Costs" shall mean all costs and expenses payable for supplies,
materials, labor and profit with respect to the Improvements under any
Construction Contract.

        "Hazardous Substance" shall mean any of the following: (a) any petroleum
or petroleum product, explosives, radioactive materials, asbestos, formaldehyde,
polychlorinated biphenyls, lead and radon gas; (b) any substance, material,
product, derivative, compound or mixture, mineral, chemical, waste, gas, medical
waste, or pollutant, in each case whether naturally occurring, man-made or the
by-product of any process, that is toxic, harmful or hazardous to the
environment or human health or safety as determined in accordance with any
Environmental Law; or (c) any substance, material, product, derivative, compound
or mixture, mineral, chemical, waste, gas, medical waste or pollutant that would
support the assertion of any claim under any Environmental Law, whether or not
defined as hazardous as such under any Environmental Law.

        "Holder Advance" shall mean any advance made by any Holder to the Owner
Trustee pursuant to the terms of the Trust Agreement or the Participation
Agreement.

        "Holder Amount" shall mean as of any date, the aggregate amount of
Holder Advances made by each Holder to the Trust Estate pursuant to Section 2 of
the Participation Agreement and Section 3.1 of the Trust Agreement less any
payments of any Holder Advances received by the Holders pursuant to Section 3.4
of the Trust Agreement.

        "Holder Commitments" shall mean the Holder Commitment of each Holder as
set forth in Schedule I to the Trust Agreement as such Schedule I may be amended
and replaced from time to time.

        "Holder Construction Property Cost" shall mean, with respect to each
Construction Period Property, at any date of determination, an amount equal to
the outstanding Holder Advances made with respect thereto under the Trust
Agreement.

        "Holder Overdue Rate" shall mean the lesser of (a) the then current rate
of Holder Yield respecting the particular amount in question plus two percent
(2%) and (b) the highest nonusurious rate permitted by applicable law.

        "Holder Property Cost" shall mean with respect to a Property an amount
equal to the outstanding Holder Advances with respect thereto.

        "Holder Unused Fee" shall have the meaning given to such term in Section
7.4 of the Participation Agreement.

                                 Appendix A-20
   139

        "Holder Yield" shall mean with respect to Holder Advances from time to
time either the Eurodollar Rate plus the Applicable Percentage or the ABR plus
 .75% as elected by the Owner Trustee from time to time with respect to such
Holder Advances in accordance with the terms of the Trust Agreement; provided,
however, (a) upon delivery of the notice described in Section 3.7(c) of the
Trust Agreement, the outstanding Holder Advances of each Holder shall bear a
yield at the ABR plus .75% applicable from time to time from and after the dates
and during the periods specified in Section 3.7(c) of the Trust Agreement, (b)
upon the delivery by a Holder of the notice described in Section 11.3(e) of the
Participation Agreement, the Holder Advances of such Holder shall bear a yield
at the ABR plus .75% applicable from time to time after the dates and during the
periods specified in Section 11.3(e) of the Participation Agreement and (c) upon
the increase of the Holder Commitments pursuant to Section 5.9 of the
Participation Agreement, the Holder Advances of each Holder shall bear a yield
at a rate as determined by the Majority Holders.

        "Holders" shall mean Bank of America, N.A. and shall include the other
banks and financial institutions which may be from time to time holders of
Certificates in connection with the Lexi Trust 2000-1.

        "Impositions" shall mean any and all liabilities, losses, expenses,
costs, charges and Liens of any kind whatsoever for fees, taxes, levies,
imposts, duties, charges, assessments or withholdings ("Taxes") including but
not limited to (i) real and personal property taxes, including without
limitation personal property taxes on any property covered by the Lease that is
classified by Governmental Authorities as personal property, and real estate or
ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes
and other similar taxes (including rent taxes and intangibles taxes); (iii)
excise taxes; (iv) real estate transfer taxes, conveyance taxes, stamp taxes and
documentary recording taxes and fees; (v) taxes that are or are in the nature of
franchise, income, value added, privilege and doing business taxes, license and
registration fees; (vi) assessments on any Property, including without
limitation all assessments for public Improvements or benefits, whether or not
such improvements are commenced or completed within the Term; and (vii) taxes,
Liens, assessments or charges asserted, imposed or assessed by the PBGC or any
governmental authority succeeding to or performing functions similar to, the
PBGC; and in each case all interest, additions to tax and penalties thereon,
which at any time prior to, during or with respect to the Term or in respect of
any period for which the Lessee shall be obligated to pay Supplemental Rent, may
be levied, assessed or imposed by any Governmental Authority upon or with
respect to (a) any Property or any part thereof or interest therein; (b) the
leasing, financing, refinancing, demolition, construction, substitution,
subleasing, assignment, control, condition, occupancy, servicing, maintenance,
repair, ownership, possession, activity conducted on, delivery, insuring, use,
operation, improvement, sale, transfer of title, return or other disposition of
such Property or any part thereof or interest therein; (c) the Notes, other
indebtedness with respect to any Property, or the Certificates, or any part
thereof or interest therein; (d) the rentals, receipts or earnings arising from
any Property or any part thereof or interest therein; (e) the Operative
Agreements, the performance thereof, or any payment made or accrued pursuant
thereto; (f) the income or other proceeds received with respect to any Property
or any part thereof or interest therein upon the sale or disposition thereof;
(g) any contract (including the Agency Agreement) relating to the construction,
acquisition or delivery of the Improvements or any part thereof or interest
therein; (h) the issuance of the Notes or the

                                 Appendix A-21
   140

Certificates; (i) the Owner Trustee, the Trust or the Trust Estate; or (j)
otherwise in connection with the transactions contemplated by the Operative
Agreements.

        "Improvements" shall mean, with respect to the construction, renovations
and/or Modifications on any Land, all buildings, structures, Fixtures, and other
improvements of every kind existing at any time and from time to time on or
under the Land purchased or otherwise acquired using the proceeds of the Loans
or the Holder Advances or which is subject to a Ground Lease, together with any
and all appurtenances to such buildings, structures or improvements, including
without limitation sidewalks, utility pipes, conduits and lines, parking areas
and roadways, and including without limitation all Modifications and other
additions to or changes in the Improvements at any time, including without
limitation (a) any Improvements existing as of the Property Closing Date as such
Improvements may be referenced on the applicable Requisition and (b) any
Improvements made subsequent to such Property Closing Date.

        "Indebtedness" of a Person shall mean, without duplication, such
Person's:

                (a)     obligations for borrowed money;

                (b)     obligations representing the deferred purchase price of
        Property (whether real, personal, tangible, intangible or mixed) or
        services (other than accounts payable arising in the ordinary course of
        such Person's business payable on terms customary in the trade);

                (c)     obligations secured by liens or payable out of the
        proceeds or production from property now or hereafter owned or acquired
        by such Person;

                (d)     obligations which are evidenced by notes, acceptances,
        convertible debentures or other instruments;

                (e)     Capitalized Lease obligations and the principal balance
        outstanding under any synthetic lease, tax retention operating lease,
        off-balance sheet loan or similar off-balance sheet financing product to
        which such Person is a party, where such transaction is considered
        borrowed money indebtedness for tax purposes but is classified as an
        operating lease in accordance with GAAP;

                (f)     net liabilities under interest rate swap, exchange or
        cap agreements;

                (g)     Support Obligations with respect to Indebtedness
        described in paragraphs (a) through (f) above; and

                (h)     to the extent not otherwise described in paragraphs (a)
        through (g) above, all Additional Indebtedness.

        "Indemnified Person" shall mean the Lessor, the Owner Trustee, in its
individual and its trust capacity, the Trust, the Trust Company, the Agent, the
Holders, the Lenders, the Securities Intermediary and their respective
successors, assigns, directors, shareholders, partners, officers,

                                 Appendix A-22
   141

employees, agents and Affiliates.

        "Indemnity Provider" shall mean, respecting each Property, the Lessee.

        "Initial Closing Date" shall mean October 19, 2000.

        "Initial Construction Advance" shall mean any initial Advance to pay
for: (a) Property Costs for construction of any Improvements; and (b) the
Property Costs of restoring or repairing any Property which is required to be
restored or repaired in accordance with Section 15.1(e) of the Lease.

        "Instruments" shall have the meaning given to such term in Section 1 of
the Security Agreement.

        "Insurance Requirements" shall mean all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Agency Agreement to be maintained by the Construction Agent, and
all requirements of the issuer of any such policy and, regarding self insurance,
any other requirements of the Lessee.

        "Interest Period" shall mean during the Commitment Period and thereafter
as to any Eurodollar Loan or Eurodollar Holder Advance (i) with respect to the
initial Interest Period, the period beginning on the date of the first
Eurodollar Loan and Eurodollar Holder Advance and ending one (1) month, two (2)
months, three (3) months or (to the extent available to all Lenders and all
Holders) six (6) months thereafter, as selected by the Lessor (in the case of a
Eurodollar Loan) or the Owner Trustee (in the case of a Eurodollar Holder
Advance) in its applicable notice given with respect thereto and (ii)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance
and ending one (1) month, two (2) months, three (3) months or (to the extent
available to all Lenders and all Holders) six (6) months thereafter, as selected
by the Lessor by irrevocable notice to the Agent (in the case of a Eurodollar
Loan) or by the Owner Trustee (in the case of a Eurodollar Holder Advance) in
each case not less than three (3) Business Days prior to the last day of the
then current Interest Period with respect thereto; provided, however, that all
of the foregoing provisions relating to Interest Periods are subject to the
following: (A) if any Interest Period would end on a day which is not a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next succeeding
calendar month, then on the next preceding Business Day), (B) no Interest Period
shall extend beyond the Maturity Date or the Expiration Date, as the case may
be, (C) where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the Interest Period
is to end, such Interest Period shall end on the last Business Day of such
calendar month and (D) there shall not be more than four (4) Interest Periods
outstanding at any one (1) time.

        "Investment Company Act" shall mean the Investment Company Act of 1940,
as amended, together with the rules and regulations promulgated thereunder.

        "Investments", in any Person, shall mean any loan or advance to such
Person, any purchase

                                 Appendix A-23
   142

or other acquisition of any capital stock, warrants, rights, options,
obligations or other securities of, or equity interest in, such Person, any
capital contribution to such Person or any other investment in such Person,
including, without limitation, any guaranty obligation incurred for the benefit
of such Person.

        "Land" shall mean a parcel of real property described on (a) the
Requisition issued by the Construction Agent on the Property Closing Date
relating to such parcel and (b) the schedules to the applicable Lease Supplement
executed and delivered in accordance with the requirements of Section 2.4 of the
Lease.

        "Larger Tract Purchase Agreement" shall mean the Contract for Purchase
and Sale of Real Property effective as of October 12, 2000 between The Woodlands
Commercial Properties Company, L.P. and Lexicon Genetics Incorporated, with
respect to that certain tract of land containing approximately 6.7677 acres
located in the John Taylor Survey, A-547, in Montgomery County, Texas, as more
particularly described in Exhibit A thereto.

        "Law" shall mean any federal, state, local or foreign statute, law,
ordinance, regulation, rule, directive or any order, writ, injunction or decree
of any Tribunal.

        "Lease" or "Lease Agreement" shall mean the Lease Agreement dated on or
about the Initial Closing Date, between the Lessor and the Lessee, together with
any Lease Supplements thereto.

        "Lease Accounting Rules" shall have the meaning given such term in
Section 2.2(c) of the Trust Agreement.

        "Lease Default" shall mean any event or condition which, with the lapse
of time or the giving of notice, or both, would constitute a Lease Event of
Default.

        "Lease Event of Default" shall have the meaning specified in Section
17.1 of the Lease.

        "Lease Supplement" shall mean each Lease Supplement substantially in the
form of Exhibit A to the Lease, together with all attachments and schedules
thereto.

        "Legal Requirements" shall mean all foreign, federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Owner Trustee, any
Holder, the Lessor, the Lessee, the Agent, any Lender or any Property, Land,
Improvement, Equipment or the taxation, demolition, construction, use or
alteration of such Improvements, whether now or hereafter enacted and in force,
including without limitation any that require repairs, modifications or
alterations in or to any Property or in any way limit the use and enjoyment
thereof (including without limitation all building, zoning and fire codes and
the Americans with Disabilities Act of 1990, 42 U.S.C. Section 12101 et. seq.,
and any other similar federal, state or local laws or ordinances and the
regulations promulgated thereunder) and any that may relate to environmental
requirements (including without limitation all Environmental Laws), and all
permits, certificates of occupancy, licenses, authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and

                                 Appendix A-24
   143

encumbrances contained in any instruments which are either of record or known to
the Lessee affecting any Property or the Appurtenant Rights.

        "Lender Commitments" shall mean the Lender Commitment of each Lender as
set forth in Schedule 2.1 to the Credit Agreement as such Schedule 2.1 may be
amended and replaced from time to time.

        "Lender Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdiction in order to procure a security interest in favor of the
Agent in the Collateral subject to the Security Documents.

        "Lender Unused Fee" shall have the meaning given to such term in Section
7.4 of the Participation Agreement.

        "Lenders" shall mean Bank of America, N.A. and shall include the other
banks and financial institutions which may be from time to time party to the
Participation Agreement and the Credit Agreement.

        "Lessee" shall have the meaning set forth in the Lease.

        "Lessee Related Party" shall mean the Lessee, the Construction Agent,
any of their respective agents, employees, officers, directors, contractors
and/or subcontractors.

        "Lessor" shall mean the Owner Trustee, not in its individual capacity,
but as the Lessor under the Lease.

        "Lessor Basic Rent" shall mean the scheduled Holder Yield and the Holder
Amounts (if any) due on the Rent Commencement Date and on any Scheduled Interest
Payment Date pursuant to the Trust Agreement and the Holders Amounts (if any)
due on the Payment Date immediately following the Final Completion Date (but not
including interest on (a) any such scheduled Holder Yield and repayment of
Holder Amounts (if any) due on the Holder Advances prior to the Rent
Commencement Date with respect to the Property to which such Holder Advances
relate or (b) overdue amounts under the Trust Agreement or otherwise), including
specifically, without limitation, any such payments due in connection with any
extension of the Maturity Date of the Holder Advances pursuant to Section 3.3 of
the Trust Agreement; provided, Lessor Basic Rent shall not include Holder Yield
calculated on any Holder Advance used to pay any Excluded Cost unless a Lease
Event of Default shall have occurred and be continuing.

        "Lessor Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdictions in order to protect the Lessor's interest under the
Lease to the extent the Lease is a security agreement or a mortgage.

        "Lessor Funding Obligations" shall mean Transaction Expenses, fees,
expenses, indemnity obligations and other disbursements payable by the Lessor
regarding the Initial Closing Date, any Property Closing Date, any Acquisition
Advance, any Construction Advance

                                 Appendix A-25
   144

or any Property prior to the Rent Commencement Date as specified pursuant to the
Operative Agreements (excluding amounts payable by the Trust Company but
including, without limitation, amounts payable by the Lessor pursuant to the
applicable provisions of Sections 7 and 11.8 of the Participation Agreement and
Section 2.1 of the Agency Agreement).

        "Lessor Lien" shall mean any Lien, true lease or sublease or disposition
of title of any Property arising as a result of (a) any claim against the
Lessor, the Trust Company, the Agent or any Financing Party, not resulting from
the transactions contemplated by the Operative Agreements, (b) any act or
omission of the Lessor, the Trust Company, the Agent or any Financing Party,
which is not required or permitted by the Operative Agreements or is in
violation of any of the terms of the Operative Agreements, (c) any claim against
the Lessor, the Trust Company, the Agent or any Financing Party, with respect to
Taxes or Transaction Expenses against which the Lessee is not required to
indemnify pursuant to Section 11 of the Participation Agreement or (d) any claim
against the Lessor or the Agent arising out of any transfer by the Lessor of all
or any portion of the interest of the Lessor in the Properties, the Trust Estate
or the Operative Agreements other than the transfer of title to or possession of
any Properties by the Lessor pursuant to and in accordance with the Lease, the
Credit Agreement, the Security Agreement or the Participation Agreement or
pursuant to the exercise of the remedies set forth in Article XVII of the Lease,
Article V of the Agency Agreement or Section 6 of the Credit Agreement.

        "Lexi Trust 2000-1" shall mean the grantor trust created pursuant to the
terms and conditions of the Trust Agreement.

        "Lexicon" shall mean Lexicon Genetics Incorporated, a Delaware
corporation, in its individual capacity, in its capacities as Lessee and
Construction Agent, and in any other capacity it may assume under the Operative
Agreements.

        "Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), option, preference, priority or charge of any kind, including,
without limitation, any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, and any lease in the nature thereof.

        "Limited Recourse Amount" shall mean with respect to all the Properties
on an aggregate basis, an amount equal to the sum of the Termination Values with
respect to all the Properties on an aggregate basis on each Payment Date, less
the Maximum Residual Guarantee Amount as of such date with respect to all the
Properties on an aggregate basis.

        "Liquidity" shall mean, as of any date of calculation thereof, the
aggregate of all cash and Cash Equivalents owned by the Consolidated Group on
such date; provided that, Liquidity as calculated hereunder shall exclude all
Cash Equivalents held as Securities Collateral.

        "Loan Basic Rent" shall mean the scheduled interest and principal
payments (if any) due on the Loans on the Rent Commencement Date and on any
Scheduled Interest Payment Date pursuant to the Credit Agreement and the
principal payments (if any) due on the Payment Date

                                 Appendix A-26
   145

immediately following the Final Completion Date (but not including interest on
(a) any such Loan due prior to the Rent Commencement Date with respect to the
Property to which such Loan relates or (b) any overdue amounts under Section
2.8(b) of the Credit Agreement or otherwise), including specifically, without
limitation, any such payments due in connection with any extension of the
Maturity Date of the Loans pursuant to Section 2.6(e) of the Credit Agreement;
provided, Loan Basic Rent shall not include interest calculated on any Loan used
to pay any Excluded Cost unless a Lease Event of Default shall have occurred and
be continuing.

        "Loan Property Cost" shall mean, with respect to each Property at any
date of determination, an amount equal to (a) the aggregate principal amount all
Loans (including without limitation all Acquisition Loans and Construction
Loans) made on or prior to such date with respect to such Property, as increased
pursuant to Section 2.3(b) of the Credit Agreement, minus (b) the aggregate
amount of prepayments or repayments as the case may be of the Loans allocated to
reduce the Loan Property Cost of such Property pursuant to Section 2.6(c) of the
Credit Agreement.

        "Loans" shall mean the loans extended pursuant to the Credit Agreement
and shall include both the Tranche A Loans and the Tranche B Loans.

        "Majority Holders" shall mean at any time, Holders whose Holder Advances
outstanding represent at least sixty-six and two thirds percent (66 2/3%) of (a)
the aggregate Holder Advances outstanding or (b) to the extent there are no
Holder Advances outstanding, the aggregate Holder Commitments.

        "Majority Lenders" shall mean at any time, Lenders whose Loans
outstanding represent at least sixty-six and two thirds percent (66 2/3%) of (a)
the aggregate Loans outstanding or (b) to the extent there are no Loans
outstanding, the aggregate of the Lender Commitments.

        "Majority Secured Parties" shall mean at any time, Lenders and Holders
whose Loans and Holder Advances outstanding represent at least sixty-six and two
thirds percent (66 2/3%) of (a) the aggregate Advances outstanding or (b) to the
extent there are no Advances outstanding, the sum of the aggregate Holder
Commitments plus the aggregate Lender Commitments.

        "Margin Base" shall mean on any date of determination, the sum of (i)
that Class A Collateral described in clause (a) of the definition of Class A
Collateral; plus (ii) the product of the market value of that Class A Collateral
described in clause (b) of the definition of Class A Collateral multiplied by
95%; plus (iii) the market value of that Class A Collateral described in clause
(c) of the definition of Class A Collateral; plus (iv) the product of the market
value of that Class B Collateral described in clause (a) of the definition of
Class B Collateral multiplied by 85%; plus (v) the product of the market value
of that Class B Collateral described in clause (b) of the definition of Class B
Collateral multiplied by 95%.

        "Marketing Period" shall mean, if the Lessee has given a Sale Notice in
accordance with Section 20.1 of the Lease, the period commencing on the date
such Sale Notice is given and ending on the Expiration Date.

                                 Appendix A-27
   146

        "Material Adverse Effect" shall mean a material adverse effect on (a)
the business, condition (financial or otherwise), assets, liabilities or
operations of the Lessee, (b) the ability of the Lessee to perform its
obligations under any Operative Agreement to which it is a party, (c) the
validity or enforceability of any Operative Agreement or the rights and remedies
of the Agent, the Lenders, the Holders, or the Lessor thereunder, (d) the
validity, priority or enforceability of any Lien on any Property created by any
of the Operative Agreements (other than any of same caused by the Agent or a
Lender), or (e) the value, utility or useful life of any Property or the use, or
ability of the Lessee to use, any Property for the purpose for which it was
intended.

        "Maturity Date" shall mean the Expiration Date.

        "Maximum Amount" shall mean (a) one hundred percent (100%) of the cost
of the Land or the Ground Lease (as the case may be) for all, but not less than
all, the Construction Period Properties (collectively, the "Land Cost"), plus
(b) the product of eighty-nine and nine tenths percent (89.9%) multiplied by the
following: (the aggregate Termination Value for all, but not less than all, the
Construction Period Properties, minus the Land Cost, minus all structuring fees
payable in connection with the transactions evidenced by the Operative
Agreements to Banc of America Securities, LLC, Bank of America, N.A. and/or any
Affiliates of either of the foregoing, minus accrued, unpaid Holder Yield
respecting any and all Construction Period Properties), minus the amount of each
Advance used to pay Excluded Costs minus (c) the accreted value (calculated at a
rate of 6.94% per annum) of any payments previously made by the Construction
Agent or the Lessee regarding any and all Construction Period Properties and not
reimbursed plus (d) the aggregate Termination Value for all Properties from time
to time for which the Rent Commencement Date has occurred at such time.

        "Maximum Residual Guarantee Amount" shall mean an amount equal to the
product of the aggregate Property Cost for all of Properties (minus the amount
of each Advance used to pay Excluded Costs) times eighty-six and thirty-one one
hundredths percent (86.31%).

        "Modifications" shall have the meaning specified in Section 11.1(a) of
the Lease.

        "Moody's" shall mean Moody's Investors Service, Inc., or any successor
or assignee of the business of such company in the business of rating
securities.

        "Mortgage Instrument" shall mean any mortgage, deed of trust or any
other instrument executed by the Owner Trustee and the Lessee (or regarding any
property subject to a Ground Lease, the applicable Affiliate of the Lessee) in
favor of the Agent (for the benefit of the Lenders and the Holders) and
evidencing a Lien on the Property, in form and substance reasonably acceptable
to the Agent.

        "Multiemployer Plan" shall mean any Plan described in Section 4001(a)(3)
or Section 3(37) of ERISA to which contributions are or have been made or
required by the Lessee or any of its Subsidiaries or ERISA Affiliates.

        "Multiple Employer Plan" shall mean a Plan to which the Lessee, any
Subsidiary of

                                 Appendix A-28
   147

Lessee or any ERISA Affiliate and at least one (1) other employer other than the
Lessee, any Subsidiary of the Lessee or any ERISA Affiliate is making or
accruing an obligation to make, or has made or accrued an obligation to make,
contributions.

        "New Facility" shall have the meaning given to such term in Section 28.1
of the Lease.

        "Non-Integral Equipment" shall mean Equipment which (a) is personal
property that is readily removable without causing material damage to the
applicable Property and (b) is not integral or necessary, respecting the
applicable Property, for compliance with Section 8.3 of the Lease or otherwise
to the structure thereof, the mechanical operation thereof, the electrical
systems thereof or otherwise with respect to any aspect of the physical plant
thereof.

        "Notes" shall mean those notes issued to the Lenders pursuant to the
Credit Agreement and shall include both the Tranche A Notes and the Tranche B
Notes.

        "Obligations" shall have the meaning given to such term in Section 1 of
the Security Agreement.

        "Officer's Certificate" with respect to any person shall mean a
certificate executed on behalf of such person by a Responsible Officer who has
made or caused to be made such examination or investigation as is necessary to
enable such Responsible Officer to express an informed opinion with respect to
the subject matter of such Officer's Certificate.

        "Operative Agreements" shall mean the following: the Participation
Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the
Credit Agreement, the Notes, the Lease, the Lease Supplements (and memoranda of
the Lease and each Lease Supplement in a form reasonably acceptable to the
Agent), the Security Agreement, the Mortgage Instruments, the other Security
Documents, the Ground Leases, the Deeds and the Bills of Sale, the Collateral
Agreement, the Control Agreement and any and all other agreements, documents and
instruments executed in connection with any of the foregoing.

        "Original Executed Counterpart" shall have the meaning given to such
term in Section 5 of Exhibit A to the Lease.

        "Overdue Interest" shall mean any interest payable pursuant to Section
2.8(b) of the Credit Agreement.

        "Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and
any other amount owed under or with respect to the Credit Agreement or the
Security Documents, the rate specified in Section 2.8(b) of the Credit
Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any
other amount owed under or with respect to the Trust Agreement, the Holder
Overdue Rate, and (c) with respect to any other amount, the amount referred to
in clause (y) of Section 2.8(b) of the Credit Agreement.

        "Owner Trustee," "Borrower" or "Lessor" shall mean First Security Bank,
National Association, not individually, except as expressly stated in the
various Operative Agreements,

                                 Appendix A-29
   148

but solely as the Owner Trustee under the Lexi Trust 2000-1, and any successor,
replacement and/or additional Owner Trustee expressly permitted under the
Operative Agreements.

        "Participant" shall have the meaning given to such term in Section 9.7
of the Credit Agreement.

        "Participation Agreement" shall mean the Participation Agreement dated
on or about the Initial Closing Date, among the Lessee, the Owner Trustee, not
in its individual capacity except as expressly stated therein, the Holders, the
Lenders and the Agent.

        "Payment Date" shall mean any Scheduled Interest Payment Date and any
date on which interest or Holder Yield in connection with a prepayment of
principal on the Loans or of the Holder Advances is due under the Credit
Agreement or the Trust Agreement.

        "PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002(a) of ERISA or any successor thereto.

        "Pension Plan" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan), and to which the Lessee or any ERISA Affiliate may have any
liability, including without limitation any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five (5) years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.

        "Permitted Facility" shall mean any office or other commercial building,
parking facility associated therewith or vivarium located in Montgomery County,
Texas, on parcels identified in Lease Supplement No. 1, that is customarily used
and operated by the Lessee in its ordinary course of business as of the Initial
Closing Date.

        "Permitted Liens" shall mean:

                (a)     the respective rights and interests of the parties to
        the Operative Agreements as provided in the Operative Agreements;

                (b)     the rights of any sublessee or assignee under a sublease
        or an assignment expressly permitted by the terms of the Lease for no
        longer than the duration of the Lease;

                (c)     Liens for Taxes that either are not yet due or are being
        contested in accordance with the provisions of Section 13.1 of the
        Lease;

                (d)     Liens arising by operation of law, materialmen's,
        mechanics', workmen's, repairmen's, employees', carriers',
        warehousemen's and other like Liens relating to the construction of the
        Improvements or in connection with any Modifications or arising in the
        ordinary course of business for amounts that either are not more than
        thirty (30) days past due or are being diligently contested in good
        faith by appropriate proceedings, so

                                 Appendix A-30
   149

        long as such proceedings satisfy the conditions for the continuation of
        proceedings to contest Taxes set forth in Section 13.1 of the Lease;

                (e)     Liens of any of the types referred to in clause (d)
        above that have been bonded for not less than the full amount in dispute
        (or as to which other security arrangements satisfactory to the Lessor
        and the Agent have been made), which bonding (or arrangements) shall
        comply with applicable Legal Requirements, and shall have effectively
        stayed any execution or enforcement of such Liens;

                (f)     Liens arising out of judgments or awards with respect to
        which appeals or other proceedings for review are being prosecuted in
        good faith and for the payment of which adequate reserves have been
        provided as required by GAAP or other appropriate provisions have been
        made, so long as such proceedings have the effect of staying the
        execution of such judgments or awards and satisfy the conditions for the
        continuation of proceedings to contest Taxes set forth in Section 13.1
        of the Lease;

                (g)     Liens in favor of municipalities to the extent agreed to
        by the Lessor;

                (h)     Liens securing purchase money and sale/leaseback
        Indebtedness (including Capitalized Leases) to the extent permitted
        under Section 8.3B(a)(iii), provided that any such Lien attaches only to
        the Subject Property (but not to any Property) financed or leased and
        such Lien attaches thereto concurrently with or within 90 days after the
        acquisition thereof in connection with the purchase money transactions
        and within 30 days after the closing of any sale/leaseback transaction;
        and

                (i)     Liens in renewal, extension or replacement of any Lien
        referenced in paragraphs (a) through (h) above; provided such renewal,
        extension or replacement Liens shall not cover any additional property
        or secure any additional Indebtedness not theretofore covered or secured
        by the Lien being renewed, extended or replaced.

        "Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other entity.

        "Plan" shall mean any employee benefit plan (as defined in Section 3(3)
of ERISA) which is covered by ERISA and with respect to which Lessee, any
Subsidiary of Lessee or any ERISA Affiliate is (or, if such plan were terminated
at such time, would under Section 4069 of ERISA be deemed to be) an "employer"
within the meaning of Section 3(5) of ERISA.

        "Planned Office Building" shall mean the office building contemplated to
be constructed by the Construction Agent pursuant to the Operative Agreements.

        "Planned Parking Facility" shall mean the parking facility contemplated
to be constructed by the Construction Agent pursuant to the Operative
Agreements.

        "Planned Vivarium" shall mean the vivarium contemplated to be
constructed by the

                                 Appendix A-31
   150

Construction Agent pursuant to the Operative Agreements.

        "Plans and Specifications" shall mean, with respect to Improvements, the
plans and specifications for such Improvements to be constructed or already
existing, as such Plans and Specifications may be amended, modified or
supplemented from time to time in accordance with the terms of the Operative
Agreements.

        "Prime Lending Rate" shall have the meaning given to such term in the
definition of ABR.

        "Prior Property" shall have the meaning given to such term in Section
5.11 of the Participation Agreement.

        "Property" shall mean, with respect to each Permitted Facility that is
(or is to be) acquired, constructed and/or renovated pursuant to the terms of
the Operative Agreements, the Land, and/or the various Improvements, in each
case as identified on the applicable Lease Supplement, and the Equipment
associated with such Property including without limitation each Construction
Period Property, each Property subject to a Ground Lease and each Property for
which the Basic Term has commenced.

        "Property Acquisition Cost" shall mean the cost to the Lessor to
purchase a Property on a Property Closing Date.

        "Property Closing Date" shall mean the date on which the Lessor
purchases a Property or, with respect to the first Advance, the date on which
the Lessor seeks reimbursement for Property previously purchased by the Lessor.

        "Property Cost" shall mean with respect to a Property the aggregate
amount (and/or the various items and occurrences giving rise to such amounts) of
the Loan Property Cost plus the Holder Property Cost for such Property (as such
amounts shall be increased equally among all Properties respecting the Holder
Advances and the Loans extended from time to time to pay for Lessor Funding
Obligations).

        "Punch List Completion Date" shall mean, with respect to a Property, the
date of Final Completion.

        "Purchase Agreements" shall mean the Larger Tract Purchase Agreement and
the Smaller Tract Purchase Agreement.

        "Purchase Option" shall have the meaning given to such term in Section
20.1 of the Lease.

        "Purchase Option Date" shall mean the first Business Day of any calendar
month and the Expiration Date.

        "Register" shall have the meaning given to such term in Section 9.9(a)
of the Credit

                                 Appendix A-32
   151

Agreement.

        "Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.

        "Regulation T" shall mean Regulation T of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.

        "Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.

        "Regulation X" shall mean Regulation X of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.

        "Release" shall mean any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Substance.

        "Renewal Term" shall have the meaning specified in Section 2.2 of the
Lease.

        "Rent" shall mean, collectively, the Basic Rent and the Supplemental
Rent, in each case payable under the Lease.

        "Rent Commencement Date" shall mean, regarding each Property, the
Completion Date.

        "Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the notice requirement has
been waived by regulation.

        "Requested Funds" shall mean any funds requested by the Lessee or the
Construction Agent, as applicable, in accordance with Section 5 of the
Participation Agreement.

        "Required S&P Rating" shall have the meaning specified in Section
17.1(o) of the Lease.

        "Requisition" shall have the meaning specified in Section 4.2 of the
Participation Agreement.

        "Responsible Officer" shall mean the Chairman or Vice Chairman of the
Board of Directors, the Chairman or Vice Chairman of the Executive Committee of
the Board of Directors, the President, any Senior Vice President or Executive
Vice President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer, except that when used with respect to the
Trust Company or the Owner Trustee, "Responsible Officer" shall also include the
Cashier, any Assistant Cashier, any Trust Officer or Assistant

                                 Appendix A-33
   152

Trust Officer, the Controller and any Assistant Controller or any other officer
of the Trust Company or the Owner Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.

        "Restricted Payment" shall mean (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock now or
hereafter outstanding, except (i) a dividend payable solely in shares of that
class to the holders of that class and (ii) dividends and other distributions
payable to Lessee, (b) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock now or hereafter outstanding and (c) any payment
made to retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock now or hereafter
outstanding.

        "Right of First Offer" shall mean the Right of First Offer Agreement
dated as of October 19, 2000 by and between The Woodlands Development Company,
L.P. and the Owner Trustee with regard to two (2) certain tracts of real
property located in Montgomery County, Texas, as more particularly described on
Exhibit A attached thereto.

        "Sale Date" shall have the meaning given to such term in Section 22.1(a)
of the Lease.

        "Sale Notice" shall mean a notice given to the Lessor in connection with
the election by the Lessee of its Sale Option.

        "Sale Option" shall have the meaning given to such term in Section 20.1
of the Lease.

        "Sale Proceeds Shortfall" shall mean the amount by which the proceeds of
a sale described in Section 22.1 of the Lease are less than the Limited Recourse
Amount with respect to the Properties if it has been determined that the Fair
Market Sales Value of the Properties at the expiration of the term of the Lease
has been impaired by greater than ordinary wear and tear during the Term of the
Lease.

        "S&P" shall mean Standard & Poor's Rating Services, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such division in the
business of rating securities.

        "Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar
Loan or Eurodollar Holder Advance, the last day of the Interest Period
applicable to such Eurodollar Loan or Eurodollar Holder Advance (and respecting
any Eurodollar Loan or Eurodollar Holder Advance having an Interest Period of
six (6) months, the three (3) month anniversary of such Interest Period), (b) as
to any ABR Loan or any ABR Holder Advance, the fifteenth day of each month,
unless such day is not a Business Day and in such case on the next occurring
Business Day and (c) as to all Loans and Holder Advances, the date of any
voluntary or involuntary payment, prepayment, return or redemption, and the
Maturity Date or the Expiration Date, as the case may be.

        "Secured Parties" shall have the meaning given to such term in the
Security Agreement.

                                 Appendix A-34
   153

        "Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.

        "Securities Collateral" shall mean such Cash Equivalents constituting
part of the Collateral pledged by the Construction Agent or the Lessee and
maintained (a) (except as otherwise specified in subsection (b)) in the
Collateral Account, all as referenced in the Collateral Agreement and the
Participation Agreement or (b) (with respect to U.S. dollar denominated
certificates of deposit of Bank of America, N.A.) in the possession, custody and
control of the Agent.

        "Securities Intermediary" shall mean Bank of America, N.A., a national
banking association, through its offices at: Bank of America Plaza, Mailcode
TX1-492-6305, 901 Main Street, Dallas, Texas, 75202, Attention: Mark S.
Tranchina, or such other address as the Securities Intermediary shall give
written notice of to the parties to the Control Agreement.

        "Security Agreement" shall mean the Security Agreement dated on or about
the Initial Closing Date between the Lessor and the Agent, for the benefit of
the Secured Parties, and accepted and agreed to by the Lessee.

        "Security Documents" shall mean the collective reference to the Security
Agreement, the Collateral Agreement, the Control Agreement, the Mortgage
Instruments, (to the extent the Lease is construed as a security instrument) the
Lease, the UCC Financing Statements and all other security documents hereafter
delivered to the Agent granting a lien on any asset or assets of any Person to
secure the obligations and liabilities of the Lessor under the Credit Agreement
and/or under any of the other Credit Documents or to secure any guarantee of any
such obligations and liabilities.

        "Single Employer Plan" shall mean any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.

        "Smaller Tract Purchase Agreement" shall mean the Contract for Purchase
and Sale of Real Property effective as of October 12, 2000 between The Woodlands
Land Development Company, L.P. and Lexicon Genetics Incorporated, with respect
to that certain tract of land containing approximately 5.592 acres located in
the John Taylor Survey, A-547, in Montgomery County, Texas, as more particularly
described in Exhibit A thereto.

        "Soft Costs" shall mean all costs which are ordinarily and reasonably
incurred in relation to the acquisition, development, installation,
construction, improvement and testing of the Properties other than Hard Costs,
including without limitation structuring fees, administrative fees, legal fees,
upfront fees, fees and expenses related to appraisals, title examinations, title
insurance, document recordation, surveys, environmental site assessments,
geotechnical soil investigations and similar costs and professional fees
customarily associated with a real estate closing, the Lender Unused Fee, the
Holder Unused Fee, fees and expenses of the Owner Trustee payable or
reimbursable under the Operative Agreements.

                                 Appendix A-35
   154

        "Structure" shall mean each of the following structures contemplated to
constitute individual Properties: the Existing Office Building, the Existing
Vivarium, the Existing Blue Building, the Planned Office Building, the Planned
Vivarium and the Planned Parking Facility.

        "Subject Properties" shall mean have the meaning given to such term in
Section 6.2(y) of the Participation Agreement.

        "Subsidiary" shall mean, as to any Person, any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person, or by one (1)
or more Subsidiaries, or by such Person and one (1) or more Subsidiaries.

        "Supplemental Amounts" shall have the meaning given to such term in
Section 9.18 of the Credit Agreement.

        "Supplemental Rent" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor,
the Trust Company, the Holders, the Agent, the Lenders or any other Person under
the Lease or under any of the other Operative Agreements including without
limitation payments of the Termination Value and the Maximum Residual Guarantee
Amount and all indemnification amounts, liabilities and obligations.

        "Support Obligations" shall mean, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (a) to purchase any such Indebtedness or
any property constituting security therefor, (b) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (c) to lease or
purchase property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (d) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount of any
Support Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Support Obligation is made; provided, if the Support Obligation is secured
by a Lien on one or more assets of such Person and the Support Obligation is
expressly limited to the value of such asset or assets, then the amount of such
Support Obligation hereunder shall be deemed to equal the value of such asset or
assets.

        "Taxes" shall have the meaning specified in the definition of
"Impositions".

        "Term" shall mean the Basic Term and each Renewal Term, if any.

                                 Appendix A-36
   155

        "Termination Date" shall have the meaning specified in Section 16.2(a)
of the Lease.

        "Termination Event" shall mean (a) with respect to any Pension Plan, the
occurrence of a Reportable Event or an event described in Section 4062(e) of
ERISA, (b) the withdrawal of the Lessee or any ERISA Affiliate from a Multiple
Employer Plan during a plan year in which it was a substantial employer (as such
term is defined in Section 4001(a)(2) of ERISA), or the termination of a
Multiple Employer Plan, (c) the distribution of a notice of intent to terminate
a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A of ERISA,
(d) the institution of proceedings to terminate a Plan or Multiemployer Plan by
the PBGC under Section 4042 of ERISA, (e) any other event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan or Multiemployer Plan, or
(f) the complete or partial withdrawal of the Lessee or any ERISA Affiliate from
a Multiemployer Plan.

        "Termination Notice" shall have the meaning specified in Section 16.1 of
the Lease.

        "Termination Value" shall mean the sum of (a) either (i) with respect to
all Properties, an amount equal to the aggregate outstanding Property Cost
(including, without limitation, the amount of each Advance used to pay one or
more Excluded Costs) for all the Properties, in each case as of the last
occurring Payment Date, or (ii) with respect to a particular Property, an amount
equal to the Property Cost (including, without limitation, the amount of each
Advance used to pay one or more Excluded Costs) allocable to such Property, plus
(b) respecting the amounts described in each of the foregoing subclause (i) or
(ii), as applicable, any and all accrued but unpaid interest on the Loans and
any and all Holder Yield on the Holder Advances related to the applicable
Property Cost (including, without limitation, the amount of each Advance used to
pay one or more Excluded Costs), plus (c) to the extent the same is not
duplicative of the amounts payable under clause (b) above, all other Rent and
other amounts then due and payable or accrued under the Agency Agreement, Lease
and/or under any other Operative Agreement (including without limitation amounts
under Sections 11.1 through 11.8 of the Participation Agreement and all costs
and expenses referred to in clause FIRST of Section 22.2 of the Lease). If any
Claim or cost in relation thereto is not satisfied in favor of the Owner Trustee
pursuant to Section 11.7 of the Participation Agreement because Section 11.7(b)
is not satisfied, the amount of such Claim or cost shall be added to the
Termination Value.

        "Tranche A Commitments" shall mean the obligation of the Tranche A
Lenders to make the Tranche A Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche A Lender's name on Schedule 2.1 to the
Credit Agreement, as such amount may be increased or reduced from time to time
in accordance with the provisions of the Operative Agreements; provided, no
Tranche A Lender shall be obligated to make Tranche A Loans in excess of such
Tranche A Lender's share of the Tranche A Commitments as set forth adjacent to
such Tranche A Lender's name on Schedule 2.1 to Credit Agreement.

        "Tranche A Lenders" shall mean Bank of America, N.A. and shall include
the several banks and other financial institutions from time to time party to
the Credit Agreement that commit to make the Tranche A Loans.

                                 Appendix A-37
   156

        "Tranche A Loans" shall mean the Loans made pursuant to the Tranche A
Commitment.

        "Tranche A Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.

        "Tranche B Commitments" shall mean the obligation of the Tranche B
Lenders to make the Tranche B Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche B Lender's name on Schedule 2.1 to the
Credit Agreement, as such amount may be increased or reduced from time to time
in accordance with the provisions of the Operative Agreements; provided, no
Tranche B Lender shall be obligated to make Tranche B Loans in excess of such
Tranche B Lender's share of the Tranche B Commitments as set forth adjacent to
such Tranche B Lender's name on Schedule 2.1 to Credit Agreement.

        "Tranche B Lenders" shall mean Bank of America, N.A. and shall include
the several banks and other financial institutions from time to time party to
the Credit Agreement that commit to make the Tranche B Loans.

        "Tranche B Loan" shall mean the Loans made pursuant to the Tranche B
Commitment.

        "Tranche B Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.

        "Transaction Expenses" shall mean all Soft Costs and all other costs and
expenses incurred in connection with the preparation, execution and delivery of
the Operative Agreements and the transactions contemplated by the Operative
Agreements including, without limitation, the following:

                (a)     the reasonable fees, out-of-pocket expenses and
        disbursements of counsel to the Agent, the Lenders, the Holders, the
        Lessor and the Lessee in negotiating the terms of the Operative
        Agreements and the other transaction documents, preparing for the
        closings under, and rendering opinions in connection with, such
        transactions and in rendering other services customary for counsel
        representing parties to transactions of the types involved in the
        transactions contemplated by the Operative Agreements;

                (b)     the reasonable fees, out-of-pocket expenses and
        disbursements of accountants for the Lessee or the Construction Agent in
        connection with the transaction contemplated by the Operative
        Agreements;

                (c)     any and all other reasonable fees, charges or other
        amounts payable to the Lenders, the Agent, the Holders, the Owner
        Trustee or any broker which arises under any of the Operative
        Agreements;

                (d)     any other reasonable fee, out-of-pocket expenses,
        disbursement or cost of any party to the Operative Agreements or any of
        the other transaction documents,

                                 Appendix A-38
   157

        including costs of surveys of the Land, any appraisals or environmental
        reports required pursuant to the Operative Agreements and any title
        insurance expenses incurred under the Operative Agreements; and

                (e)     any and all Taxes and fees incurred in recording or
        filing any Operative Agreement or any other transaction document, any
        deed, declaration, mortgage, security agreement, notice or financing
        statement with any public office, registry or governmental agency in
        connection with the transactions contemplated by the Operative
        Agreements.

        "Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision agency, department,
commission, board, bureau or instrumentality of a governmental body.

        "Trust" shall mean the Lexi Trust 2000-1.

        "Trust Agreement" shall mean the Trust Agreement dated on or about the
Initial Closing Date between the Holders and the Owner Trustee.

        "Trust Company" shall mean First Security Bank, National Association, in
its individual capacity, and any successor owner trustee under the Trust
Agreement in its individual capacity.

        "Trust Estate" shall have the meaning specified in Section 2.2 of the
Trust Agreement.

        "Type" shall mean, as to any Loan, whether it is an ABR Loan or a
Eurodollar Loan.

        "UCC Financing Statements" shall mean collectively the Lender Financing
Statements and the Lessor Financing Statements.

        "Unanimous Vote Matters" shall have the meaning given it in Section 12.4
of the Participation Agreement.

        "Unfunded Amount" shall have the meaning specified in Section 3.2 of the
Agency Agreement.

        "Unfunded Liability" shall mean, with respect to any Plan, at any time,
the amount (if any) by which (a) the present value of all benefits under such
Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plan, but only to the extent that such excess represents a potential liability
of the Company or any member of the Controlled Group to the PBGC or such Plan
under Title IV of ERISA.

        "Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.

        "United States Bankruptcy Code" shall mean Title 11 of the United States
Code.

                                 Appendix A-39
   158

        "Unused Fee" shall mean, collectively, the Holder Unused Fee and the
Lender Unused Fee.

        "Unused Fee Payment Date" shall mean the last Business Day of each
January, April, July and October and the last Business Day of the Commitment
Period, or such earlier date as the Commitments shall terminate as provided in
the Credit Agreement or the Holder Commitment shall terminate as provided in the
Trust Agreement.

        "U.S. Person" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.

        "U.S. Taxes" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.

        "Voting Stock" of any Person, shall mean the capital stock of such
Person entitled to vote in the election of the Board of Directors of such
Person.

        "Withholdings" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.

        "Work" shall mean the furnishing of labor, materials, components,
furniture, furnishings, fixtures, appliances, machinery, equipment, tools,
power, water, fuel, lubricants, supplies, goods and/or services with respect to
any Property.

                                 Appendix A-40
   159
- ------------------------------------------------------------------------------

                                AGENCY AGREEMENT

                          Dated as of October 19, 2000

                                     between

                         LEXICON GENETICS INCORPORATED,
                            as the Construction Agent

                                       and

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                  as Owner Trustee under the Lexi Trust 2000-1,
                                  as the Lessor

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

   160

                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I  DEFINITIONS; RULES OF USAGE.......................................1
      1.1  Definitions.......................................................1
      1.2  Interpretation....................................................1

ARTICLE II  APPOINTMENT OF THE CONSTRUCTION AGENT............................2
      2.1  Appointment.......................................................2
      2.2  Acceptance and Undertaking........................................4
      2.3  Term..............................................................4
      2.4  Scope of Authority................................................4
      2.5  Delegation of Duties..............................................5
      2.6  Covenants of the Construction Agent...............................5

ARTICLE III  THE PROPERTIES..................................................7
      3.1  Construction......................................................7
      3.2  Amendments; Modifications.........................................7
      3.3  Abandonment or Permanent Discontinuance...........................8

ARTICLE IV  PAYMENT OF FUNDS.................................................8
      4.1  Right to Receive Construction Cost................................8

ARTICLE V  EVENTS OF DEFAULT.................................................9
      5.1  Events of Default.................................................9
      5.2  Damages...........................................................9
      5.3  Remedies; Remedies Cumulative.....................................9

ARTICLE VI  THE LESSOR'S RIGHTS.............................................10
      6.1  Exercise of the Lessor's Rights..................................10
      6.2  The Lessor's Right to Cure the Construction Agent's Defaults.....10

ARTICLE VII  MISCELLANEOUS..................................................11
      7.1  Notices..........................................................11
      7.2  Successors and Assigns...........................................11
      7.3  GOVERNING LAW....................................................11
      7.4  Submission To Jurisdiction; Venue; Waivers.......................11
      7.5  Amendments and Waivers...........................................11
      7.6  Counterparts.....................................................11
      7.7  Severability.....................................................11
      7.8  Headings and Table of Contents...................................11
      7.9  WAIVER OF JURY TRIAL.............................................11

ARTICLE I  DEFINITIONS; RULES OF USAGE.......................................1
      1.1  Definitions.......................................................1
      1.2  Interpretation....................................................1

ARTICLE II  APPOINTMENT OF THE CONSTRUCTION AGENT............................2
      2.1  Appointment.......................................................2
      2.2  Acceptance and Undertaking........................................4
      2.3  Term..............................................................4
      2.4  Scope of Authority................................................4
      2.5  Delegation of Duties..............................................5
      2.6  Covenants of the Construction Agent...............................5

                                       i
   161

                                                                         
ARTICLE III  THE PROPERTIES..................................................7
      3.1  Construction......................................................7
      3.2  Amendments; Modifications.........................................7
      3.3  Abandonment or Permanent Discontinuance...........................8

ARTICLE IV  PAYMENT OF FUNDS.................................................8
      4.1  Right to Receive Construction Cost................................8

ARTICLE V  EVENTS OF DEFAULT.................................................9
      5.1  Events of Default.................................................9
      5.2  Damages...........................................................9
      5.3  Remedies; Remedies Cumulative.....................................9

ARTICLE VI  THE LESSOR'S RIGHTS.............................................10
      6.1  Exercise of the Lessor's Rights..................................10
      6.2  The Lessor's Right to Cure the Construction Agent's Defaults.....10

ARTICLE VII  MISCELLANEOUS..................................................11
      7.1  Notices..........................................................11
      7.2  Successors and Assigns...........................................11
      7.3  GOVERNING LAW....................................................11
      7.4  Submission To Jurisdiction; Venue; Waivers.......................11
      7.5  Amendments and Waivers...........................................11
      7.6  Counterparts.....................................................11
      7.7  Severability.....................................................11
      7.8  Headings and Table of Contents...................................11
      7.9  WAIVER OF JURY TRIAL.............................................11

                                       ii

   162

                                AGENCY AGREEMENT

      THIS AGENCY AGREEMENT, dated as of October 19, 2000 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the
"Agreement"), between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association ("FSB"), as Owner Trustee under the Lexi Trust 2000-1 (the
"Lessor") and LEXICON GENETICS INCORPORATED, a Delaware corporation (the
"Construction Agent").

                              PRELIMINARY STATEMENT

      A.     The Lessor and the Construction Agent are parties to that certain
Lease Agreement dated as of even date herewith (as amended, modified, extended,
supplemented, restated and/or replaced from time to time, the "Lease"), pursuant
to which the Construction Agent, as lessee (in such capacity, the "Lessee") has
agreed to lease certain Land, Improvements and Equipment and/or to sublease a
ground leasehold in certain Properties subject to one (1) or more Ground Leases
from the Lessor.

      B.     In connection with the execution and delivery of the Participation
Agreement, the Lease and the other Operative Agreements, and subject to the
terms and conditions hereof, (i) the Lessor desires to appoint the Construction
Agent as its sole and exclusive agent in connection with the identification and
acquisition or ground lease of the Properties (provided, title to the Properties
shall be held in the name of the Lessor, except that the interest of the Lessor
in certain of the Properties shall be a ground leasehold interest pursuant to
one (1) or more Ground Leases, if requested by the Construction Agent) and the
development, acquisition, installation, construction and testing of the
Improvements and the Equipment in accordance with the Plans and Specifications
and (ii) the Construction Agent desires, for the benefit of the Lessor, to
identify and acquire or ground lease the Properties and to cause the
development, acquisition, installation, construction and testing of the
Improvements, the Equipment and the other components of the Properties in
accordance with the Plans and Specifications and to undertake such other
liabilities and obligations as are herein set forth.

      NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:

                                    ARTICLE I

                           DEFINITIONS; RULES OF USAGE

      1.1    DEFINITIONS.

             For purposes of this Agreement, capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain Participation Agreement dated as of October
19, 2000 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among the Construction Agent, the Lessor, the various
banks and lending institutions parties thereto from time to time, as Holders,
the various banks and lending institutions parties thereto from time to time, as
Lenders, and Bank of America, N.A., as the agent for the Lenders and respecting
the Security Documents, as the agent for the Secured Parties. Unless otherwise
indicated, references in this Agreement to articles, sections, paragraphs,
clauses, appendices, schedules and exhibits are to the same contained in this
Agreement.

      1.2    INTERPRETATION.

             The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Agreement.

   163

                                   ARTICLE II

                      APPOINTMENT OF THE CONSTRUCTION AGENT

      2.1    APPOINTMENT.

      Subject to the terms and conditions hereof, the Lessor hereby irrevocably
designates and appoints Lexicon as its exclusive agent and as general
contractor, and the Construction Agent accepts such appointment, in connection
with the identification and acquisition from time to time of the Properties
(provided, title to the Properties shall be held in the name of the Lessor,
except that the interest of the Lessor in certain Properties shall be a ground
leasehold interest pursuant to one or more Ground Leases if requested by the
Construction Agent) and the development, acquisition, installation, construction
and testing of the Improvements, the Equipment and the other components of the
Properties in accordance with the Plans and Specifications on the Land, and
pursuant to the terms of the Operative Agreements. Notwithstanding any
provisions hereof or in any other Operative Agreement to the contrary, the
Construction Agent acknowledges and agrees that the Lessor shall advance no more
than the sum of the aggregate Commitment of the Lenders plus the aggregate
amount of the Holder Commitments of the Holders in regard to the Properties
(including without limitation for any and all Advances in the aggregate from the
Lenders under the Credit Agreement and from the Holders under the Trust
Agreement).

      After the Construction Agent gains knowledge or a reasonable expectation
that (i) the sum of the Available Commitments and the Available Holder
Commitments (less any Unfunded Amounts) shall be less than the amounts necessary
for Completion of all Properties or (ii) Completion of one or more Properties
shall not occur on or prior to the Construction Period Termination Date (such
occurrences referenced in Sections 2.1(i) and 2.1(ii) may be referred to as the
"Construction Failure"), the Construction Agent shall promptly (and in any event
within ten (10) Business Days of gaining such knowledge or expectation) notify
the Agent in writing of the same.

      Notwithstanding any other provision of the Operative Agreements (but
subject to the proviso to this sentence), if at any time prior to the
Construction Period Termination Date, the Lessor or the Agent shall have (x)
determined in its respective reasonable good faith judgment that any
Construction Failure or Extra Budget Cost shall have occurred or is reasonably
likely to occur and shall have given a written notice of such determination to
the Construction Agent or (y) received any notice from the Construction Agent
that any Construction Failure or Extra Budget Cost shall have occurred or is
reasonably likely to occur, then in any such case Lexicon shall have the option
of purchasing all the Properties on a date specified by the Lessor that is not
earlier than fifteen (15) days nor later than sixty (60) days after delivery of
the applicable notice referenced in clauses (x) or (y) directly above (as the
case may be) by paying the Lessor an amount equal to the Termination Value for
all, but not less than all, the Properties plus any and all fees and expenses
incurred by or on behalf of the Lessor, the Agent or the other Financing Parties
in connection with the Properties (including without limitation the transfer
thereof); provided, no breach of any obligation by the Construction Agent or the
Lessee pursuant to Section 5.15 of the Participation Agreement or Section 2.6(l)
of this Agreement shall constitute a Construction Failure or Extra Budget Cost
for purposes of this Section 2.1 or otherwise be subject to the provisions of
this Section 2.1 but instead shall constitute an Event of Default and be subject
to the provisions of Sections 5.2 and 5.3 of this Agreement. If Lexicon does not
exercise its purchase option referenced in the preceding sentence within five
(5) Business Days of the events referenced in subsections (x) or (y) of the
preceding sentence, then Lessor shall have the option, but not in limitation of
any other right of the Lessor pursuant to the Operative Agreements (at the
direction of the Agent) to elect, subject to the last two sentences of this
paragraph, (A), (B), (C) and/or (D) as determined by the Lessor: (A) the Lessor
may replace the Construction Agent with a new construction agent selected by the
Lessor (at the direction of the Agent) to finalize the Completion of the
Properties, (B) the Lessor may instruct the Construction Agent, and the
Construction Agent shall comply with such instructions, to remedy, but not pay
for other than with Advances, each Construction Failure and each Extra Budget
Cost (which may include without limitation modifications to any or all
applicable Properties, changes in contractors and/or subcontractors,
modifications to the Plans and Specifications and/or the Construction Budgets),
(C) only with respect to any Construction Failure or Extra Budget Cost that
could have been avoided by the Construction Agent, the Lessor may instruct
Lexicon to elect, and Lexicon shall comply with such instructions, a
Construction Agent Option and/or (D) the Lessor may instruct the Construction
Agent to cease Work and the Lessor may elect that no additional Work or only
limited Work shall be conducted and all such Work conducted pursuant to this
clause (D) shall be paid for only with Advances (but after the Lessor has
elected the option set forth in this clause (D), all subsequent Advances
regarding the affected Property will be included in the

                                       2
   164

definition of Excluded Costs). Notwithstanding the foregoing, the Lessor shall
only elect the option set forth in (D) of the preceding sentence (to the extent
of directing the Construction Agent to cease Work) with regard to any
Construction Failure or Extra Budget Cost that could not have been avoided by
the Construction Agent to the extent such Construction Failure or Extra Budget
Cost prevents Completion of the applicable Property, as such prevention of
Completion shall be determined in the sole discretion of the Majority Secured
Parties. In the instance described in the preceding sentence in which the Lessor
has elected the option set forth in (D) above, (i) with respect to any Property
which has suffered a Construction Failure or Extra Budget Cost, Lexicon will
have no obligation under the Operative Agreements other than pursuant to the
indemnification provisions and such other provisions that by their terms survive
expiration or termination of the Operative Agreements and (ii) Lexicon shall be
irrevocably deemed (upon the election of the Lessor, which election shall be
made only upon direction from the Agent), without any further action, to have
relinquished all right, title and interest in and to all, but not less than all,
the Properties and to have transferred and conveyed all such right, title and
interest to the Lessor.

      The "Construction Agent Options" shall refer to the election by Lexicon
within fifteen (15) Business Days of the Lessor's direction to make such
election for Lexicon to (a) pay, or to cause its nominee to pay, to the Lessor,
on a date designated by the Lessor not earlier than fifteen (15) days and not
later than sixty (60) days after the Lessor's receipt of notification of such
election by Lexicon, an aggregate amount equal to (i) the Termination Value for
all, but not less than all, the Properties plus (ii) any and all fees and
expenses incurred by or on behalf of the Lessor, the Agent or the other
Financing Parties in connection with the Properties (including without
limitation the transfer thereof) and on such date the Lessor shall transfer and
convey to Lexicon or to its nominee all right, title and interest of the Lessor
in and to the Properties or (b) pay to the Lessor, on a date designated by the
Lessor not earlier than fifteen (15) days and not later than sixty (60) days
after the Lessor's receipt of notification of such election by Lexicon, an
aggregate amount equal to the Maximum Amount and on and after such date, Lexicon
shall be irrevocably deemed, without any further action, to have relinquished
all right, title and interest in and to all, but not less than all, the
Properties and to have transferred and conveyed all such right, title and
interest to the Lessor.

      In connection with any transfer of the Properties as referenced above in
this Section 2.1 by the Lessor to Lexicon, the Lessor shall execute and deliver
to Lexicon, at the cost and expense of Lexicon (subject to the limitations
described in the next sentence), each of the following together with any other
item set forth in Section 19.1 of the Lease: (v) a termination or assignment (as
requested by Lexicon) of each applicable Ground Lease and Deeds conveying each
Property (to the extent it is real property not subject to a Ground Lease) to
Lexicon free and clear of the Lien of the Lease, the Lien of the Credit
Documents and any Lessor Liens; (w) a Bill of Sale conveying each Property (to
the extent it is personal property) to Lexicon free and clear of the Lien of the
Lease, the Lien of the Credit Documents and any Lessor Liens; (x) any real
estate tax affidavit or other document required by law to be executed and filed
in order to record the applicable Deed and/or the applicable Ground Lease
termination; (y) Foreign Investment in Real Property Tax Act ("FIRPTA")
affidavits; and (z) closing or settlement statements and other documents as may
be reasonably required by any title company closing such transaction (but,
except for the representation and warranty that such transfer is free and clear
of the Lien of the Lease, the Lien of the Credit Documents and Lessor Liens, the
Lessor shall make no representations or warranties as to title or any other
matter). The Lessor (at the discretion of the Agent) shall elect whether the
out-of-pocket fees and expenses associated with the transfer of the Properties
shall be paid by either (i) sales proceeds from the Properties, (ii) the Lessor
(but only to the extent amounts are available therefor with respect to the
Available Commitments and the Available Holder Commitments or each Lender and
each Holder approves the necessary increases in the Available Commitments and
the Available Holder Commitments to fund such fees and expenses) or (iii)
Lexicon; provided, if Lexicon funds such fees and expenses (as referenced in
subsection (iii)) then the Maximum Amount will be reduced accordingly, as more
specifically described in the definition of "Maximum Amount". Amounts funded by
the Lenders and the Holders with respect to the foregoing shall be added to the
Property Cost. All of the foregoing documentation must be in form and substance
reasonably satisfactory to the Lessor. Subject to the foregoing, all, but not
less than all, the Properties shall be conveyed to the Construction Agent
"AS-IS", "WHERE-IS" and in then present physical condition.

      No Construction Failure or Extra Budget Cost will be funded by the Lenders
or the Holders unless the Majority Secured Parties agree to fund such
Construction Failure or Extra Budget Cost at the time of its occurrence;
provided no individual Lender or Holder shall be required to increase its Lender
Commitment or Holder Commitment, as the case may be, unless such Lender or
Holder elects in its sole discretion to do so (in accordance with Section 5.9 of
the Participation Agreement).

                                       3
   165

      For all purposes of the Operative Agreements, the Construction Agent
agrees that the Construction Agent shall be in absolute control of each Property
and all activities in connection therewith and solely responsible for any and
all acts and/or omissions relating to any Property or activities in connection
therewith, any component of any Property, any event, circumstance or occurrence
at, near or otherwise with respect to any Property or any activity in connection
therewith and any and all Claims resulting from any of the foregoing, including
without limitation those arising under tort, contract, strict liability,
negligence, gross negligence, willful misconduct or any other theory of law or
equity.

      2.2    ACCEPTANCE AND UNDERTAKING.

      The Construction Agent hereby unconditionally accepts the agency
appointment and undertakes, for the benefit of the Lessor, to identify and
acquire certain Properties (provided, title to the Properties shall be held in
the name of the Lessor, except that the interest of the Lessor in certain
Properties shall be a ground leasehold interest pursuant to one (1) or more
Ground Leases if requested by the Construction Agent) and the development,
acquisition, installation, construction and testing of the Improvements, the
Equipment and the other components of the Properties in accordance with the
Plans and Specifications and the Operative Agreements.

      2.3    TERM.

      This Agreement shall commence on the date hereof and, unless the Lessor
(in its sole discretion upon the occurrence and during the continuation of any
Event of Default hereunder or upon the occurrence of any of the matters
described in subsections (x) or (y) of the third paragraph of Section 2.1)
elects otherwise, this Agreement shall terminate on the Construction Period
Termination Date; provided, upon the occurrence of any Construction Failure or
any Extra Budget Cost, the Agent (upon instruction from the Majority Secured
Parties) may from time to time unilaterally and independently extend the
Construction Period Termination Date.

      2.4    SCOPE OF AUTHORITY.

             (a)    The Lessor hereby expressly authorizes the Construction
      Agent, or any agent or contractor of the Construction Agent, and the
      Construction Agent unconditionally agrees for the benefit of the Lessor,
      subject to Section 2.4(b), to take all action necessary or desirable for
      the performance and satisfaction of any and all of the Lessor's
      obligations under any construction agreement and to fulfill all of the
      obligations of the Construction Agent including without limitation:

                  (i)     the identification and assistance with the acquisition
            of Properties in accordance with the terms and conditions of the
            Participation Agreement;

                  (ii)    all design and supervisory functions relating to the
            development, acquisition, installation, construction and testing of
            the related Improvements, Equipment and other components of the
            applicable Property and performing all engineering work related
            thereto;

                  (iii)   (A) negotiating, entering into, performing and
            enforcing all contracts and arrangements to acquire or ground lease
            the Properties and to procure the equipment necessary to construct
            the Properties and (B) negotiating, executing, performing and
            enforcing all contracts and arrangements to develop, acquire,
            install, construct and test the Improvements, the Equipment and
            the other components of the Properties on such terms and
            conditions as are customary and reasonable in light of local and
            national standards and practices and the businesses in which the
            Lessee is engaged;

                  (iv)    obtaining all necessary permits, licenses, consents,
            approvals, entitlements and other authorizations, including without
            limitation all of the foregoing required for the Properties and the
            use and occupancy thereof and those required under applicable Law
            (including without limitation Environmental Laws), from all
            Governmental Authorities in connection with the development,
            acquisition, installation, construction and testing of the
            Improvements, the

                                       4
   166
            Equipment and the other components of the Properties in accordance
            with the Plans and Specifications;

                  (v)     maintaining all books and records with respect to the
            Properties and the construction, operation and management
            thereof;

                  (vi)    using proceeds of any property insurance maintained
            by, or at the direction of, the Construction Agent to complete
            construction of or to rebuild any portion of any Property after the
            occurrence of a Casualty with regard to such Property,

                  (vii)   using proceeds of any Condemnation proceeding to
            complete construction of or to rebuild any portion of any Property
            after a Condemnation with regard to such Property; and

                  (viii) performing any other acts necessary in connection with
            the identification and acquisition or ground leasing of the
            Properties and the development, acquisition, installation,
            construction and testing of the related Improvements, Equipment and
            all other additional components of the Properties in accordance with
            the Plans and Specifications.

            (b)   Neither the Construction Agent nor any of its Affiliates or
      agents shall enter into any contract or consent to any contract in the
      name of the Lessor without the Lessor's prior written consent, such
      consent to be given or withheld in the exercise of the Lessor's reasonable
      discretion and not to be unreasonably withheld or delayed; provided,
      however, that (i) no such contract will increase the obligations of the
      Lessor beyond the obligations of the Lessor as are expressly set forth in
      the Operative Agreements and (ii) each such contract shall be expressly
      non-recourse to the Lessor on terms and conditions that are reasonably
      acceptable to the Lessor.

            (c)   Subject to the terms and conditions of this Agreement and the
      other Operative Agreements, the Construction Agent shall have sole
      management and control over the installation, construction and testing
      means, methods, sequences and procedures with respect to the Properties.

      2.5    DELEGATION OF DUTIES

      The Construction Agent may execute any of its duties under this Agreement
by or through agents, contractors, employees or attorneys-in-fact; provided,
however, that no such delegation shall limit or reduce in any way the
Construction Agent's duties and obligations under this Agreement.

      2.6    COVENANTS OF THE CONSTRUCTION AGENT.

      The Construction Agent hereby covenants and agrees that it will:

             (a)  following the Construction Commencement Date for each

      Property, cause the development, acquisition, installation, construction
      and testing of such Property to be prosecuted in a good and workmanlike
      manner, and respecting each Property in accordance with the applicable
      Plans and Specifications, the Construction Budget, the applicable
      contracts relating to the Improvements, the Equipment, other components
      of such Property and procurement of construction materials, the
      applicable construction contracts, the applicable construction schedule,
      prevalent industry practices and otherwise in accordance with Section 3.1
      hereof;

             (b)  not commence construction with respect to any Improvements on
      a date that is within six (6) months prior to the Construction Period
      Termination Date;

             (c)  cause the Completion Date for any Improvements to occur on or
      before the Construction Period Termination Date, in each case free and
      clear (by removal or bonding) of Liens or claims for materials supplied or
      labor or services performed in connection with the development,
      acquisition, installation, construction or testing thereof; provided, if
      the Construction Agent does not timely complete

                                       5
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      its construction obligations referenced in this subsection (c), then the
      provisions of the third paragraph of Section 2.1 shall apply;

             (d)  cause all outstanding punch list items with respect to such
      Improvements to be completed by the Final Completion Date; provided, if
      the Construction Agent does not timely complete its construction
      obligations referenced in this subsection (d), then the provisions of the
      third paragraph of Section 2.1 shall apply;

             (e)  at all times subsequent to the initial Advance respecting a
      Property (i) cause good and indefeasible title to the applicable Property
      to vest in the Owner Trustee (except that the interest of the Lessor in
      certain Properties shall be a ground leasehold interest pursuant to one
      (1) or more Ground Leases if requested by the Construction Agent) (ii)
      cause a valid, perfected, first priority Lien on the applicable Property
      to be in place in favor of the Agent (for the benefit of the Lenders and
      the Holders), (iii) file all necessary documents under the applicable real
      property law and Article 9 of the Uniform Commercial Code to perfect such
      title and Liens and (iv) not permit Liens (other than Permitted Liens and
      Lessor Liens) to be filed or maintained respecting the applicable
      Property;

             (f)  no less than five (5) Business Days prior to the scheduled
      date for the initial Construction Advance to be made in connection with
      any Property, the Construction Agent shall deliver to the Agent (for the
      benefit of the Lessor) true, complete and correct copies of the
      Construction Budget therefor. Thereafter, the Construction Agent, on a
      monthly basis, shall deliver to the Lessor true, correct and complete
      copies of any material modifications of the Construction Budget and
      progress reports regarding the development, acquisition, installation,
      construction and testing of the Properties;

             (g)  procure insurance for the Properties during the
       Construction Period in accordance with the provisions of Article XIV of
       the Lease and as the Lessor shall otherwise reasonably request from time
       to time for such risks which the Lessor determines are not otherwise
       sufficiently covered by the Construction Agent and perform (in its
       capacity as Lessee) its obligations pursuant to Article XV of the Lease;

             (h)  include in each Construction Budget and maintain Available
      Commitments and Available Holder Commitments in amounts equal to all
      deductible amounts regarding insurance policies related to the Properties
      in place from time to time pursuant to the Operative Agreements and also
      for the amount of all insurable losses regarding the Properties that are
      not insured;

             (i)  take all commercially reasonable measures necessary to prevent
      the occurrence of any and all acts, omissions or circumstances giving rise
      to Claims against any Financing Party respecting any Property;

             (j)  take all commercially reasonable and lawful measures to
      prevent any Condemnation by any Governmental Authority regarding any
      Property prior to the Completion of such Property;

             (k)  ensure that each Construction Contract with respect to any
      Property is a guaranteed maximum price contract with a contractor (i)
      presenting a payment and performance bond in an amount equal to the
      Construction Budget for such Property and (ii) otherwise reasonably
      acceptable to the Agent, the Lenders and the Holders in their sole
      discretion; and

             (l)   without regard to the occurrence of any Force Majeure Event
      or any other matter (except if the Lessor is excused from all obligations
      and liabilities pursuant to the Purchase Agreements for the duration of
      such Force Majeure Events or such other matters), (i) commence
      Construction of Properties (in a manner which is sufficient to "Commence
      Construction" (as such term is defined in the Smaller Tract Purchase
      Agreement) of properties subject to the Smaller Tract Purchase Agreement)
      within three (3) months from the Initial Closing Date and (ii) cause to
      be satisfied all obligations of the Lessor pursuant to Section 2.01 of
      the Larger Tract Purchase Agreement and Section 2.04 of the Smaller Tract
      Purchase Agreement.

                                       6
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                                   ARTICLE III

                                 THE PROPERTIES

      3.1    CONSTRUCTION.

      The Construction Agent shall cause the Improvements, the Equipment and all
other components of the Properties to be developed, acquired, installed,
constructed and tested in compliance with all Legal Requirements, all Insurance
Requirements, all manufacturer's specifications and standards and the standards
maintained by the Construction Agent for similar properties owned or operated by
the Construction Agent, unless non-compliance, individually or in the aggregate,
shall not have and could not be reasonably expected to have a Material Adverse
Effect.

      3.2    AMENDMENTS; MODIFICATIONS.

             (a)     Subject to Section 3.2(c), the Construction Agent may at
      any time revise, amend or modify (i) the Plans and Specifications without
      the consent of the Lessor; provided, that any such amendment to the Plans
      and Specifications does not (x) result in the Completion Date of the
      Improvements occurring on or after the Construction Period Termination
      Date or (y) result in the cost of all Improvements exceeding the amount
      specified in the Construction Budget, as amended from time to time, or an
      amount equal to the sum of the then Available Commitments plus the then
      Available Holder Commitments (reduced by the amount, if any, necessary to
      pay for the cost of construction and development of Improvements on other
      Properties which are currently under construction but have not yet been
      completed (such amount the "Unfunded Amount")), and (ii) the Construction
      Budget and enter into any related amendments, modifications or
      supplements without the consent of the Lessor (including without
      limitation adjusting or amending line items or amounts allocated to a
      particular item or reserve in the Construction Budget based upon savings
      actually incurred or which are reasonably expected to occur with respect
      to such item or reserve or excess amounts originally allocated in the
      Construction Budget for a particular item in the Construction Budget);
      provided, that such revisions, amendments or modifications to the Plans
      and Specifications or related amendments, modifications or supplements to
      the Construction Budget do not result in (A) any increase in total
      Property Costs greater than the amount specified in the Construction
      Budget, as amended from time to time, or the then Available Commitments
      and Available Holder Commitment (reduced by the Unfunded Amount) or (B) a
      breach of, or default under, the guaranteed maximum price Construction
      Contract with respect to such Property.

            (b)      The Construction Agent agrees that it will not implement
      any revision, amendment or modification to the Plans and Specifications
      for any Property if the aggregate effect of such revision, amendment or
      modification, when taken together with any previous or contemporaneous
      revision, amendment or modification to the Plans and Specifications for
      any Property, would cause a material reduction in value in excess of the
      cost reduction of such revision, amendment or modification of the
      Property when completed, unless such revision, amendment or modification
      is required by Legal Requirements.

            (c)      Subject to the rights of Lexicon to purchase all of the
      Properties for the Termination Value in accordance with the mechanics for
      such a purchase by Lexicon under paragraph three and subsection (a) of
      paragraph four of Section 2.1, upon the occurrence of any Construction
      Failure or Extra Budget Cost, the Lessor may (i) modify the Plans and
      Specifications and the Construction Budget for any Property in the sole
      discretion of the Lessor, (ii) inform the Construction Agent that the
      Construction Agent no longer has the right to modify any Plans and
      Specifications or any Construction Budget without the prior written
      consent of the Lessor, (iii) change the location of any Property and (iv)
      change the scope and/or intended purpose of any Property.

                                       7
   169

      3.3    ABANDONMENT OR PERMANENT DISCONTINUANCE.

      Until termination of the Lease Agreement and the Agency Agreement, the
Construction Agent shall promptly and diligently complete the development,
acquisition, refinancing, installation, construction and testing of such
Construction Period Property in accordance with the Plans and Specifications and
with the terms hereof and cause the Completion Date with respect to such
Construction Period Property to occur on or prior to the Construction Period
Termination Date; provided, if the Construction Agent does not timely complete
its obligations referenced in this paragraph, then the provisions of the third
paragraph of Section 2.1 shall apply.

      If the Construction Agent shall abandon or permanently discontinue the
construction and development of one or more Construction Period Properties
(which abandonment or permanent discontinuance shall be deemed to have occurred
if no work at any such Construction Period Property site is undertaken or
completed during a period of thirty (30) days or more for reasons other than a
Force Majeure Event), then the Construction Agent shall pay to the Lessor, on a
date designated by the Lessor, an aggregate amount equal to the liquidated
damages amount referenced in Section 5.3(b) of this Agreement regarding all, but
not less than all, Properties. On such date, Lessor shall deliver the Properties
to the Construction Agent in accordance with Sections 2.1(v) through (z).

                                   ARTICLE IV

                                PAYMENT OF FUNDS

      4.1    RIGHT TO RECEIVE CONSTRUCTION COST.

             (a)     In connection with the development, acquisition,
      installation, construction and testing of any Property and during the
      course of the construction of the Improvements on any Property, the
      Construction Agent may request that the Lessor advance funds for the
      payment of Property Acquisition Costs or other Property Costs, and the
      Lessor will comply with such request to the extent provided for under the
      Participation Agreement. The Construction Agent and the Lessor
      acknowledge and agree that the Construction Agent's right to request such
      funds and the Lessor's obligation to advance such funds for the payment
      of Property Acquisition Costs or other Property Costs is subject in all
      respects to the terms and conditions of the Participation Agreement and
      each of the other Operative Agreements. Without limiting the generality
      of the foregoing it is specifically understood and agreed that in no
      event shall the aggregate amounts advanced by the Lenders and the Holders
      for Property Acquisition Costs or other Property Costs and any other
      amounts due and owing hereunder or under any of the other Operative
      Agreements exceed the sum of the aggregate Commitment of the Lenders plus
      the aggregate amount of the Holder Commitments, including without
      limitation such amounts owing for (i) development, acquisition,
      installation, construction and testing of the Properties, (ii) additional
      amounts which accrue or become due and owing under the Credit Agreement
      or Trust Agreement as obligations of the Lessor prior to any Completion
      Date or (iii) any other purpose.

            (b)      The proceeds of any funds made available to the Lessor to
      pay Property Acquisition Costs or other Property Costs shall be made
      available to the Construction Agent in accordance with the Requisition
      relating thereto and the terms of the Participation Agreement. The
      Construction Agent will use such proceeds only to pay the Property
      Acquisition Costs or other Property Costs set forth in the Requisition
      relating to such funds.

                                       8
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                                    ARTICLE V

                                EVENTS OF DEFAULT

      5.1    EVENTS OF DEFAULT.

      If any one (1) or more of the following events (each an "Event of
Default") shall occur:

             (a)     the Construction Agent fails to apply any funds paid by the
      Lessor to the Construction Agent in a manner consistent with the
      requirements of the Operative Agreements and as specified in the
      applicable Requisition for the development, acquisition, installation,
      construction and testing of the Properties and related Improvements and
      Equipment or otherwise respecting the Properties to the payment of
      Property Acquisition Costs or other Property Costs;

             (b)     the Construction Agent shall fail to make any payment
      required pursuant to the terms of this Agreement (including without
      limitation pursuant to Sections 2.1 and 3.3) within five (5) days after
      the same has become due and payable;

             (c)     any Lease Event of Default shall have occurred and not be
      cured within any cure period expressly permitted under the terms of the
      Lease; and

             (d)     the Construction Agent shall materially breach any of its
      representations or warranties under any Operative Agreement or shall fail
      to observe or perform any term, covenant or condition of any Operative
      Agreement other than as set forth in paragraphs (a), (b) or (c) of this
      Section 5.1 and such failure to observe or perform any such term, covenant
      or condition shall continue for more than fifteen (15) days after the
      Construction Agent either has gained knowledge thereof or has received
      notice thereof;

then, in any such event, the Lessor may, in addition to the other rights and
remedies provided for in this Agreement, terminate this Agreement by giving the
Construction Agent written notice of such termination and upon the expiration of
the time fixed in such notice and the payment of all amounts owing by the
Construction Agent hereunder (including without limitation any amounts specified
under Section 5.3 hereof), this Agreement shall terminate. The Construction
Agent shall pay all costs and expenses incurred by or on behalf of the Lessor,
including without limitation fees and expenses of counsel, as a result of any
Event of Default hereunder.

      5.2    DAMAGES.

      The termination of this Agreement pursuant to Section 5.1 shall in no
event relieve the Construction Agent of its liability and obligations hereunder,
all of which shall survive any such termination.

      5.3    REMEDIES; REMEDIES CUMULATIVE.

             (a)     If an Event of Default hereunder shall have occurred and be
      continuing, then, subject to the provisions of Section 5.3(c), the Lessor
      shall have all rights available to the Lessor under the Lease and the
      other Operative Agreements and all other rights otherwise available at
      law, equity or otherwise.

             (b)     Upon the occurrence of an Event of Default hereunder, the
      Lessor shall have (in addition to its rights otherwise described in this
      Agreement or existing at law, equity or otherwise) the option (and shall
      be deemed automatically, and without any further action, to have
      exercised such option upon the occurrence of any Lease Event of Default
      arising under Sections 17.1(g), (h), (i) or (j) of the Lease) to transfer
      and convey to the Construction Agent or its nominee upon a date
      designated by the Lessor all right, title and interest of the Lessor in
      and to any Property or Properties (including without limitation any Land
      and/or any Improvements, any interest in any Improvements, any Equipment
      and any Property then under construction) for which the Rent Commencement
      Date has not yet occurred (a "Construction Period Property"). On any
      transfer and conveyance date specified by the Lessor pursuant to this
      Section 5.3(b), (i) the Lessor shall transfer and convey (at the cost of
      the Construction Agent) all right, title and interest of the Lessor in
      and to any or all such Construction Period Properties free and clear of
      the Lien of the Lease and

                                       9
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      all Lessor Liens, (ii) the Construction Agent hereby covenants and agrees
      that it will accept such transfer and conveyance of right, title and
      interest in and to the respective Construction Period Property or
      Construction Period Properties and (iii) the Construction Agent hereby
      promises to pay to the Lessor, as liquidated damages (it being agreed
      that it would be impossible accurately to determine actual damages), an
      aggregate amount equal to the Termination Value of any or all such
      Construction Period Properties. The Construction Agent specifically
      acknowledges and agrees that its obligations under this Section 5.3(b),
      including without limitation its obligations to accept the transfer and
      conveyance of Construction Period Properties and its payment obligations
      described in subparagraph (iii) of this Section 5.3(b), shall be absolute
      and unconditional under any and all circumstances and shall be performed
      and/or paid, as the case may be, without notice or demand and without any
      abatement, reduction, diminution, setoff, defense, counterclaim or
      recoupment whatsoever. Notwithstanding the foregoing provisions of this
      Section 5.3(b), the Lessor shall have the right in its sole discretion to
      rescind any exercise of its option under this Section 5.3(b) upon the
      giving of its written confirmation of such rescission to the Construction
      Agent on or prior to the earlier to occur of (a) the actual date of
      transfer and (b) the date one hundred and twenty (120) days after the
      date the Lessor has given notice of its intent to transfer and convey any
      Property to the Construction Agent as referenced above in this Section
      5.3(b).

             (c)     Prior to the date the Lessor has entered into any binding
      commitment or agreement with another party regarding any given Property
      pursuant to the exercise of remedies by the Lessor, the Construction Agent
      shall have the right to cure an Event of Default hereunder with respect to
      such Property by purchasing all Properties from the Lessor or by causing
      its nominee to purchase all Properties for an amount equal to the
      liquidated damages amount set forth in Section 5.3(b) of this Agreement
      calculated with respect to all Properties.

             (d)     No failure to exercise and no delay in exercising, on the
      part of the Lessor, any right, remedy, power or privilege under this
      Agreement or under the other Operative Agreements shall operate as a
      waiver thereof; nor shall any single or partial exercise of any right
      remedy, power or privilege under this Agreement preclude any other or
      further exercise thereof or the exercise of any other right, remedy,
      power or privilege. The rights, remedies, powers and privileges provided
      in this Agreement are cumulative and not exclusive of any rights,
      remedies, powers and privileges provided by law.

                                   ARTICLE VI

                               THE LESSOR'S RIGHTS

      6.1    EXERCISE OF THE LESSOR'S RIGHTS.

      Subject to the Excepted Payments, the Construction Agent and the Lessor
hereby acknowledge and agree that, subject to and in accordance with the terms
of the Security Agreement made by the Lessor in favor of the Agent, the rights
and powers of the Lessor under this Agreement have been assigned to the Agent.

      6.2    THE LESSOR'S RIGHT TO CURE THE CONSTRUCTION AGENT'S DEFAULTS.

      The Lessor, without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) remedy any Event of Default
for the account of and at the sole cost and expense of the Construction Agent.
All out-of-pocket costs and expenses so incurred (including without limitation
fees and expenses of counsel), together with interest thereon at the Overdue
Rate from the date on which such sums or expenses are paid by the Lessor, shall
be paid by the Construction Agent to the Lessor on demand.

                                       10
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                                   ARTICLE VII

                                  MISCELLANEOUS

      7.1    NOTICES.

      All notices required or permitted to be given under this Agreement shall
be in writing and delivered as provided in Section 12.2 of the Participation
Agreement.

      7.2    SUCCESSORS AND ASSIGNS.

      This Agreement shall be binding upon and inure to the benefit of the
Lessor, the Construction Agent and their respective successors and the assigns
of the Lessor. The Construction Agent may not assign this Agreement or any of
its rights or obligations hereunder or with respect to any Property in whole or
in part to any Person without the prior written consent of the Agent, the
Lenders, the Holders and the Lessor.

      7.3    GOVERNING LAW.

      THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

      7.4    SUBMISSION TO JURISDICTION; VENUE; WAIVERS.

      The provisions of the Participation Agreement relating to submission to
jurisdiction, venue are hereby incorporated by reference herein, mutatis
mutandis.

      7.5    AMENDMENTS AND WAIVERS.

      This Agreement may not be terminated, amended, supplemented, waived or
modified except in accordance with the provisions of Section 12.4 of the
Participation Agreement.

      7.6    COUNTERPARTS.

      This Agreement may be executed in any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.

      7.7    SEVERABILITY.

      Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

      7.8    HEADINGS AND TABLE OF CONTENTS.

      The headings and table of contents contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

      7.9    WAIVER OF JURY TRIAL.

      TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, THE LESSOR AND THE
CONSTRUCTION AGENT IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY

                                       11
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LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY COUNTERCLAIM
THEREUNDER.

                           [signature page follows]

                                       12
   174

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                    LEXICON GENETICS INCORPORATED, as the
                                    Construction Agent

                                    By:    /s/ Julia P. Gregory
                                           ------------------------------------
                                    Name:      Julia P. Gregory
                                           ------------------------------------
                                    Title:     EVP & Chief Financial Officer
                                           ------------------------------------

                                    FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                                    as Owner Trustee under the Lexi Trust
                                    2000-1, as the Lessor

                                    By:    /s/ C. Scott Nielsen
                                           ------------------------------------
                                    Name:      C. Scott Nielsen
                                           ------------------------------------
                                    Title:     Vice President
                                           ------------------------------------

   175
- --------------------------------------------------------------------------------

                                CREDIT AGREEMENT

                          Dated as of October 19, 2000

                                      among

                   First Security Bank, National Association,
                  as Owner Trustee under the Lexi Trust 2000-1,
                                as the Borrower,

                               The Several Lenders
                        from Time to Time Parties Hereto,

                                       and

                             BANK OF AMERICA, N.A.,
                                  as the Agent

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

   176

                                TABLE OF CONTENTS

                                                                                           Page

SECTION 1.  DEFINITIONS......................................................................1
        1.1  Definitions.....................................................................1
        1.2  Interpretation..................................................................1

SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS..................................................1
        2.1  Commitments.....................................................................1
        2.2  Notes...........................................................................2
        2.3  Procedure for Borrowing.........................................................2
        2.4  Lender Unused Fees..............................................................2
        2.5  Termination of Commitments......................................................2
        2.6  Prepayments and Payments........................................................3
        2.7  Conversion and Continuation Options.............................................4
        2.8  Interest Rates and Payment Dates................................................4
        2.9  Computation of Interest.........................................................5
        2.10 Pro Rata Treatment and Payments.................................................5
        2.11 Notice of Amounts Payable; Mandatory Assignment.................................6

SECTION 3.  REPRESENTATIONS AND WARRANTIES...................................................6

SECTION 4.  CONDITIONS PRECEDENT.............................................................6
        4.1  Conditions to Effectiveness.....................................................6
        4.2  Conditions to Each Loan.........................................................7

SECTION 5.  COVENANTS........................................................................7
        5.1  Other Activities................................................................7
        5.2  Ownership of Properties, Indebtedness...........................................7
        5.3  Disposition of Assets...........................................................7
        5.4  Compliance with Operative Agreements............................................7
        5.5  Further Assurances..............................................................7
        5.6  Notices.........................................................................8
        5.7  Discharge of Liens..............................................................8
        5.8  Trust Agreement.................................................................8

SECTION 6.  EVENTS OF DEFAULT................................................................8

SECTION 7.  THE AGENT.......................................................................10
        7.1  Appointment....................................................................10
        7.2  Delegation of Duties...........................................................10
        7.3  Exculpatory Provisions.........................................................10
        7.4  Reliance by the Agent..........................................................10
        7.5  Notice of Default..............................................................11
        7.6  Non-Reliance on the Agent and Other Lenders....................................11
        7.7  Indemnification................................................................11
        7.8  The Agent in Its Individual Capacity...........................................12
        7.9  Successor Agent................................................................12
        7.10 Actions of the Agent on Behalf of Holders......................................12
        7.11 The Agent's Duty of Care.......................................................12

SECTION 8.  MATTERS RELATING TO PAYMENT AND COLLATERAL......................................13
        8.1  Collection and Allocation of Payments and Other Amounts........................13
        8.2  Certain Remedial Matters.......................................................13
        8.3  Excepted Payments..............................................................13

SECTION 9.  MISCELLANEOUS...................................................................13
        9.1  Amendments and Waivers.........................................................13
        9.2  Notices........................................................................13

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        9.3  No Waiver; Cumulative Remedies.................................................13
        9.5  Payment of Expenses and Taxes..................................................14
        9.6  Successors and Assigns.........................................................14
        9.7  Participations.................................................................14
        9.8  Assignments....................................................................14
        9.9  The Register; Disclosure; Pledges to Federal Reserve Banks.....................15
        9.10 Adjustments; Set-off...........................................................15
        9.11 Counterparts...................................................................16
        9.12 Severability...................................................................16
        9.13 Integration....................................................................16
        9.14 GOVERNING LAW..................................................................16
        9.15 SUBMISSION TO JURISDICTION; VENUE..............................................16
        9.16 Acknowledgements...............................................................17
        9.17 WAIVERS OF JURY TRIAL..........................................................17
        9.18 Nonrecourse....................................................................17
        9.19 USURY SAVINGS PROVISION........................................................17

SCHEDULES

Schedule 2.1   Commitments and Addresses of Lenders

EXHIBITS

Exhibit A-1    Form of Tranche A Note
Exhibit A-2    Form of Tranche B Note
Exhibit B      Form of Assignment and Acceptance

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                                CREDIT AGREEMENT

        THIS CREDIT AGREEMENT, dated as of October 19, 2000 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
the "Agreement") is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Owner
Trustee under the Lexi Trust 2000-1 (the "Owner Trustee" or the "Borrower"), the
several banks and other financial institutions from time to time parties to this
Agreement (the "Lenders") and BANK OF AMERICA, N.A., a national banking
association, as a Lender and as the agent for the Lenders (the "Agent").

        The parties hereto hereby agree as follows:

                             SECTION 1. DEFINITIONS

        1.1    DEFINITIONS.

        For purposes of this Agreement, capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings assigned to them in
Appendix A to that certain Participation Agreement dated as of October 19, 2000
(as amended, modified, extended, supplemented, restated and/or replaced from
time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among Lexicon Genetics Incorporated, as Lessee and
Construction Agent, the Borrower, the various banks and other lending
institutions which are parties thereto from time to time, as the Holders, the
various banks and other lending institutions which are parties thereto from time
to time, as the Lenders, and Bank of America, N.A., as agent for the Lenders and
respecting the Security Documents, as the agent for the Secured Parties. Unless
otherwise indicated, references in this Agreement to articles, sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in this Agreement.

        1.2    INTERPRETATION.

        The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Agreement.

                   SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

        2.1    COMMITMENTS.

        (a) Subject to the terms and conditions hereof, each of the Lenders
severally agrees to make the portion of the Tranche A Loans and the Tranche B
Loans to the Borrower from time to time during the Commitment Period in an
amount up to such Lender's Commitment as is set forth adjacent to such Lender's
name in Schedule 2.1 hereto for the purpose of enabling the Borrower to purchase
the Properties and to pay Property Acquisition Costs, Property Costs and
Transaction Expenses, provided, that the aggregate principal amount at any one
time outstanding with respect to each of the Tranche A Loans and the Tranche B
Loans shall not exceed the amount of the Tranche A Commitments and the Tranche B
Commitments respectively. Any prepayments of the Loans, whether mandatory or at
the Borrower's election, shall not be subject to reborrowing except as set forth
in Section 5.2(d) of the Participation Agreement.

        (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Agent in accordance with Sections 2.3 and 2.7. In the event the
Borrower fails to provide notice pursuant to Section 2.3, the Loan shall be an
ABR Loan. Further, any Loans by the Lenders on a given date in an aggregate
amount less than $100,000 shall be ABR Loans, unless the remaining Available
Commitment for the Lenders in the aggregate is less than $100,000, in which
case, the Borrower may elect a Eurodollar Loan for such remaining amount.

        (c) The Commitment of each Lender to make Tranche A Loans and Tranche B
Loans shall be pro rata in accordance with its respective Lender Commitment.

   179

        2.2    NOTES.

        The Loans made by each Lender shall be evidenced by promissory notes of
the Borrower, substantially in the form of Exhibit A-1 in the case of the
Tranche A Loans (each, a "Tranche A Note") or Exhibit A-2 in the case of the
Tranche B Loans (each, a "Tranche B Note," and with the Tranche A Notes, the
"Notes"), with appropriate insertions as to payee, payable to the order of such
Lender and in a principal amount up to the Tranche A Commitment or Tranche B
Commitment, as the case may be, of such Lender. Each Lender is hereby authorized
to record the date, Type and amount of each Loan made by such Lender, each
continuation thereof, each conversion of all or a portion thereof to another
Type, and the date and amount of each payment or prepayment of principal thereof
on the schedule annexed to and constituting a part of its Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided, that the failure to make any such recordation
or any error in such recordation shall not affect the Borrower's obligations
hereunder or under such Note. Each Note shall (i) be dated the Initial Closing
Date, (ii) be stated to mature on the Maturity Date and (iii) provide for the
payment of principal in accordance with Section 2.6(d) and the payment of
interest in accordance with Section 2.8.

        2.3    PROCEDURE FOR BORROWING.

        (a) The Borrower may borrow under the Commitments during the Commitment
Period on any Business Day that an Advance may be requested pursuant to the
terms of Section 5.2 of the Participation Agreement, provided, that the Borrower
shall give the Agent irrevocable notice (which must be received by the Agent
prior to 12:00 Noon, Austin, Texas time at least three (3) Business Days prior
to the requested Borrowing Date specifying (i) the amount to be borrowed (which
on any date shall not be in excess of the then Available Commitments), (ii) the
requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar
Loans, ABR Loans or a combination thereof, (iv) if the borrowing is to be a
combination of Eurodollar Loans and ABR Loans, the respective amounts of each
Type of Loan and (v) the Interest Period applicable to each Eurodollar Loan.
Pursuant to the terms of the Participation Agreement, the Borrower shall be
deemed to have delivered such notice upon the delivery of a notice by the
Construction Agent or the Lessee containing such required information. Upon
receipt of any such notice from the Borrower, the Agent shall promptly notify
each Lender thereof. Each Lender will make the amount of its pro rata share of
each borrowing available to the Agent for the account of the Borrower at the
office of the Agent specified in Section 9.2 prior to 12:00 Noon, Austin, Texas
time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Agent. Such borrowing will then be made available to the
Borrower by the Agent crediting an account designated, subject to Section 9.1 of
the Participation Agreement, by the Borrower on the books of such office with
the aggregate of the amounts made available to the Agent by the Lenders and in
like funds as received by the Agent or in reliance on Section 2.10(b) hereof. No
amount of any Loan which is repaid or prepaid by the Borrower may be reborrowed
hereunder, except as set forth in Section 5.2(d) of the Participation Agreement.

        (b) Interest accruing on each Loan during the Construction Period with
respect to any Property shall, subject to the limitations set forth in Section
5.1(b) of the Participation Agreement be added to the principal amount of such
Loan on the relevant Scheduled Interest Payment Date. On each such Scheduled
Interest Payment Date, the Loan Property Cost and Construction Loan Property
Cost shall be increased by the amount of interest added to the Loans.

        2.4    LENDER UNUSED FEES.

        Promptly after receipt from the Lessee of the payment of the Lender
Unused Fee payable pursuant to Section 7.4 of the Participation Agreement, the
Agent shall distribute such payments to the Lenders pro rata in accordance with
their respective Commitments.

        2.5    TERMINATION OF COMMITMENTS.

        (a) The Borrower shall have the right, upon not less than three (3)
Business Days' written notice to the Agent, to terminate the Commitments.

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        (b) The Commitments respecting any particular Property shall
automatically be reduced to zero (0) upon the occurrence of the Rent
Commencement Date respecting such Property. On any date on which the Commitments
shall automatically be reduced to zero (0) pursuant to Section 6, the Borrower
shall prepay all outstanding Loans, together with accrued unpaid interest
thereon and all other amounts owing under the Operative Agreements.

        2.6    PREPAYMENTS AND PAYMENTS.

        (a) The Borrower may at any time and from time to time prepay the Loans,
in whole or in part, without premium or penalty (but with payment of all amounts
then due and owing pursuant to the Operative Agreements including without
limitation pursuant to Sections 11.2(e), 11.3 and 11.4 of the Participation
Agreement) and without setoff, deduction or counterclaim, upon at least three
(3) Business Days' irrevocable notice to the Agent, specifying the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR
Loans or a combination thereof, and, if a combination thereof, the amount
allocable to each. Upon receipt of any such notice the Agent shall promptly
notify each Lender thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein. Amounts
prepaid may not be reborrowed, and shall reduce the Commitments and the
Available Commitments, except in each case as set forth in Section 5.2(d) of the
Participation Agreement.

        (b) If on any date the Agent or the Lessor shall receive any payment in
respect of (i) any Casualty, Condemnation or Environmental Violation pursuant to
Sections 15.1(a) or 15.1(g) or Article XVI of the Lease (excluding any payments
in respect thereof which are payable to the Lessee in accordance with the
Lease), or (ii) the Termination Value of any Property in connection with the
delivery of a Termination Notice pursuant to Article XVI of the Lease, or (iii)
the Termination Value of any Property in connection with the exercise of the
Purchase Option under Article XX of the Lease or the exercise of the option of
the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (iv) any payment required to be made or elected to be made by the
Construction Agent to the Lessor pursuant to the terms of the Agency Agreement,
then in each case, the Borrower shall pay such amounts to the Agent and the
Agent shall be required to apply and pay such amounts in accordance with the
provisions of Section 8.7(b)(ii) of the Participation Agreement.

        (c) Each prepayment of the Loans pursuant to Section 2.6(a) shall be
allocated to reduce the respective Loan Property Costs of all Properties pro
rata according to the Loan Property Costs of such Properties immediately before
giving effect to such prepayment. Each prepayment of the Loans pursuant to
Section 2.6(b) shall be allocated to reduce the Loan Property Cost of the
Property or Properties subject to the respective Casualty, Condemnation,
Environmental Violation, termination, purchase, transfer or other circumstance
giving rise to such prepayment. Any amounts applied to reduce the Loan Property
Cost of any Construction Period Property pursuant to this paragraph (c) shall
also be applied to reduce the Construction Loan Property Cost of such Property
until such Construction Loan Property Cost has been reduced to zero (0).

        On the Rent Commencement Date, the Borrower shall repay the outstanding
principal balance of the Loans in part in an amount equal to (i) in the case of
the Tranche A Loans, the Extra Budget Costs paid for with Tranche A Loans and
(ii) in the case of Tranche B Loans, the Extra Budget Costs paid for with
Tranche B Loans. On the Payment Date immediately following the Final Completion
Date, the Borrower shall repay the outstanding principal balance of the Loans in
an amount equal to (A) in the case of Tranche A Loans, the product of the Final
Completion Escrow Balance multiplied by eighty-six and thirty-one one hundredths
percent (86.31%) and (B) in the case of Tranche B Loans, the product of the
Final Completion Escrow Balance multiplied by nine and nineteen one-hundredths
percent (9.19%).

        (d) The outstanding principal balance of the Loans and all other amounts
then due and owing under this Agreement or otherwise with respect to the Loans
shall be due and payable in full on the Basic Term Expiration Date; provided,
however, in the event the Lease is extended for a Renewal Term pursuant to the
terms of Section 2.2 of the Lease, the Lenders and the Holders may elect to
extend the maturity date of the Loans and Holder Amount, as applicable, to the
last day of such Renewal Term (it being acknowledged and agreed that no such
extension shall be granted unless consented to by each of the Lenders as to its
extension pursuant to the terms of this Section 2.6(d) and by each of the
Holders as to its extension pursuant to the terms of Section 3.3 of the Trust
Agreement). The date that the Loans are due and payable in full pursuant to the
terms of the preceding sentence may be referred to herein

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and in the other Operative Agreements from time to time as the "Maturity Date".
As a condition to any such extension, the Lenders, in their sole and absolute
discretion, may require such modifications and amendments to this Credit
Agreement as the Lenders determine to be appropriate or necessary in connection
with such extension, including without limitation increasing the spread over the
Eurodollar Rate and ABR applicable to outstanding Loans and/or requiring the
Borrower to amortize all or any part of the outstanding Loans over such Renewal
Term and/or requiring the Lessee to provide collateral for any or all of the
Lessee's obligations under the Operative Agreements during such Renewal Term.
The Borrower agrees to execute any amendments to this Credit Agreement as may be
requested by the Lenders to reflect any such modification of terms of this
Credit Agreement.

        2.7    CONVERSION AND CONTINUATION OPTIONS.

        (a) The Borrower may elect from time to time to convert Eurodollar Loans
to ABR Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election, provided, that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto, and provided, further, to the extent an Event of Default has
occurred and is continuing on the last day of any such Interest Period, the
applicable Eurodollar Loan shall automatically be converted to an ABR Loan. The
Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by
giving the Agent at least three (3) Business Days' prior irrevocable notice of
such election. Upon receipt of any such notice, the Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans or ABR
Loans may be converted as provided herein, provided, that (i) no ABR Loan may be
converted into a Eurodollar Loan after the date that is one (1) month prior to
the Maturity Date and (ii) such notice of conversion regarding any Eurodollar
Loan shall contain an election by the Borrower of an Interest Period for such
Eurodollar Loan to be created by such conversion and such Interest Period shall
be in accordance with the terms of the definition of the term "Interest Period"
including without limitation subparagraphs (A) through (D) thereof.

        (b) Subject to the restrictions set forth in Section 2.3 hereof, any
Eurodollar Loan may be continued as such upon the expiration of the current
Interest Period with respect thereto by the Borrower giving irrevocable notice
to the Agent, in accordance with the applicable notice provision for the
conversion of ABR Loans to Eurodollar Loans set forth herein, of the length of
the next Interest Period to be applicable to such Loans, provided, that no
Eurodollar Loan may be continued as such after the date that is one (1) month
prior to the Maturity Date, provided, further, no Eurodollar Loans may be
continued as such if an Event of Default has occurred and is continuing as of
the last day of the Interest Period for such Eurodollar Loan, and provided,
further, that if the Borrower shall fail to give any required notice as
described above or otherwise herein, or if such continuation is not permitted
pursuant to the proceeding proviso, such Loan shall automatically be converted
to an ABR Loan on the last day of such then expiring Interest Period.

        (c) Each such conversion and continuation of a Loan shall be made
pursuant to submission of an interest rate/holder yield selection notice in the
form of Exhibit K to the Participation Agreement.

        2.8    INTEREST RATES AND PAYMENT DATES.

        (a) The Loans outstanding hereunder from time to time shall bear
interest at a rate per annum equal to either (i) with respect to a Eurodollar
Loan, the Eurodollar Rate determined for the applicable Interest Period plus the
Applicable Percentage or (ii) with respect to an ABR Loan, the ABR, as selected
by the Borrower in accordance with the provisions hereof; provided, however, (A)
upon delivery by the Agent of the notice described in Section 2.9(c), the Loans
of each of the Lenders shall bear interest at the ABR applicable from time to
time from and after the dates and during the periods specified in Section
2.9(c), (B) upon the delivery by a Lender of the notice described in Section
11.3(e) of the Participation Agreement, the Loans of such Lender shall bear
interest at the ABR applicable from time to time from and after the dates and
during the periods specified in Section 11.3(e) of the Participation Agreement
and (C) in such other circumstances as expressly provided herein, the Loans
shall bear interest at the ABR.

        (b) If (i) all or a portion of (A) the principal amount of any Loan, (B)
any interest payable thereon or (C) any other amount payable hereunder shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise)
or (ii) (A) a replacement Construction Agent is hired in accordance with the
provisions of the Agency Agreement, (B) Completion of all Properties has not
occurred on or prior to the Construction Period Termination

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   182

Date or (C) the cost of any Property exceeds the original Construction Budget
therefor (or the applicable Construction Budget modified in accordance with the
Operative Agreements), in each case as previously delivered to the Agent, such
overdue amount (in the case of Section 2.8(b)(i)) or all Loans, including
without limitation principal and interest, and all other amounts payable
hereunder (in the case of Section 2.8(b)(ii)) shall bear interest at a rate per
annum which is the lesser of (x) the ABR plus two percent (2%) and (y) the
highest interest rate permitted by applicable law, in each case from the date of
such non-payment until such payment is paid in full (whether after or before
judgment) (in the case of Section 2.8(b)(i)) or Completion of all Properties (in
the case of Section 2.8(b)(ii)). All such amounts referenced in this Section
2.8(b) shall be paid upon demand.

        (c) Interest shall be payable in arrears on the applicable Scheduled
Interest Payment Date, provided, that (i) interest accruing pursuant to
paragraph (b) of this Section 2.8 shall be payable from time to time on demand
and (ii) each prepayment of the Loans shall be accompanied by accrued interest
to the date of such prepayment on the amount prepaid.

        2.9    COMPUTATION OF INTEREST.

        (a) Whenever it is calculated on the basis of the Prime Lending Rate,
interest shall be calculated on the basis of a year of three hundred sixty-five
(365) days (or three hundred sixty-six (366) days, as the case may be) for the
actual days elapsed; and, otherwise, interest shall be calculated on the basis
of a year of three hundred sixty (360) days for the actual days elapsed. The
Agent shall as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the day on which such change becomes effective. The
Agent shall as soon as practicable notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.

        (b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error.

        (c) If the Eurodollar Rate cannot be determined by the Agent in the
manner specified in the definition of the term "Eurodollar Rate", the Agent
shall give telecopy or telephonic notice thereof to the Borrower and the Lenders
as soon as practicable thereafter. Until such time as the Eurodollar Rate can be
determined by the Agent in the manner specified in the definition of such term,
no further Eurodollar Loans shall be made or shall be continued as such at the
end of the then current Interest Period nor shall the Borrower have the right to
convert ABR Loans to Eurodollar Loans.

        2.10   PRO RATA TREATMENT AND PAYMENTS.

        (a) Each borrowing by the Borrower from the Lenders hereunder and any
reduction of the Commitments of the Lenders shall be made pro rata according to
their respective Commitments. Subject to the provisions of Section 8.7 of the
Participation Agreement and Section 2.11(b) hereof, each payment (including
without limitation each prepayment) by the Borrower on account of principal of
and interest on the Loans shall be made pro rata according to the respective
outstanding principal amounts on the Loans then held by the Lenders. All
payments (including without limitation prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, Austin, Texas time, on the due date thereof to the Agent, for the
account of the Lenders, at the Agent's office specified in Section 9.2, in
Dollars and in immediately available funds. The Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day; provided,
however, if such payment includes an amount of interest calculated with
reference to the Eurodollar Rate and the result of such extension would be to
extend such payment into another calendar month, then such payment shall be made
on the immediately preceding Business Day. In the case of any extension of any
payment of principal pursuant to the preceding two (2) sentences, interest
thereon shall be payable at the then applicable rate during such extension.

        (b) Unless the Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make its share of such borrowing
available to the Agent, the Agent may assume that such Lender is

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   183

making such amount available to the Agent, and the Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If such
amount is not made available to the Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Agent. A certificate of the Agent submitted to any Lender with respect to
any amounts owing under this Section 2.10(b) shall be conclusive in the absence
of manifest error. If such Lender's share of such borrowing is not made
available to the Agent by such Lender within three (3) Business Days of such
Borrowing Date, the Agent shall also be entitled to recover such amount with
interest thereon at the rate as set forth above on demand from the Borrower.

        2.11   NOTICE OF AMOUNTS PAYABLE; MANDATORY ASSIGNMENT.

        (a) In the event that any Lender becomes aware that any amounts are or
will be owed to it pursuant to Sections 11.2(e), 11.3 or 11.4 of the
Participation Agreement or that it is unable to make Eurodollar Loans, then it
shall promptly notify the Borrower, the Lessee and the Agent thereof and, as
soon as possible thereafter, such Lender shall submit to the Borrower (with a
copy to the Agent) a certificate indicating the amount owing to it and the
calculation thereof. The amounts set forth in such certificate shall be prima
facie evidence of the obligations of the Borrower hereunder.

        (b) In the event that any Lender delivers to the Borrower a certificate
in accordance with Section 2.11(a) in connection with amounts payable pursuant
to Sections 11.2(e) or 11.3 of the Participation Agreement or such Lender is
required to make Loans as ABR Loans in accordance with Section 11.3(e) of the
Participation Agreement then, subject to Section 9.1 of the Participation
Agreement, the Borrower may, at its own expense (provided, such amounts shall be
reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as
Supplemental Rent) and in the discretion of the Borrower, (i) require such
Lender to transfer or assign, in whole or (with such Lender's consent) in part,
without recourse (in accordance with Section 9.8), all or (with such Lender's
consent) part of its interests, rights (except for rights to be indemnified for
actions taken while a party hereunder) and obligations under this Agreement to a
replacement bank or institution if the Borrower (subject to Section 9.1 of the
Participation Agreement), with the full cooperation of such Lender, can identify
a Person who is ready, willing and able to be such replacement bank or
institution with respect thereto and such replacement bank or institution (which
may be another Lender) shall assume such assigned obligations, or (ii) during
such time as no Default or Event of Default has occurred and is continuing,
terminate the Commitment of such Lender and prepay all outstanding Loans of such
Lender; provided, however, that (x) subject to Section 9.1 of the Participation
Agreement, the Borrower or such replacement bank or institution, as the case may
be, shall have paid to such Lender in immediately available funds the principal
of and interest accrued to the date of such payment on the Loans made by it
hereunder and all other amounts owed to it hereunder (and, if such Lender is
also a Holder, all Holder Advances and Holder Yield accrued and unpaid thereon)
and (y) such assignment or termination of the Commitment of such Lender and
prepayment of Loans does not conflict with any law, rule or regulation or order
of any court or Governmental Authority.

                    SECTION 3. REPRESENTATIONS AND WARRANTIES

        To induce the Agent and the Lenders to enter into this Agreement and to
make the Loans, each of the Trust Company and the Owner Trustee hereby makes and
affirms the representations and warranties set forth in Section 6.1 of the
Participation Agreement to the same extent as if such representations and
warranties were set forth in this Agreement in their entirety.

                         SECTION 4. CONDITIONS PRECEDENT

        4.1    CONDITIONS TO EFFECTIVENESS.

        The effectiveness of this Agreement is subject to the satisfaction of
all conditions precedent set forth in Section 5.3 of the Participation Agreement
required by said Section to be satisfied on or prior to the Initial Closing
Date.

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        4.2    CONDITIONS TO EACH LOAN.

        The agreement of each Lender to make any Loan requested to be made by it
on any date is subject to the satisfaction of all conditions precedent set forth
in Section 5.3 and 5.4 of the Participation Agreement required by said Sections
to be satisfied on or prior to the date of the applicable Loan.

Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this Section 4.2 have been satisfied.

                              SECTION 5. COVENANTS

        So long as any Loan or Note remains outstanding and unpaid or any other
amount is owing to any Lender or the Agent hereunder:

        5.1    OTHER ACTIVITIES.

        Except as otherwise expressly contemplated by the Trust Agreement, the
Borrower shall not conduct, transact or otherwise engage in, or commit to
transact, conduct or otherwise engage in, any business or operations other than
the entry into, and exercise of rights and performance of obligations in respect
of, the Operative Agreements and other activities incidental or related to the
foregoing.

        5.2    OWNERSHIP OF PROPERTIES, INDEBTEDNESS.

        Except as otherwise expressly contemplated by the Trust Agreement, the
Borrower shall not own, lease, manage or otherwise operate any properties or
assets other than in connection with the activities described in Section 5.1, or
incur, create, assume or suffer to exist any Indebtedness or other consensual
liabilities or financial obligations other than as may be incurred, created or
assumed or as may exist in connection with the activities described in Section
5.1 (including without limitation the Loans and other obligations incurred by
the Borrower hereunder).

        5.3    DISPOSITION OF ASSETS.

        The Borrower shall not convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets, whether now owned
or hereafter acquired, except to the extent expressly contemplated by the
Operative Agreements.

        5.4    COMPLIANCE WITH OPERATIVE AGREEMENTS.

        The Borrower shall at all times (a) observe and perform all of the
covenants, conditions and obligations required to be performed by it (whether in
its capacity as the Lessor, the Owner Trustee or otherwise) under each Operative
Agreement to which it is a party and (b) observe and perform, or cause to be
observed and performed, all of the covenants, conditions and obligations of the
Lessor under the Lease, even in the event that the Lease is terminated at stated
expiration following a Lease Event of Default or otherwise.

        5.5    FURTHER ASSURANCES.

        At any time and from time to time, upon the written request of the
Agent, and at the expense of the Borrower (provided, such amounts shall be
reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as
Supplemental Rent), the Borrower will promptly and duly execute and deliver such
further instruments and documents and take such further action as the Agent or
the Majority Lenders may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and the other Operative
Agreements and of the rights and powers herein or therein granted.

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        5.6    NOTICES.

        If on any date, a Responsible Officer of the Borrower shall obtain
actual knowledge of the occurrence of a Default or Event of Default, the
Borrower will give written notice thereof to the Agent within five (5) Business
Days after such date.

        5.7    DISCHARGE OF LIENS.

        Neither the Borrower nor the Trust Company will create or permit to
exist at any time, and will, at its own expense, promptly take such action as
may be necessary duly to discharge, or cause to be discharged, all Lessor Liens
attributable to it, provided, that the Borrower and the Trust Company shall not
be required to discharge any Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as such
proceedings shall not involve any material danger of impairment of any of the
Liens contemplated by the Security Documents or of the sale, forfeiture or loss
of, and shall not materially interfere with the disposition of, any Property or
title thereto or any interest therein or the payment of Rent.

        5.8    TRUST AGREEMENT.

        Without prejudice to any right under the Trust Agreement of the Owner
Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII of the
Trust Agreement, (b) agrees not to amend, supplement, terminate, revoke or
otherwise modify any provision of the Trust Agreement in any manner which could
reasonably be expected to have an adverse effect on the rights or interests of
the Agent or the Lenders hereunder or under the other Operative Agreements and
(c) agrees to comply with all of the terms of the Trust Agreement.

                          SECTION 6. EVENTS OF DEFAULT

        Upon the occurrence of any of the following specified events (each an
"Event of Default"):

        (a) Except as provided in Sections 6(c), the Borrower shall default in
the payment when due of any principal on the Loans or default in the payment
when due of any interest on the Loans, and in either such case, such default
shall continue for three (3) or more days; or

        (b) Except as provided in Sections 6(a) and 6(c), the Borrower shall
default, and such default shall continue for three (3) or more days, in the
payment of any amount owing under any Credit Document; or

        (c) (i) The Borrower shall default in the payment of any amount due on
the Maturity Date owing under any Credit Document or (ii) the Borrower shall
default in the payment when due of any principal or interest on the Loans
payable with regard to any obligation of Lessee to pay Termination Value or
Maximum Amount when due or to pay Basic Rent or Supplemental Rent at such time
as any Termination Value or Maximum Amount is due; or

        (d) The Borrower shall default in the due performance or observance by
it of any term, covenant or agreement contained in any Credit Document to which
it is a party (other than those referred to in paragraphs (a), (b) and (c)
above), provided, that in the case of any such default under Sections 5.4, 5.5
or 5.8(c), such default shall have continued unremedied for a period of at least
fifteen (15) days after notice to the Borrower by the Agent or the Majority
Lenders.

        (e) Any representation, warranty or statement made or deemed made by the
Borrower herein or in any other Credit Document or by the Borrower or the Lessee
in the Participation Agreement, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto, shall prove to be untrue in
any material respect on the date as of which made or deemed made; or

        (f) (i) Any Lease Event of Default shall have occurred and be
continuing, or (ii) the Owner Trustee shall default in the due performance or
observance by it of any term, covenant or agreement contained in the

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Participation Agreement or in the Trust Agreement to or for the benefit of the
Agent or a Lender, provided, that in the case of this clause (ii) such default
shall have continued unremedied for a period of at least fifteen (15) days after
notice to the Owner Trustee and Lessee by the Agent or the Majority Lenders; or

        (g) The Borrower shall commence a voluntary case concerning itself under
the Bankruptcy Code or an involuntary case is commenced against the Borrower and
the petition is not controverted within ten (10) days after commencement of the
case or an involuntary case is commenced against the Borrower and the petition
is not dismissed within sixty (60) days after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Borrower; or the Borrower
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Borrower, or there is commenced against the Borrower any such proceeding which
remains undismissed for a period of sixty (60) days; or the Borrower is
adjudicated insolvent or bankrupt, or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of sixty (60) days;
or the Borrower makes a general assignment for the benefit of creditors; or any
corporate or partnership action is taken by the Borrower for the purpose of
effecting any of the foregoing; or

        (h) Any Security Document shall, for any reason not the fault of the
Agent or any Lender, cease to be in full force and effect, or shall cease to
give the Agent the Liens, rights, powers and privileges purported to be created
thereby (including without limitation a first priority perfected security
interest in, and Lien on, all of the Properties), in favor of the Agent on
behalf of the Lenders and the Holders, superior to and prior to the rights of
all third Persons and subject to no other Liens (except in each case to the
extent expressly permitted herein or in any Operative Agreement) other than any
Ground Lease; or

        (i) The Lease shall cease to be enforceable against the Lessee; or

        (j) One (1) or more judgments or decrees shall be entered against the
Borrower involving a liability of $100,000 or more in the aggregate for all such
judgments and decrees for the Borrower and any such judgments or decrees shall
not have been vacated, discharged or stayed or bonded pending appeal within
sixty (60) days from the entry thereof,

then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Majority Lenders, the Agent may, or upon the request of the
Majority Lenders, the Agent shall, by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Majority Lenders, the
Agent may, or upon the request of the Majority Lenders, the Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable (any of the foregoing occurrences or actions referred to in clause (A)
or (B) above, an "Acceleration"). Except as expressly provided above in this
Section 6, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.

        Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Agent shall, upon the
written instructions of the Majority Secured Parties, exercise any or all of the
rights and powers and pursue any and all of the remedies available to it
hereunder and (subject to the terms thereof) under the other Credit Documents,
the Lease and the other Operative Agreements and shall have any and all rights
and remedies available under the Uniform Commercial Code or any provision of
law.

        Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Agent may, and upon
request of the Majority Secured Parties shall, proceed to protect and enforce
this Agreement, the Notes, the other Credit Documents and the Lease by suit or
suits or proceedings in equity, at law or in bankruptcy, and whether for the
specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted, or for foreclosure hereunder, or
for the appointment of

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a receiver or receivers for the Property or for the recovery of judgment for the
indebtedness secured thereby or for the enforcement of any other proper, legal
or equitable remedy available under applicable laws.

        The Borrower shall be liable for any and all accrued and unpaid amounts
due hereunder before, after or during the exercise of any of the foregoing
remedies, including without limitation all reasonable legal fees and other
reasonable costs and expenses incurred by the Agent or any Lender by reason of
the occurrence of any Event of Default or the exercise of remedies with respect
thereto.

                              SECTION 7. THE AGENT

        7.1    APPOINTMENT.

        Each Lender hereby irrevocably designates and appoints the Agent as the
agent of such Lender under this Agreement and the other Operative Agreements,
and each such Lender irrevocably authorizes the Agent, in such capacity, to
execute the Operative Agreements as agent for and on behalf of such Lender, to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Operative Agreements and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of this Agreement
and other Operative Agreements, together with such other powers as are
reasonably incidental thereto. Without limiting the generality of the foregoing,
each of the Lenders hereby specifically acknowledges the terms and provisions of
the Participation Agreement and directs the Agent to exercise such powers, make
such decisions and otherwise perform such duties as are delegated to the Agent
thereunder without being required to obtain any specific consent with respect
thereto from any Lender, unless the matter under consideration is a Unanimous
Vote Matter or otherwise requires the consent of the Majority Lenders and/or the
Majority Secured Parties. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Operative Agreement or otherwise exist against the Agent.

        7.2    DELEGATION OF DUTIES.

        The Agent may execute any of its duties under this Agreement and the
other Operative Agreements by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.

        7.3    EXCULPATORY PROVISIONS.

        Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Operative Agreement (except for its or such Person's
own gross negligence or willful misconduct) or (b) responsible in any manner to
any of the Lenders for any recitals, statements, representations or warranties
made by the Borrower or the Lessee or any officer thereof contained in this
Agreement or any other Operative Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Operative
Agreement or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Operative Agreement or for any
failure of the Borrower or the Lessee to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Operative
Agreement, or to inspect the properties, books or records of the Borrower or the
Lessee.

        7.4    RELIANCE BY THE AGENT.

        The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the

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proper Person or Persons and upon advice and statements of legal counsel
(including without limitation counsel to the Borrower or the Lessee),
independent accountants and other experts selected by the Agent. The Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Operative
Agreement unless it shall first receive such advice or concurrence of the
Majority Lenders, the Majority Secured Parties or all Secured Parties, as the
case may be, as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Operative Agreements in accordance
with a request of the Majority Lenders, the Majority Secured Parties or all
Secured Parties, as the case may be, and such and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes (or all Secured Parties, as the case may be).

        7.5    NOTICE OF DEFAULT.

        The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received written notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Majority Secured Parties; provided, that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Secured Parties; provided, further, the foregoing shall
not limit (a) the rights of the Majority Secured Parties to elect remedies as
set forth in Section 6 and/or (b) the rights of the Majority Secured Parties or
all Secured Parties, as the case may be, as described in the Participation
Agreement (including without limitation Sections 8.2(h) and 8.6 of the
Participation Agreement).

        7.6    NON-RELIANCE ON THE AGENT AND OTHER LENDERS.

        Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Agent hereinafter
taken, including without limitation any review of the affairs of the Borrower or
the Lessee, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the
Lessee and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Operative Agreements, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and the Lessee. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Borrower or the Lessee which may come into the possession of the Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

        7.7    INDEMNIFICATION.

        The Lenders agree to indemnify the Agent, in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation of
the Borrower to do so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnification is sought under this
Section 7.7 (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with their Commitment Percentages immediately prior to
such date), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,

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expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the Notes) be
imposed on, incurred by or asserted against any of them in any way relating to
or arising out of, the Commitments, this Agreement, any of the other Operative
Agreements or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by any of them under or in connection with any of the foregoing; provided, that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the gross negligence or willful misconduct
of the Agent. The agreements in this Section 7.7 shall survive the payment of
the Notes and all other amounts payable hereunder.

        7.8    THE AGENT IN ITS INDIVIDUAL CAPACITY.

        The Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower or the Lessee as
though the Agent were not the Agent hereunder and under the other Operative
Agreements. With respect to its Loans made or renewed by it and any Note issued
to it, the Agent shall have the same rights and powers under this Agreement and
the other Operative Agreements as any Lender and may exercise the same as though
it were not the Agent, and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacity.

        7.9    SUCCESSOR AGENT.

        The Agent may resign at any time as the Agent upon thirty (30) days'
notice to the Lenders, the Borrower and, so long as no Lease Event of Default
shall have occurred and be continuing, the Lessee. If the Agent shall resign as
the Agent under this Agreement, the Majority Lenders shall appoint from among
the Lenders a successor Agent which successor Agent shall be subject to the
approval of the Borrower and, so long as no Lease Event of Default shall have
occurred and be continuing, the Lessee, such approval not to be unreasonably
withheld or delayed. If no successor Agent is appointed prior to the effective
date of the resignation of the resigning Agent, the Agent may appoint, after
consulting with the Lenders and subject to the approval of the Borrower and, so
long as no Lease Event of Default shall have occurred and be continuing, the
Lessee, such approval not to be unreasonably withheld or delayed, a successor
Agent from among the Lenders (or such other Person as shall be acceptable to the
Majority Lenders). If no successor Agent has accepted appointment as the Agent
by the date which is thirty (30) days following a retiring Agent's notice of
resignation, the retiring Agent's notice of resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Agent until such time, if any, as the Majority Lenders appoint a successor
Agent, as provided for above. Upon the effective date of such resignation, only
such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's rights, powers and duties in such capacity shall be terminated.
After any retiring Agent resigns hereunder as the Agent, the provisions of this
Article VII and Section 9.5 shall inure to their respective benefit as to any
actions taken or omitted to be taken by it while it was the Agent under this
Agreement.

        7.10   ACTIONS OF THE AGENT ON BEHALF OF HOLDERS.

        The parties hereto specifically acknowledge and consent to the Agent's
acting on behalf of the Holders as provided in the Participation Agreement, and,
in any such case, the Lenders acknowledge that the Holders shall be entitled to
vote as "Secured Parties" hereunder to the extent required or permitted by the
Operative Agreements (including without limitation Sections 8.2(h) and 8.6 of
the Participation Agreement).

        7.11   THE AGENT'S DUTY OF CARE.

        Other than the exercise of reasonable care to assure the safe custody of
the Collateral while being held by the Agent hereunder or under any other
Operative Agreement, the Agent shall have no duty or liability to preserve
rights pertaining thereto, it being understood and agreed that the Lessee shall
be responsible for preservation of all rights in the Collateral, and the Agent
shall be relieved of all responsibility for the Collateral upon surrendering it
or tendering the surrender of it to the Lessee. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Agent accords its own property, which shall be no less than the
treatment employed by a

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reasonable and prudent agent in the industry, it being understood that the Agent
shall not have responsibility for taking any necessary steps to preserve rights
against any parties with respect to any of the Collateral.

              SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL

        8.1    COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.

        The Lessee, the Construction Agent, the Agent, the Lenders, the Holders
and the Borrower have agreed pursuant to the terms of Section 8.7 of the
Participation Agreement to a procedure for the allocation and distribution of
certain payments and distributions, including without limitation the proceeds of
Collateral.

        8.2    CERTAIN REMEDIAL MATTERS.

        Notwithstanding any other provision of this Agreement or any other
Credit Document:

        (a) the Borrower shall at all times retain to the exclusion of all other
parties, all rights to Excepted Payments payable to it and to demand, collect or
commence an action at law to obtain such payments and to enforce any judgment
with respect thereto; and

        (b) the Borrower and each Holder shall at all times retain the right,
but not to the exclusion of the Agent, (i) to retain all rights with respect to
insurance that Article XIV of the Lease specifically confers upon the "Lessor",
(ii) to provide such insurance as the Lessee shall have failed to maintain in
accordance with the Operative Agreements or as the Borrower or any Holder may
desire, and (iii) to bring an action to enforce compliance by the Lessee with
the provisions of Articles VIII, IX, X, XI, XIV and XVII of the Lease.

        8.3    EXCEPTED PAYMENTS.

        Notwithstanding any other provision of this Agreement or the Security
Documents, any Excepted Payment received at any time by the Agent shall be
distributed promptly to the Person entitled to receive such Excepted Payment.

                            SECTION 9. MISCELLANEOUS

        9.1    AMENDMENTS AND WAIVERS.

        None of the terms or provisions of this Agreement may be terminated,
amended, supplemented, waived or modified except in accordance with the terms of
Section 12.4 of the Participation Agreement.

        9.2    NOTICES.

        All notices required or permitted to be given under this Agreement shall
be given in accordance with Section 12.2 of the Participation Agreement.

        9.3    NO WAIVER; CUMULATIVE REMEDIES.

        No failure to exercise and no delay in exercising, on the part of the
Agent or any Lender, any right, remedy, power or privilege hereunder or under
the other Credit Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.

        9.4    [reserved]

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        9.5    PAYMENT OF EXPENSES AND TAXES.

        The Borrower agrees to (with funds provided by the Lessee as
Supplemental Rent): (a) pay all reasonable out-of-pocket costs and expenses of
(i) the Agent whether or not the transactions herein contemplated are
consummated, in connection with the negotiation, preparation, execution and
delivery of the Operative Agreements and the documents and instruments referred
to therein (including without limitation the reasonable fees and disbursements
of Moore & Van Allen, PLLC) and any amendment, waiver or consent relating
thereto (including without limitation the reasonable fees and disbursements of
counsel to the Agent) and (ii) the Agent and each of the Lenders in connection
with the enforcement of the Operative Agreements and the documents and
instruments referred to therein (including without limitation the reasonable
fees and disbursements of counsel for the Agent and for each of the Lenders) and
(b) pay and hold each of the Lenders harmless from and against any and all
present and future stamp and other similar taxes with respect to the foregoing
matters and save each of the Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Lender) to pay such taxes.

        9.6    SUCCESSORS AND ASSIGNS.

        This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement except in
accordance with Section 10.1 of the Participation Agreement and the other
applicable provisions of the Operative Agreements.

        9.7    PARTICIPATIONS.

        Subject to and in accordance with Section 10.1 of the Participation
Agreement, each Lender may sell participations to one or more Persons (each, a
"Participant") in all or a portion of its rights, obligations or rights and
obligations under the Operative Agreements (including all or a portion of its
Commitment or its Loans); provided, however, that (a) such Lender's obligations
under the Operative Agreements shall remain unchanged, (b) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (c) the Participant shall be entitled to the benefit of the
yield protection provisions contained in Sections 11.2(e), 11.3 and 11.4 of the
Participation Agreement and the right of set-off contained in Section 12.15 of
the Participation Agreement, and (d) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under the Operative Agreements, and such Lender shall retain the
sole right to enforce the obligations of the Borrower relating to its Loans and
its Notes and to approve any amendment, modification, or waiver of any provision
of the Operative Agreements (other than amendments, modifications, or waivers
decreasing the amount of principal of or the rate at which interest is payable
on such Loans or Notes, extending any scheduled principal payment date or date
fixed for the payment of interest on such Loans or Notes, or extending its
Commitment).

        Any Lender may furnish any information concerning the Borrower, the
Lessee or any Subsidiaries of the Lessee in the possession of such Lender from
time to time to participants (including prospective participants), subject,
however, to the provisions of Section 12.13 of the Participation Agreement.

        9.8    ASSIGNMENTS.

        Assignments. (a)    Subject to and in accordance with Section 10.1 of
the Participation Agreement, each Lender may assign to one or more Eligible
Assignees all or a portion of its rights and obligations under the Operative
Agreements (including, without limitation, all or a portion of its Loans, its
Notes, and its Commitment); provided, however, that

               (i)  each such assignment shall be to an Eligible Assignee;

               (ii) except in the case of an assignment to another Lender or an
        assignment of all of a Lender's rights and obligations under the
        Operative Agreements, any such partial assignment shall be in an amount
        at least equal to $5,000,000 or an integral multiple of $1,000,000 in
        excess thereof;

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               (iii) each such assignment by a Lender shall be of a constant,
        and not varying, percentage of all of its rights and obligations under
        the Operative Agreements and the Notes; and

               (iv)  the parties to such assignment shall execute and deliver to
        the Agent for its acceptance an Assignment and Acceptance substantially
        in the form of Exhibit B hereto, together with any Note subject to such
        assignment and a processing fee of $3,500.

Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights and benefits of a Lender under the
Operative Agreements and the assigning Lender shall, to the extent of such
assignment, relinquish its rights and be released from its obligations under the
Operative Agreements. Upon the consummation of any assignment pursuant to this
Section, the assignor, the Agent and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the assignor and the
assignee. If the assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall deliver to the Borrower and the
Agent certification as to exemption from deduction or withholding of Taxes in
accordance with Section 11.2(e) of the Participation Agreement.

        (b) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Exhibit B hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the parties thereto.

        (c) Notwithstanding any other provision set forth in any Operative
Agreement, any Lender may at any time assign and pledge all or any portion of
its Loans and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from its
obligations hereunder.

        (d) Any Lender may furnish any information concerning the Borrower, the
Lessee or any Subsidiaries of the Lessee in the possession of such Lender from
time to time to assignees (including prospective assignees), subject, however,
to the provisions of Section 12.13 of the Participation Agreement.

        9.9    THE REGISTER; DISCLOSURE; PLEDGES TO FEDERAL RESERVE BANKS.

        The Agent shall maintain at its address referred to in Section 12.2 of
the Participation Agreement a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the
Loans owing to, each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.

        9.10   ADJUSTMENTS; SET-OFF.

        (a) Except as otherwise expressly provided in Section 8.1 hereof and
Section 8.7 of the Participation Agreement where, and to the extent, one (1)
Lender is entitled to payments prior to other Lenders, if any Lender (a
"Benefitted Lender") shall at any time receive any payment of all or part of its
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 6(g), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans, or interest thereon,
such Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the event of such recovery, but without interest.

                                       15
   193

        (b) In addition to any rights now or hereafter granted under applicable
law or otherwise, and not by way of limitation of any such rights, upon the
occurrence and during the continuation of an Event of Default, the Agent and
each Lender are hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by the Agent or such Lender (including
without limitation by branches and agencies of the Agent or such Lender wherever
located) to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Agent or such
Lender under this Agreement or under any of the other Operative Agreements,
including without limitation all interests in obligations of the Borrower
purchased by any such Lender pursuant to Section 9.10(a), and all other claims
of any nature or description arising out of or connected with this Agreement or
any other Operative Agreement, irrespective or whether or not the Agent or such
Lender shall have made any demand and although said obligations, liabilities or
claims, or any of them, shall be contingent or unmatured.

        9.11   COUNTERPARTS.

        This Agreement may be executed by one (1) or more of the parties to this
Agreement on any number of separate counterparts (including without limitation
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one (1) and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Agent.

        9.12   SEVERABILITY.

        Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

        9.13   INTEGRATION.

        THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT OF THE BORROWER, THE AGENT, AND THE LENDERS WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND THEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN OR ORAL AGREEMENTS AMONG THE PARTIES HERETO AND NO PROMISES,
UNDERTAKINGS, REPRESENTATIONS OR WARRANTIES BY THE AGENT OR ANY LENDER RELATIVE
TO THE SUBJECT MATTER HEREOF NOT EXPRESSLY SET FORTH OR REFERRED TO HEREIN OR IN
THE OTHER CREDIT DOCUMENTS.

        9.14   GOVERNING LAW.

        THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED,
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NORTH CAROLINA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW).

        9.15   SUBMISSION TO JURISDICTION; VENUE.

        THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION, VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
MUTANDIS.

                                       16
   194

        9.16   ACKNOWLEDGEMENTS.

        The Borrower hereby acknowledges that:

        (a) neither the Agent nor any Lender has any fiduciary relationship with
or duty to the Borrower arising out of or in connection with this Agreement or
any of the other Credit Documents, and the relationship between the Agent (and
the Lenders) and the Borrower, in connection herewith or therewith is solely
that of debtor and creditor; and

        (b) no joint venture is created hereby or by the other Credit Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrower and the Lenders.

        9.17   WAIVERS OF JURY TRIAL.

        THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

        9.18   NONRECOURSE.

        In addition to and not in limitation of Section 12.9 of the
Participation Agreement, anything to the contrary contained in this Agreement or
in any other Operative Agreement notwithstanding, no Exculpated Person shall be
personally liable in any respect for any liability or obligation hereunder or
under any other Operative Agreement including without limitation the payment of
the principal of, or interest on, the Notes, or for monetary damages for the
breach of performance of any of the covenants contained in this Agreement, the
Notes or any of the other Operative Agreements. The Agent and the Lenders agree
that, in the event any of them pursues any remedies available to them under this
Agreement, the Notes or any other Operative Agreement, neither the Agent nor the
Lenders shall have any recourse against the Borrower, nor any other Exculpated
Person, for any deficiency, loss or claim for monetary damages or otherwise
resulting therefrom and recourse shall be had solely and exclusively against the
Trust Estate and the Lessee; but nothing contained herein shall be taken to
prevent recourse against or the enforcement of remedies against the Trust Estate
in respect of any and all liabilities, obligations and undertakings contained in
this Agreement, the Notes or any other Operative Agreement. The Agent and the
Lenders further agree that the Borrower shall not be responsible for the payment
of any amounts owing hereunder (excluding principal and interest (other than
Overdue Interest) in respect of the Loans) (such non-excluded amounts,
"Supplemental Amounts") except to the extent that payments of Supplemental Rent
designated by the Lessee for application to such Supplemental Amounts shall have
been paid by the Lessee pursuant to the Lease (it being understood that the
failure by the Lessee for any reason to pay any Supplemental Rent in respect of
such Supplemental Amounts shall nevertheless be deemed to constitute a default
by the Borrower for the purposes of Section 6). Notwithstanding the foregoing
provisions of this Section 9.18, nothing in this Agreement or any other
Operative Agreement shall (a) constitute a waiver, release or discharge of any
obligation evidenced or secured by this Agreement or any other Credit Document,
(b) limit the right of the Agent or any Lender to name the Borrower as a party
defendant in any action or suit for judicial foreclosure and sale under any
Security Document, or (c) affect in any way the validity or enforceability of
any guaranty (whether of payment and/or performance) given to the Lessor, the
Agent or the Lenders, or of any indemnity agreement given by the Borrower, in
connection with the Loans made hereunder.

        9.19   USURY SAVINGS PROVISION.

        IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN
STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT AND THAT
N.C. GEN. STAT. Section 24-9 SHALL APPLY WITH RESPECT TO THIS AGREEMENT. TO THE
EXTENT N.C. GEN. STAT. Section 24-9 IS HEREAFTER DEEMED NOT TO APPLY BY A COURT
OF COMPETENT JURISDICTION AND ANY PAYMENTS HEREUNDER ARE HEREINAFTER
CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF
PRINCIPAL AND INTEREST THEREON, THE FOLLOWING PROVISIONS OF THIS SECTION 9.19
SHALL APPLY. ANY SUCH PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO
HEREIN AS "INTEREST." ALL

                                       17
   195

AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS
PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY
EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF
THE MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED
FOR, CHARGED, OR RECEIVED UNDER THIS AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM
NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE
CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR
AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM
NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF
THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE
AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER
APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW
DOCUMENT OR AGREEMENT. IF THE AGENT OR ANY LENDER SHALL EVER RECEIVE ANYTHING OF
VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED
HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE
IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH
WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE
REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE
PAYMENT OF INTEREST, OR REFUNDED TO THE BORROWER OR ANY OTHER PAYOR THEREOF, IF
AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY
AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT
TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH
DEMAND, AND NEITHER THE AGENT NOR ANY LENDER INTENDS TO CHARGE OR RECEIVE ANY
UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE
PAID TO THE AGENT OR ANY LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED
TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS AGREEMENT
SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE
MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.

                           [signature pages to follow]

                                       18
   196

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                   FIRST SECURITY BANK, NATIONAL ASSOCIATION, as
                                   Owner Trustee under the Lexi Trust 2000-1

                                   By:    /s/ Wade Morgan
                                          ------------------------------------
                                   Name:      Wade Morgan
                                          ------------------------------------
                                   Title:     Vice President
                                          ------------------------------------

                                   BANK OF AMERICA, N.A., as the Agent and the
                                   Lender

                                   By:    /s/ C. Scott Nielsen
                                          ------------------------------------
                                   Name:      C. Scott Nielsen
                                          ------------------------------------
                                   Title:     Vice President
                                          ------------------------------------

   197

                                  Schedule 2.1

                                                 Tranche A                    Tranche B
                                                Commitment                   Commitment
Name and Address of Lender                 Amount       Percentage      Amount       Percentage
                                           ------       ----------      ------       ----------

Bank of America, N.A.                     $38,839,500      100%         $4,135,500      100%
Bank of America Tower
515 Congress Avenue
Mail Code: TX9-329-11-01
Austin, TX 78701-3503
Attention: Wade Morgan
Telephone:     (512) 397-2241
Telecopy:      (512) 397-2052

TOTAL                                     $38,839,500      100%         $4,135,500      100%

   198

                                   Exhibit A-1

                                 TRANCHE A NOTE

                               (Lexi Trust 2000-1)

                                                            [___________, 200__]

        FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee
under the Lexi Trust 2000-1 (the "Borrower"), hereby unconditionally promises to
pay to the order of [LENDER] (the "Lender"), at the office of Bank of America,
N.A., located at Austin, Texas, or at such other address as may be specified by
[LENDER], in lawful money of the United States of America and in immediately
available funds, on the Rent Commencement Date, the Tranche A Loan amount
referenced in Section 2.6(d) of the Credit Agreement, on the Payment Date
immediately following the Final Completion Date, the Tranche A Loan Amount
referenced in Section 2.6(c) of the Credit Agreement, and on the Maturity Date,
the aggregate unpaid principal amount of all Tranche A Loans made by the Lender
to the Borrower pursuant to Section 2.1 of the Credit Agreement (as defined
below). The Borrower agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in Section 2.8 of such Credit Agreement.

        The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Tranche A Loan made pursuant to the Credit Agreement and the date and amount of
each payment or prepayment of principal thereof, each continuation thereof and
each conversion of all or a portion thereof to another Type. Each such
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement or any error in
such endorsement shall not affect the obligations of the Borrower in respect of
such Loan.

        This Note (a) is one of the Notes referred to in the Credit Agreement
dated as of October 19, 2000 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the Borrower, the Lender, the
other banks and financial institutions from time to time parties thereto and
Bank of America, N.A., as the Agent, (b) is subject to the provisions of the
Credit Agreement (including without limitation Section 9.18 thereof) and (c) is
subject to optional and mandatory prepayment in whole or in part as provided in
the Credit Agreement. Reference is hereby made to the Credit Documents for a
description of the properties and assets in which a security interest has been
granted, the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.

        Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.

        All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind except as
expressly set forth to the contrary in the Credit Agreement or the Participation
Agreement.

        Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

        THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

                                      A1-1
   199

                                      A1-2
   200

        IN WITNESS WHEREOF, THE UNDERSIGNED AUTHORIZED OFFICER OF THE BORROWER
HAS EXECUTED THIS NOTE AS OF THE DATE FIRST SET FORTH ABOVE.

                                   FIRST SECURITY BANK, NATIONAL ASSOCIATION, as
                                   Owner Trustee under the Lexi Trust 2000-1

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

                                      A1-3
   201

                                   Exhibit A-2

                                 TRANCHE B NOTE

                               (Lexi Trust 2000-1)

                                                              [_________, 200__]

        FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee
under the Lexi Trust 2000-1 (the "Borrower"), hereby unconditionally promises to
pay to the order of [LENDER] (the "Lender") at the office of Bank of America,
N.A. located at Austin, Texas, or at such other address as may be specified by
[LENDER], in lawful money of the United States of America and in immediately
available funds, on the Rent Commencement Date, the Tranche B Loan Amount
referenced in Section 2.6(c) of the Credit Agreement, on the Payment Date
immediately following the Final Completion Date, the Tranche B Loan Amount
referenced in Section 2.6(c) of the Credit Agreement, and on the Maturity Date,
the aggregate unpaid principal amount of all Tranche B Loans made by the Lender
to the Borrower pursuant to Section 2.1 of the Credit Agreement (as defined
below). The Borrower agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in Section 2.8 of such Credit Agreement.

        The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Tranche B Loan made pursuant to the Credit Agreement and the date and amount of
each payment or prepayment of principal thereof, each continuation thereof and
each conversion of all or a portion thereof to another Type. Each such
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement or any error in
such endorsement shall not affect the obligations of the Borrower in respect of
such Loan.

        This Note (a) is one of the Notes referred to in the Credit Agreement
dated as of October 19, 2000 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the Borrower, the Lender, the
other banks and financial institutions from time to time parties thereto and
Bank of America, N.A., as the Agent, (b) is subject to the provisions of the
Credit Agreement (including without limitation Section 9.18 thereof) and (c) is
subject to optional and mandatory prepayment in whole or in part as provided in
the Credit Agreement. Reference is hereby made to the Credit Documents for a
description of the properties and assets in which a security interest has been
granted, the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.

        Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.

        All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind except as
expressly set forth to the contrary in the Credit Agreement or the Participation
Agreement.

        Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

        THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

                                      A2-1
   202

        IN WITNESS WHEREOF, THE UNDERSIGNED AUTHORIZED OFFICER OF THE BORROWER
HAS EXECUTED THIS NOTE AS OF THE DATE FIRST SET FORTH ABOVE.

                                   FIRST SECURITY BANK, NATIONAL ASSOCIATION, as
                                   Owner Trustee under the Lexi Trust 2000-1

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

                                      A2-2
   203

                                    Exhibit B

                            ASSIGNMENT AND ACCEPTANCE

        THIS ASSIGNMENT AND ACCEPTANCE dated as of ____________, 200__ (as
amended, modified, supplemented, restated and/or replaced from time to time, the
"Assignment and Acceptance") is between [____________________] (the "Assignor")
and [_______________] (the "Assignee").

        Reference is made to the Credit Agreement, dated as of October 19, 2000
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as the Owner Trustee under the Lexi Trust 2000-1
(the "Owner Trustee" or the "Borrower"), the Lenders named therein and Bank of
America, N.A., as the Agent. Unless otherwise defined herein, terms defined in
the Credit Agreement (or pursuant to Section 1 of the Credit Agreement, defined
in other agreements) and used herein shall have the meanings given to them in or
pursuant to the Credit Agreement.

        The Assignor and the Assignee agree as follows:

        1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a [___%] interest (the "Assigned Interest")
in and to the Assignor's rights and obligations under the Credit Agreement with
respect to the credit facility contained in the Credit Agreement as are set
forth on Schedule 1 hereto (the "Assigned Facility"), in a principal amount for
the Assigned Facility as set forth on Schedule 1.

        2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Operative
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Operative Agreement or
any other instrument or document furnished pursuant thereto, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, or any other obligor or the
performance or observance by the Borrower, or any other obligor of any of their
respective obligations under the Credit Agreement or any other Operative
Agreement or any other instrument or document furnished pursuant hereto or
thereto; and (c) attaches the Note held by it evidencing the Assigned Facility
and requests that the Agent exchange such Note for a new Note payable to the
Assignee and (if the Assignor has retained any interest in the Assigned
Facility) a new Note payable to the Assignor in the respective amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).

        3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received copies of the Operative Agreements, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, the other Operative Agreements or any other
instrument or document furnished pursuant hereto or thereto; (d) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Operative
Agreements or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and the other Operative Agreements to which
Assignee is a party and will perform in accordance herewith all the obligations
which by the terms of the Credit Agreement and the other Operative Agreements to
which Assignee is a party are required to be performed by it as a Lender
including without limitation, if it is organized under the laws of a
jurisdiction outside the U.S., its obligation pursuant to Section 11.2(e) of the
Participation Agreement.

                                       B-1
   204

        4. The effective date of this Assignment and Acceptance shall be
[________, 200__] (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance by
it and recording by the Agent pursuant to Section 9.9 of the Credit Agreement,
effective as of the Effective Date (which shall not, unless otherwise agreed to
by the Agent, be earlier than five (5) Business Days after the date of such
acceptance and recording by the Agent).

        5. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the Assigned Interest
(including without limitation payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to the
Effective Date or accrue subsequent to the Effective Date. The Assignor and the
Assignee shall make all appropriate adjustments in payments by the Agent for
periods prior to the Effective Date or with respect to the making of this
assignment directly between themselves.

        6. From and after the Effective Date, (a) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Operative Agreements and shall be bound by the provisions thereof and (b)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement and the other Operative Agreements.

        7. This Assignment and Acceptance shall be governed by, and construed,
INTERPRETED AND ENFORCED in accordance with the INTERNAL laws of the State of
north carolina (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW).

                                      B-2
   205

        IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.

                               [Name of Assignor]

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

                               [Name of Assignor]

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

                               Consented To:

                               FIRST SECURITY BANK, NATIONAL ASSOCIATION, as
                               Owner Trustee under the Lexi Trust 2000-1

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

                               BANK OF AMERICA, N.A., as the Agent

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

[consents required only to the extent expressly provided in Section 9.8 of the
Credit Agreement]

                                      B-3
   206

                                   SCHEDULE 1
                          TO ASSIGNMENT AND ACCEPTANCE
                        RELATING TO THE CREDIT AGREEMENT,
                          DATED AS OF OCTOBER 19, 2000,
                                      AMONG
                    FIRST SECURITY BANK, NATIONAL ASSOCIATION
                                AS OWNER TRUSTEE,
                            THE LENDERS NAMED THEREIN
                                       AND
                       BANK OF AMERICA, N.A., AS THE AGENT
                 FOR THE LENDERS (IN SUCH CAPACITY, THE "AGENT")

Name of Assignor:
                  ---------------------------------

Name of Assignee:
                  ---------------------------------

Effective Date of Assignment:
                              ---------------------

               Credit Facility              Principal Amount           Commitment Percentage
                  Assigned                      Assigned                     Assigned
                                                              
                                       $                                                    %
          --------------------          -----------------------       ----------------------

        [Name of Assignor]

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

        [Name of Assignee]

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

                                      B-4
   207
- --------------------------------------------------------------------------------

                                 LEASE AGREEMENT

                          Dated as of October 19, 2000

                                     between

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                  as Owner Trustee under the Lexi Trust 2000-1,
                                    as Lessor

                                       and

                         LEXICON GENETICS INCORPORATED,
                                    as Lessee

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

This Lease Agreement is subject to a security interest in favor of Bank of
America, N.A., as the agent for the Lenders and respecting the Security
Documents, as the agent for the Secured Parties (the "Agent") under a Security
Agreement dated as of October 19, 2000, between First Security Bank, National
Association, as Owner Trustee under the Lexi Trust 2000-1 and the Agent, as
amended, modified, extended, supplemented, restated and/or replaced from time to
time in accordance with the applicable provisions thereof. This Lease Agreement
has been executed in several counterparts. To the extent, if any, that this
Lease Agreement constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Lease Agreement may be created through the transfer or
possession of any counterpart other than the original counterpart containing the
receipt therefor executed by the Agent on the signature page hereof.

   208

                                TABLE OF CONTENTS

                                                                                                           
ARTICLE I.........................................................................................................1
         1.1      Definitions.....................................................................................1
                  -----------
         1.2      Interpretation..................................................................................1
                  --------------

ARTICLE II........................................................................................................1
         2.1      Property........................................................................................1
                  --------
         2.2      Lease Term......................................................................................2
                  ----------
         2.3      Title...........................................................................................2
                  -----
         2.4      Lease Supplements...............................................................................2
                  -----------------

ARTICLE III.......................................................................................................2
         3.1      Rent............................................................................................2
                  ----
         3.2      Payment of Basic Rent...........................................................................3
                  ---------------------
         3.3      Supplemental Rent...............................................................................3
                  -----------------
         3.4      Performance on a Non-Business Day...............................................................3
                  ---------------------------------
         3.5      Rent Payment Provisions.........................................................................3
                  -----------------------

ARTICLE IV........................................................................................................3
         4.1      Taxes; Utility Charges..........................................................................3
                  ----------------------

ARTICLE V.........................................................................................................4
         5.1      Quiet Enjoyment.................................................................................4
                  ---------------

ARTICLE VI........................................................................................................4
         6.1      Net Lease.......................................................................................4
                  ---------
         6.2      No Termination or Abatement.....................................................................4
                  ---------------------------

ARTICLE VII.......................................................................................................5
         7.1      Ownership of the Properties.....................................................................5
                  ---------------------------

ARTICLE VIII......................................................................................................6
         8.1      Condition of the Properties.....................................................................6
                  ---------------------------
         8.2      Possession and Use of the Properties............................................................6
                  ------------------------------------
         8.3      Integrated Properties...........................................................................9
                  ---------------------

ARTICLE IX........................................................................................................7
         9.1      Compliance With Legal Requirements, Insurance Requirements and Manufacturer's
                  -----------------------------------------------------------------------------
         Specifications and Standards.............................................................................7
         ----------------------------

ARTICLE X.........................................................................................................8
         10.1     Maintenance and Repair; Return..................................................................8
                  ------------------------------
         10.2     Environmental Inspection........................................................................9
                  ------------------------

ARTICLE XI........................................................................................................9
         11.1     Modifications...................................................................................9
                  -------------
         11.2     Other Property.................................................................................10
                  --------------

ARTICLE XII......................................................................................................10
         12.1     Warranty of Title..............................................................................10
                  -----------------

ARTICLE XIII.....................................................................................................11
         13.1     Permitted Contests Other Than in Respect of Indemnities........................................11
                  -------------------------------------------------------

                                       i
   209

                                                                                                           
         13.2     Impositions, Utility Charges, Other Matters; Compliance with Legal Requirements................11
                  -------------------------------------------------------------------------------

ARTICLE XIV......................................................................................................11
         14.1     Commercial Liability and Workers' Compensation Insurance.......................................11
                  --------------------------------------------------------
         14.2     Permanent Hazard and Other Insurance...........................................................12
                  ------------------------------------
         14.3     Coverage.......................................................................................12
                  --------
         14.4     Additional Insurance Requirements..............................................................18
                  ---------------------------------

ARTICLE XV.......................................................................................................13
         15.1     Casualty and Condemnation......................................................................13
                  -------------------------
         15.2     Environmental Matters..........................................................................14
                  ---------------------
         15.3     Notice of Environmental Matters................................................................15
                  -------------------------------

ARTICLE XVI......................................................................................................15
         16.1     Termination Upon Certain Events................................................................15
                  -------------------------------
         16.2     Procedures.....................................................................................15
                  ----------

ARTICLE XVII.....................................................................................................16
         17.1     Lease Events of Default........................................................................16
                  -----------------------
         17.2     Surrender of Possession........................................................................18
                  -----------------------
         17.3     Reletting......................................................................................18
                  ---------
         17.4     Damages........................................................................................18
                  -------
         17.5     Power of Sale..................................................................................19
                  -------------
         17.6     Final Liquidated Damages.......................................................................19
                  ------------------------
         17.7     Environmental Costs............................................................................19
                  -------------------
         17.8     Waiver of Certain Rights.......................................................................20
                  ------------------------
         17.9     Assignment of Rights Under Contracts...........................................................20
                  ------------------------------------
         17.10    Remedies Cumulative............................................................................20
                  -------------------
         17.11    Lessee's Right to Cure by Purchase of All Properties...........................................20
                  ----------------------------------------------------

ARTICLE XVIII....................................................................................................20
         18.1     Lessor's Right to Cure Lessee's Lease Defaults.................................................20
                  ----------------------------------------------

ARTICLE XIX......................................................................................................21
         19.1     Provisions Relating to Lessee's Exercise of its Purchase Option................................21
                  ---------------------------------------------------------------
         19.2     No Purchase or Termination With Respect to Less than All of a Property.........................21
                  ----------------------------------------------------------------------

ARTICLE XX.......................................................................................................21
         20.1     Purchase Option, Sale Option or Walk-Away Option - General Provisions..........................21
                  ---------------------------------------------------------------------
         20.2     Lessee Purchase Option.........................................................................22
                  ----------------------
         20.3     Third Party Sale Option........................................................................22
                  -----------------------
         20.4     Walk-Away Option...............................................................................23
                  ----------------

ARTICLE XXI......................................................................................................23
         21.1     [Intentionally Omitted]........................................................................23

ARTICLE XXII.....................................................................................................24
         22.1     Sale Procedure.................................................................................24
                  --------------
         22.2     Application of Proceeds of Sale................................................................26
                  -------------------------------
         22.3     Indemnity for Excessive Wear...................................................................26
                  ----------------------------
         22.4     Appraisal Procedure............................................................................36
                  -------------------
         22.5      Certain Obligations Continue..................................................................37
                   ----------------------------

ARTICLE XXIII....................................................................................................27
         23.1     Holding Over...................................................................................27
                  ------------

                                       ii

   210

                                                                                                           
ARTICLE XXIV.....................................................................................................27
         24.1     Risk of Loss...................................................................................27
                  ------------

ARTICLE XXV......................................................................................................27
         25.1     Assignment.....................................................................................27
                  ----------
         25.2     Subleases......................................................................................28
                  ---------

ARTICLE XXVI.....................................................................................................28
         26.1     No Waiver......................................................................................28
                  ---------

ARTICLE XXVII....................................................................................................28
         27.1     Acceptance of Surrender........................................................................28
                  -----------------------
         27.2     No Merger of Title.............................................................................28
                  ------------------

ARTICLE XXVIII...................................................................................................28
         28.1     [Intentionally Omitted]........................................................................28
                   ---------------------

ARTICLE XXIX.....................................................................................................29
         29.1     Notices........................................................................................29
                  -------

ARTICLE XXX......................................................................................................29
         30.1     Miscellaneous..................................................................................29
                  -------------
         30.2     Amendments and Modifications...................................................................29
                  ----------------------------
         30.3     Successors and Assigns.........................................................................29
                  ----------------------
         30.4     Headings and Table of Contents.................................................................29
                  ------------------------------
         30.5     Counterparts...................................................................................29
                  ------------
         30.6     GOVERNING LAW..................................................................................29
                  -------------
         30.7     Calculation of Rent............................................................................30
                  -------------------
         30.8     Memoranda of Lease and Lease Supplements.......................................................30
                  ----------------------------------------
         30.9     Allocations between the Lenders and the Holders................................................30
                  -----------------------------------------------
         30.10    Limitations on Recourse........................................................................30
                  -----------------------
         30.11    WAIVERS OF JURY TRIAL..........................................................................30
                  ---------------------
         30.12    Exercise of Lessor Rights......................................................................30
                  -------------------------
         30.13    SUBMISSION TO JURISDICTION; VENUE..............................................................31
                  ---------------------------------
         30.14    USURY SAVINGS PROVISION........................................................................31
                  -----------------------

EXHIBITS

EXHIBIT A           -      Lease Supplement No. ____
EXHIBIT B           -      Memorandum of Lease and Lease Supplement No. ____

                                      iii

   211

                                 LEASE AGREEMENT

         THIS LEASE AGREEMENT dated as of October 19, 2000 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Lease") is between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, having its principal office at 79 South Main Street, Salt
Lake City, Utah 84111, as Owner Trustee under the Lexi Trust 2000-1, as lessor
(the "Lessor"), and LEXICON GENETICS INCORPORATED, a Delaware corporation,
having its principal place of business at 4000 Research Forest Drive, The
Woodlands, Texas, Montgomery County, 77381, Texas, as lessee (the "Lessee").

                              W I T N E S S E T H:

         A. WHEREAS, subject to the terms and conditions of the Participation
Agreement and the Agency Agreement, Lessor will (i) purchase or ground lease
various parcels of real property, some of which will (or may) have existing
Improvements thereon, from one (1) or more third parties designated by Lessee
and (ii) fund the acquisition, installation, testing, use, development,
construction, operation, maintenance, repair, refurbishment and restoration of
the Properties by the Construction Agent; and

         B. WHEREAS, the Basic Term shall commence with respect to each Property
upon the Property Closing Date with respect thereto; provided, Basic Rent with
respect thereto shall not be payable until the applicable Rent Commencement
Date; and

         C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to
lease from Lessor, each Property;

         NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

         1.1      DEFINITIONS.

                  For purposes of this Lease, capitalized terms used in this
Lease and not otherwise defined herein shall have the meanings assigned to them
in Appendix A to that certain Participation Agreement dated as of October 19,
2000 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among Lessee, Lessor, the various banks and other
lending institutions which are parties thereto from time to time, as the
Holders, the various banks and other lending institutions which are parties
thereto from time to time, as the Lenders, and Bank of America, N.A., as agent
for the Lenders and respecting the Security Documents, as the agent for the
Secured Parties. Unless otherwise indicated, references in this Lease to
articles, sections, paragraphs, clauses, appendices, schedules and exhibits are
to the same contained in this Lease.

         1.2      INTERPRETATION.

         The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Lease.

                                   ARTICLE II

         2.1      PROPERTY.

                  Subject to the terms and conditions hereinafter set forth and
contained in the respective Lease Supplement relating to each Property, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor, each Property.

   212

         2.2      LEASE TERM.

         The basic term of this Lease with respect to each Property (the "Basic
Term") shall begin upon the Property Closing Date for such Property (in each
case the "Basic Term Commencement Date") and shall end on the sixth annual
anniversary of the Initial Closing Date (the "Basic Term Expiration Date"),
unless the Basic Term is earlier terminated or the term of this Lease is renewed
(as described below) in accordance with the provisions of this Lease.
Notwithstanding the foregoing, Lessee shall not be obligated to pay Basic Rent
until the Rent Commencement Date with respect to such Property.

         To the extent no Lease Default or Lease Event of Default has occurred
and is continuing, and if, at least one hundred twenty (120) days prior to the
Basic Term Expiration Date or such Renewal Term, as applicable, Lessee has (a)
not provided written notice to Lessor of its determination to exercise its
purchase option, sale option or walk-away option under Article XX hereof and (b)
provided the Agent with a written request for extension, the term of this Lease
for all Properties may, in the sole and absolute discretion of the Lenders and
the Holders, be extended one (1) additional term of one (1) year's duration from
the Basic Term Expiration Date or such Renewal Term, as applicable, (each, a
"Renewal Term"); provided, that (i) the initial request for extension may not be
made earlier than the fifth anniversary of the Initial Closing Date and (ii) no
more than seven (7) Renewal Terms may be granted.

         2.3      TITLE.

         Each Property is leased to Lessee without any representation or
warranty, express or implied, by Lessor and subject to the rights of parties in
possession (if any), the existing state of title (including without limitation
the Permitted Liens) and all applicable Legal Requirements. Lessee shall in no
event have any recourse against Lessor for any defect in Lessor's title to any
Property or any interest of Lessee therein other than for Lessor Liens.

         2.4      LEASE SUPPLEMENTS.

         On or prior to each Basic Term Commencement Date, Lessee and Lessor
shall each execute and deliver a Lease Supplement for the Property to be leased
effective as of such Basic Term Commencement Date in substantially the form of
Exhibit A hereto.

                                   ARTICLE III

         3.1      RENT.

                  (a)      Lessee shall pay Basic Rent in arrears on each
         Payment Date, and on any date on which this Lease shall terminate with
         respect to any or all Properties during the Term; provided, however,
         with respect to each individual Property Lessee shall have no
         obligation to pay Basic Rent with respect to such Property until the
         Rent Commencement Date with respect to such Property (notwithstanding
         that Basic Rent for such Property shall accrue from and including the
         Scheduled Interest Payment Date immediately preceding such Rent
         Commencement Date).

                  (b)      Basic Rent shall be due and payable in lawful money
         of the United States and shall be paid by wire transfer of immediately
         available funds to the Agent on the due date therefor (or within the
         applicable grace period) to such account or accounts at such bank or
         banks as Lessor shall from time to time direct.

                  (c)      Lessee's inability or failure to take possession of
         all or any portion of any Property when delivered by Lessor, whether or
         not attributable to any act or omission of Lessor, the Construction
         Agent, Lessee or any other Person or for any other reason whatsoever,
         shall not delay or otherwise affect Lessee's obligation to pay Rent for
         such Property in accordance with the terms of this Lease.

                  (d)      Lessee shall make all payments of Rent prior to 12:00
         Noon, Austin, Texas time, on the applicable date for payment of such
         amount.

                                       2
   213

         3.2      PAYMENT OF BASIC RENT.

         Basic Rent shall be paid absolutely net to Lessor or its designee, so
that this Lease shall yield to Lessor the full amount thereof, without setoff,
deduction or reduction.

         3.3      SUPPLEMENTAL RENT.

         Lessee shall pay to the Person entitled thereto any and all
Supplemental Rent when and as the same shall become due and payable, and if
Lessee fails to pay any Supplemental Rent within five (5) days after the same is
due to any Financing Party or within ten (10) Business Days after the same is
due to any Person other than a Financing Party, Lessor shall have all rights,
powers and remedies provided for herein or by law or equity or otherwise in the
case of nonpayment of Basic Rent. All such payments of Supplemental Rent shall
be in the full amount thereof, without setoff, deduction or reduction. Lessee
shall pay to the appropriate Person, as Supplemental Rent due and owing to such
Person, among other things, on demand, (a) any and all payment obligations
(except for amounts payable as Basic Rent) owing from time to time under the
Operative Agreements by any Person to the Agent, any Lender, any Holder or any
other Person, (b) interest at the applicable Overdue Rate on any installment of
Basic Rent not paid when due (subject to the applicable grace period) for the
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due or demanded by the appropriate Person (subject to any
applicable grace period) for the period from the due date or the date of any
such demand, as the case may be, until the same shall be paid and (c) amounts
referenced as Supplemental Rent obligations pursuant to Section 8.3 of the
Participation Agreement. It shall be an additional Supplemental Rent obligation
of Lessee to pay to the appropriate Person all rent and other amounts when such
become due and owing from time to time under each Ground Lease and without the
necessity of any notice from Lessor with regard thereto. The expiration or other
termination of Lessee's obligations to pay Basic Rent hereunder shall not limit
or modify the obligations of Lessee with respect to Supplemental Rent. Unless
expressly provided otherwise in this Lease, in the event of any failure on the
part of Lessee to pay and discharge any Supplemental Rent as and when due,
Lessee shall also promptly pay and discharge any fine, penalty, interest or cost
which may be assessed or added for nonpayment or late payment of such
Supplemental Rent, all of which shall also constitute Supplemental Rent.

         3.4      PERFORMANCE ON A NON-BUSINESS DAY.

         If any Basic Rent is required hereunder on a day that is not a Business
Day, then such Basic Rent shall be due on the corresponding Scheduled Interest
Payment Date, or, to the extent such Basic Rent is not due on a Scheduled
Interest Payment Date, then on the next succeeding Business Day. If any
Supplemental Rent is required hereunder on a day that is not a Business Day,
then such Supplemental Rent shall be due on the next succeeding Business Day.

         3.5      RENT PAYMENT PROVISIONS.

         Lessee shall make payment of all Basic Rent and Supplemental Rent when
due (subject to the applicable grace periods) regardless of whether any of the
Operative Agreements pursuant to which same is calculated and is owing shall
have been rejected, avoided or disavowed in any bankruptcy or insolvency
proceeding involving any of the parties to any of the Operative Agreements. Such
provisions of such Operative Agreements and their related definitions are
incorporated herein by reference and shall survive any termination, amendment or
rejection of any such Operative Agreements.

                                   ARTICLE IV

         4.1      TAXES; UTILITY CHARGES.

         Lessee shall pay or cause to be paid all Impositions with respect to
the Properties and/or the use, occupancy, operation, repair, access, maintenance
or operation thereof and all charges for electricity, power, gas, oil, water,
telephone, sanitary sewer service and all other rents, utilities and operating
expenses of any kind or type used in or on any Property and related real
property during the Term. Upon Lessor's request, Lessee shall provide from

                                       3
   214

time to time Lessor with evidence of all such payments referenced in the
foregoing sentence. Lessee shall be entitled to receive any credit or refund
with respect to any Imposition or utility charge paid by Lessee. Unless an Event
of Default shall have occurred and be continuing, the amount of any credit or
refund received by Lessor on account of any Imposition or utility charge paid by
Lessee, net of the costs and expenses incurred by Lessor in obtaining such
credit or refund, shall be promptly paid over to Lessee. All charges for
Impositions or utilities imposed with respect to any Property for a period
during which this Lease expires or terminates shall be adjusted and prorated on
a daily basis between Lessor and Lessee, and each party shall pay or reimburse
the other for such party's pro rata share thereof.

                                    ARTICLE V

         5.1      QUIET ENJOYMENT.

         Subject to the rights of Lessor contained in Sections 17.2, 17.3 and
20.3 and the other terms of this Lease and the other Operative Agreements and so
long as no Event of Default shall have occurred and be continuing, Lessee shall
peaceably and quietly have, hold and enjoy each Property for the applicable
Term, free of any claim or other action by Lessor or anyone rightfully claiming
by, through or under Lessor (other than Lessee) with respect to any matters
arising from and after the applicable Basic Term Commencement Date.

                                   ARTICLE VI

         6.1      NET LEASE.

         This Lease shall constitute a net lease, and the obligations of Lessee
hereunder are absolute and unconditional. Lessee shall pay all operating
expenses arising out of the use, operation and/or occupancy of each Property.
Any present or future law to the contrary notwithstanding, this Lease shall not
terminate, nor shall Lessee be entitled to any abatement, suspension, deferment,
reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall
the obligations of Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) for any
reason whatsoever, including without limitation by reason of: (a) any damage to
or destruction of any Property or any part thereof; (b) any taking of any
Property or any part thereof or interest therein by Condemnation or otherwise;
(c) any prohibition, limitation, restriction or prevention of Lessee's use,
occupancy or enjoyment of any Property or any part thereof, or any interference
with such use, occupancy or enjoyment by any Person or for any other reason; (d)
any title defect, Lien or any matter affecting title to any Property; provided,
that the foregoing shall not relieve any Person from its responsibility to
remove any Lessor Liens attributable to it; (e) any eviction by paramount title
or otherwise; (f) any default by Lessor hereunder; (g) to the fullest extent
permitted by applicable law, any action for bankruptcy, insolvency,
reorganization, liquidation, dissolution or other proceeding relating to or
affecting the Agent, any Lender, Lessor, Lessee, any Holder or any Governmental
Authority; (h) the impossibility or illegality of performance by Lessor, Lessee
or both; (i) any action of any Governmental Authority or any other Person; (j)
Lessee's acquisition of ownership of all or part of any Property; (k) breach of
any warranty or representation with respect to any Property or any Operative
Agreement; (l) any defect in the condition, quality or fitness for use of any
Property or any part thereof; or (m) any other cause or circumstance whether
similar or dissimilar to the foregoing and whether or not Lessee shall have
notice or knowledge of any of the foregoing. The parties intend that the
obligations of Lessee hereunder shall be covenants, agreements and obligations
that are separate and independent from any obligations of Lessor hereunder and
shall continue unaffected unless such covenants, agreements and obligations
shall have been modified or terminated in accordance with an express provision
of this Lease. Lessor and Lessee acknowledge and agree that the provisions of
this Section 6.1 have been specifically reviewed and subjected to negotiation.

         6.2      NO TERMINATION OR ABATEMENT.

         Lessee shall remain obligated under this Lease in accordance with its
terms and shall not take any action to terminate, rescind or avoid this Lease,
notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting any Person or any
Governmental Authority, or any action with respect to this Lease or any
Operative Agreement which may be taken by any trustee, receiver or liquidator of
any

                                       4
   215

Person or any Governmental Authority or by any court with respect to any
Person, or any Governmental Authority. Lessee hereby waives all right (a) to
terminate or surrender this Lease (except as permitted under the terms of the
Operative Agreements) or (b) to avail itself of any abatement, suspension,
deferment, reduction, setoff, counterclaim or defense with respect to any Rent.
Lessee shall remain obligated under this Lease in accordance with its terms and
Lessee hereby waives, to the fullest extent permitted by applicable law, any and
all rights now or hereafter conferred by statute or otherwise to modify or to
avoid strict compliance with its obligations under this Lease. Notwithstanding
any such statute or otherwise, Lessee, to the fullest extent permitted by
applicable law, shall be bound by all of the terms and conditions contained in
this Lease.

                                   ARTICLE VII

         7.1      OWNERSHIP OF THE PROPERTIES.

                  (a)      Lessor and Lessee intend that for federal and all
         state and local income tax purposes, bankruptcy purposes, regulatory
         purposes (other than for purposes of Regulation S-X under the
         Securities Act), commercial law and real estate purposes and all other
         purposes (other than for financial reporting and accounting purposes)
         (A) this Lease will be treated as a secured financing arrangement and
         (B) Lessee will be treated as the owner of the Properties and will be
         entitled to all tax benefits ordinarily available to owners of property
         similar to the Properties for such tax purposes. Notwithstanding the
         foregoing, neither party hereto has made, or shall be deemed to have
         made, any representation or warranty as to the availability of any of
         the foregoing treatments under applicable accounting rules, tax,
         bankruptcy, regulatory, commercial or real estate law or under any
         other set of rules. Lessee shall claim the cost recovery deductions
         associated with each Property, and Lessor shall not, to the extent not
         prohibited by Law, take on its tax return a position inconsistent with
         Lessee's claim of such deductions.

                  (b)      For all purposes described in Section 7.1(a), Lessor
         and Lessee intend this Lease to constitute a finance lease and not a
         true lease. In order to secure the obligations of Lessee now existing
         or hereafter arising under any and all Operative Agreements, Lessee
         hereby (i) conveys, grants, assigns, transfers, hypothecates, mortgages
         and sets over to Lessor, for the benefit of the Secured Parties, a
         first priority security interest (but subject to the security interest
         in the assets granted by Lessee in favor of the Agent in accordance
         with the Security Agreement) in and lien on all right, title and
         interest of Lessee (now owned or hereafter acquired) in and to all
         Properties to the extent such is personal property and (ii) irrevocably
         grants and conveys to Lea Stromire Johnson, a resident of Mecklenburg
         County, North Carolina, trustee in trust for the benefit of Lessor and
         the Secured Parties, and grants a lien, deed of trust and mortgage on
         all right, title and interest of Lessee (now owned or hereafter
         acquired) in and to all Properties to the extent such is a real
         property. Lessor and Lessee further intend and agree that, for the
         purpose of securing the obligations of Lessee and/or the Construction
         Agent now existing or hereafter arising under the Operative Agreements,
         (i) this Lease shall be a security agreement and financing statement
         within the meaning of Article 9 of the Uniform Commercial Code
         respecting each of the Properties and all proceeds (including without
         limitation insurance proceeds thereof) to the extent such is personal
         property and an irrevocable grant and conveyance of a lien, deed of
         trust and mortgage on each of the Properties and all proceeds
         (including without limitation insurance proceeds thereof) to the extent
         such is real property; (ii) the acquisition of title by Lessor (or to
         the extent applicable, a leasehold interest pursuant to a Ground Lease)
         in each Property referenced in Article II constitutes a grant by Lessee
         to Lessor of a security interest, lien, deed of trust and mortgage in
         all of Lessee's right, title and interest in and to each Property and
         all proceeds (including without limitation insurance proceeds thereof)
         of the conversion, voluntary or involuntary, of the foregoing into
         cash, investments, securities or other property, whether in the form of
         cash, investments, securities or other property, and an assignment of
         all rents, profits and income produced by each Property; and (iii)
         notifications to Persons holding such property, and acknowledgments,
         receipts or confirmations from financial intermediaries, bankers or
         agents (as applicable) of Lessee shall be deemed to have been given for
         the purpose of perfecting such lien, security interest, mortgage lien
         and deed of trust under applicable law. Lessee shall promptly take such
         actions as necessary (including without limitation the filing of
         Uniform Commercial Code Financing Statements, Uniform Commercial Code
         Fixture Filings and memoranda (or short forms) of this Lease and the
         various Lease Supplements) to ensure that the lien, security interest,
         mortgage lien and deed of trust in each

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         Property and the other items referenced above will be deemed to be a
         perfected lien, security interest, mortgage lien and deed of trust of
         first priority under applicable law and will be maintained as such
         throughout the Term.

                                  ARTICLE VIII

         8.1      CONDITION OF THE PROPERTIES.

         LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS-IS
WHERE-IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY
LESSOR (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR
LIENS) AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE
RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS
REGARDING ITS PHYSICAL CONDITION OR WHICH AN ACCURATE SURVEY MIGHT SHOW, (D) ALL
APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY
EXIST ON THE DATE HEREOF AND/OR THE DATE OF THE APPLICABLE LEASE SUPPLEMENT.
NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER HAS MADE OR SHALL BE
DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR
LIENS) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE,
VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NEITHER LESSOR NOR THE AGENT
NOR ANY LENDER NOR ANY HOLDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT
DEFECT THEREON OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY
WITH ANY LEGAL REQUIREMENT. LESSEE HAS OR PRIOR TO THE BASIC TERM COMMENCEMENT
DATE WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE
IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS LESSOR, THE AGENT, EACH
LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS
INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS
OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE
PRECEDING SENTENCE, AS BETWEEN LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS,
ON THE ONE HAND, AND LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE.

         8.2      POSSESSION AND USE OF THE PROPERTIES.

                  (a)      At all times during the Term with respect to each
         Property, such Property shall be a Permitted Facility and shall be used
         by Lessee in the ordinary course of its business. Lessee shall pay, or
         cause to be paid, all charges and costs required in connection with the
         use of the Properties as contemplated by this Lease. Lessee shall not
         commit or permit any waste of the Properties or any part thereof.

                  (b)      The address stated in Section 29.1 of this Lease is
         the principal place of business and chief executive office of Lessee
         (as such terms are used in Section 9-103(3) of the Uniform Commercial
         Code of any applicable jurisdiction), and Lessee will provide Lessor
         with prior written notice of any change of location of its principal
         place of business or chief executive office. Regarding a particular
         Property, each Lease Supplement correctly identifies the initial
         location of the related Equipment (if any) and Improvements (if any)
         and contains an accurate legal description for the related parcel of
         Land or a copy of the Ground Lease (if any). The Equipment and
         Improvements respecting each particular Property will be located only
         at the location identified in the applicable Lease Supplement.

                  (c)      Lessee will not attach or incorporate any item of
         Equipment to or in any other item of equipment or personal property or
         to or in any real property in a manner that could give rise to the
         assertion of any Lien on such item of Equipment by reason of such
         attachment or the assertion of a claim that such

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         item of Equipment has become a fixture and is subject to a Lien in
         favor of a third party that is prior to the Liens thereon created by
         the Operative Agreements.

                  (d)      On the Basic Term Commencement Date for each
         Property, Lessor and Lessee shall execute a Lease Supplement in regard
         to such Property which shall contain an Equipment Schedule that has a
         general description of the Equipment which shall comprise the Property,
         an Improvement Schedule that has a general description of the
         Improvements which shall comprise the Property and a legal description
         of the Land to be leased hereunder (or in the case of any Property
         subject to a Ground Lease to be subleased hereunder) as of such date.
         Each Property subject to a Ground Lease shall be deemed to be ground
         subleased from Lessor to Lessee as of the Basic Term Commencement Date,
         and such ground sublease shall be in effect until this Lease is
         terminated or expires, in each case in accordance with the terms and
         provisions hereof. Lessee shall satisfy and perform all obligations
         imposed on Lessor under each Ground Lease. Simultaneously with the
         execution and delivery of each Lease Supplement, such Equipment,
         Improvements, Land, ground subleasehold interest, all additional
         Equipment and all additional Improvements which are financed under the
         Operative Agreements after the Basic Term Commencement Date and the
         remainder of such Property shall be deemed to have been accepted by
         Lessee for all purposes of this Lease and to be subject to this Lease.

                  (e)      At all times during the Term with respect to each
         Property, Lessee will comply with all obligations under and (to the
         extent no Event of Default exists and provided that such exercise will
         not impair the value, utility or remaining useful life of such
         Property) shall be permitted to exercise all rights and remedies under,
         all operation and easement agreements and related or similar agreements
         applicable to such Property.

         8.3      INTEGRATED PROPERTIES.

         On the Rent Commencement Date for each Property, Lessee shall, at its
sole cost and expense, cause such Property and the applicable property subject
to a Ground Lease to constitute (and for the duration of the Term shall continue
to constitute) all of the equipment, facilities, rights and other personal
property necessary or appropriate to operate, utilize, maintain and control a
Permitted Facility in a commercially reasonable manner. Lessee confirms and
agrees that the real property subject to Lease Supplement No. 1 shall constitute
all the real property that is necessary or appropriate to operate, utilize,
maintain and control all the Structures, other than for the Existing Blue
Building.

                                   ARTICLE IX

         9.1      COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND
                  MANUFACTURER'S SPECIFICATIONS AND STANDARDS.

         Subject to the terms of Article XIII relating to permitted contests,
Lessee, at its sole cost and expense, shall (a) comply with all applicable Legal
Requirements (including without limitation all Environmental Laws) and all
Insurance Requirements relating to the Properties, (b) procure, maintain and
comply with all licenses, permits, orders, approvals, consents and other
authorizations required for the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Properties and (c) comply with all manufacturer's
specifications and standards, including without limitation the acquisition,
installation, testing, use, development, construction, operation, maintenance,
repair, refurbishment and restoration of the Properties, whether or not
compliance therewith shall require structural or extraordinary changes in any
Property or interfere with the use and enjoyment of any Property, unless the
failure to procure, maintain and comply with such items identified in
subparagraphs (b) and (c), individually or in the aggregate, shall not have and
could not reasonably be expected to have a Material Adverse Effect. Lessor
agrees to take such actions as may be reasonably requested by Lessee in
connection with the compliance by Lessee of its obligations under this Section
9.1.

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                                    ARTICLE X

         10.1     MAINTENANCE AND REPAIR; RETURN.

                  (a)      From and after the Rent Commencement Date for a
         particular Property, Lessee, at its sole cost and expense, shall
         maintain such Property in good condition, repair and working order
         (ordinary wear and tear excepted) and in the repair and condition as
         when originally delivered to Lessor and make all necessary repairs
         thereto and replacements thereof, of every kind and nature whatsoever,
         whether interior or exterior, ordinary or extraordinary, structural or
         nonstructural or foreseen or unforeseen, in each case as required by
         Section 9.1 and on a basis consistent with the operation and
         maintenance of properties or equipment comparable in type and function
         to the applicable Property, such that such Property is capable of being
         immediately utilized by a third party and in compliance with standard
         industry practice subject, however, to the provisions of Article XV
         with respect to Casualty and Condemnation; provided, notwithstanding
         the foregoing provisions of this Section 10.1(a), Lessee, at its sole
         cost and expense, shall pay all such amounts referenced in or arising
         pursuant to this Section 10.1(a) (including such amounts arising before
         the Rent Commencement Date for a particular Property) which are
         incurred as a result of the actions or inactions of any Lessee Related
         Party or as a result of the use of any applicable Property by any
         Lessee Related Party.

                  (b)      Lessee shall not use or locate any component of any
         Property outside of the Approved State therefor. Lessee shall not move
         or relocate any component of any Property beyond the boundaries of the
         Land (comprising part of such Property) described in the applicable
         Lease Supplement, except for the temporary removal of Equipment and
         other personal property for repair or replacement.

                  (c)      From and after the Rent Commencement Date for a
         particular Property, if any component of such Property becomes worn
         out, lost, destroyed, damaged beyond repair or otherwise permanently
         rendered unfit for use, Lessee, at its own expense, will within a
         reasonable time replace such component with a replacement component
         which is free and clear of all Liens (other than Permitted Liens and
         Lessor Liens) and has a value, utility and useful life at least equal
         to the component replaced (assuming the component replaced had been
         maintained and repaired in accordance with the requirements of this
         Lease); provided, notwithstanding the foregoing provisions of this
         Section 10.1(c), Lessee, at its sole cost and expense, shall pay all
         such amounts referenced in or arising pursuant to this Section 10.1(c)
         (including such amounts arising before the Rent Commencement Date for a
         particular Property) which are incurred as a result of the actions or
         inactions of any Lessee Related Party or as a result of the use of any
         applicable Property by any Lessee Related Party. All such replacement
         components which are added to any Property shall immediately become the
         property of (and title thereto shall vest in) Lessor and shall be
         deemed incorporated in such Property and subject to the terms of this
         Lease as if originally leased hereunder.

                  (d)      Upon reasonable advance notice, Lessor and its agents
         shall have the right to inspect each Property and all maintenance
         records with respect thereto at any reasonable time during normal
         business hours but shall, in the absence of an Event of Default, use
         reasonable efforts to minimize the disruption and burden on the
         business of Lessee.

                  (e)      Lessee shall cause to be delivered to Lessor (at
         Lessee's sole expense) one or more additional Appraisals (or
         reappraisals of Property) as Lessor may request (i) if any one of
         Lessor, the Agent, the Trust Company, any Lender or any Holder is
         required pursuant to any applicable Legal Requirement to obtain such
         Appraisals (or reappraisals) from and after the Rent Commencement Date
         for any applicable Property or if such Appraisals (or reappraisals) are
         required pursuant to any particular Legal Requirement before the Rent
         Commencement Date for any applicable Property as a result of the
         actions or inactions of any Lessee Related Party or as a result of the
         use of any applicable Property by any Lessee Related Party or (ii) upon
         the occurrence of any Event of Default.

                  (f)      From and after the Rent Commencement Date for a
         particular Property, Lessor shall under no circumstances be required
         (i) to build any improvements or install any equipment on such
         Property, make any repairs, replacements, alterations or renewals of
         any nature or description to such Property, make any expenditure
         whatsoever in connection with this Lease or maintain such Property in
         any

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         way or (ii) to maintain, repair or rebuild all or any part of such
         Property, and Lessee waives the right to (A) require Lessor to
         maintain, repair, or rebuild all or any part of such Property, or (B)
         make repairs at the expense of Lessor pursuant to any Legal
         Requirement, Insurance Requirement, contract, agreement, covenant,
         condition or restriction at any time in effect; provided,
         notwithstanding the foregoing provisions of this Section 10.1(f),
         Lessee, at its sole cost and expense, shall pay all such amounts
         referenced in or arising pursuant to this Section 10.1(f) (including
         such amounts arising before the Rent Commencement Date for a particular
         Property) which are incurred as a result of the actions or inactions of
         any Lessee Related Party or as a result of the use of any applicable
         Property by any Lessee Related Party.

                  (g)      Lessee shall, upon the expiration or earlier
         termination of this Lease with respect to a Property, if Lessee shall
         not have exercised its Purchase Option with respect to such Property
         and purchased such Property, surrender such Property (i) pursuant to
         the exercise of the applicable remedies upon the occurrence of a Lease
         Event of Default, to Lessor or (ii) pursuant to Article XX hereof and
         the second paragraph of Section 22.1(a) hereof, to Lessor or the third
         party purchaser, as the case may be, subject to Lessee's obligations
         under this Lease (including without limitation the obligations of
         Lessee at the time of such surrender under Sections 9.1, 10.1(a)
         through (f), 10.2, 11.1, 12.1, 22.1 and 23.1).

         10.2     ENVIRONMENTAL INSPECTION.

         If Lessee has not given notice of exercise of its Purchase Option on
the Expiration Date pursuant to Section 20.1 or for whatever reason Lessee does
not purchase a Property in accordance with the terms of this Lease, then not
more than one hundred eighty (180) days nor less than sixty (60) days prior to
the Expiration Date, Lessee shall cause to be delivered to Lessor a Phase I
environmental site assessment recently prepared (no more than thirty (30) days
prior to the date of delivery) by an independent recognized professional
reasonably acceptable to Lessor, and in form, scope and content reasonably
satisfactory to Lessor. The cost incurred respecting such Phase I environmental
site assessment shall be paid for in accordance with the provisions set forth in
Section 20.3(b).

                                   ARTICLE XI

         11.1     MODIFICATIONS.

                  (a)      Lessee at its sole cost and expense, at any time and
         from time to time without the consent of Lessor may make modifications,
         alterations, renovations, improvements and additions to any Property or
         any part thereof and substitutions and replacements therefor
         (collectively, "Modifications"), and Lessee shall make any and all
         Modifications required to be made pursuant to all Legal Requirements,
         Insurance Requirements and manufacturer's specifications and standards;
         provided, that: (i) no Modification shall materially impair the value,
         utility or useful life of any Property from that which existed
         immediately prior to such Modification; (ii) each Modification shall be
         done expeditiously and in a good and workmanlike manner; (iii) no
         Modification shall adversely affect the structural integrity of any
         Property; (iv) to the extent required by Section 14.2(a), Lessee shall
         maintain builders' risk insurance at all times when a Modification is
         in progress; (v) subject to the terms of Article XIII relating to
         permitted contests, Lessee shall pay all costs and expenses and
         discharge any Liens arising with respect to any Modification; (vi) each
         Modification shall comply with the requirements of this Lease
         (including without limitation Sections 8.2 and 10.1); and (vii) no
         Improvement shall be demolished or otherwise rendered unfit for use
         unless Lessee shall finance the proposed replacement Modification
         outside of this lease facility; provided, further, Lessee shall not
         make any Modification (unless required by any Legal Requirement) to the
         extent any such Modification, individually or in the aggregate, shall
         have or could reasonably be expected to have a Material Adverse Effect.
         All Modifications required pursuant to Legal Requirements, Insurance
         Requirements and/or manufacturer's specifications and standards and all
         other Modifications that are not severable from the applicable Property
         without material damage or other material loss of value shall
         immediately and without further action upon their incorporation into
         the applicable Property (1) become property of Lessor, (2) be subject
         to this Lease and (3) be titled in the name of Lessor. Title to all
         other Modifications shall vest with Lessee; provided, if Lessee fails
         to remove any such Modification prior to the Expiration Date or earlier
         termination of this Lease, title to such Modifications shall revert to
         Lessor. Lessee, at its sole cost and expense, shall repair any damage
         to any Property relating to the removal of any

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         Modification. Lessee shall not remove or attempt to remove any
         Modification titled to Lessor from any Property. Each Ground Lease for
         a Property shall expressly provide for the provisions of this
         paragraph. Lessee, at its own cost and expense, will pay for the
         repairs of any damage to any Property caused by the removal or
         attempted removal of any Modification.

                  (b)      The construction process provided for in the Agency
         Agreement is acknowledged by Lessor to be consistent with and in
         compliance with the terms and provisions of this Article XI.

         11.2     OTHER PROPERTY.

         During the Term, Lessee may from time to time own or hold under lease
from Persons other than Lessor, furniture, trade fixtures, equipment and other
tangible personal property located on or about any Property that is not subject
to this Lease and does not constitute a portion of the property covered by this
Lease. Lessor shall from time to time during the Term, upon the reasonable
request of the Lessee, and at the cost and expense of Lessee (but in any event
only after the review and consent of Lessor and the Agent), which request shall
be accompanied by such supporting information and documents as Lessor may
reasonably require (including without limitation that the particular items of
furniture, trade fixtures and equipment in question (x) are not Modifications
specified as the property of Lessor pursuant to Section 11.1(a) and (y) are not
required to operate the particular Property as a Permitted Facility in a
commercially reasonable manner), promptly acknowledge in writing to Lessee or
other Persons designated by Lessee that the particular items of furniture, trade
fixtures and equipment in question are not part of any Property and that,
subject to the rights of Lessor and the Financing Parties hereunder and under
any other Operative Agreements, Lessor does not own or have any other right or
interest in or to such furniture, trade fixtures and equipment.

                                   ARTICLE XII

         12.1     WARRANTY OF TITLE.

                  (a)      Lessee hereby acknowledges and shall cause title in
         each Property (including without limitation all Equipment, all
         Improvements, all replacement components to each Property and all
         Modifications) immediately and without further action to vest in and
         become the property of Lessor subject to any Permitted Liens affecting
         same and to be subject to the terms of this Lease (provided, respecting
         each Property subject to a Ground Lease, Lessor's interest therein is
         acknowledged to be a leasehold interest pursuant to such Ground Lease)
         from and after the date hereof or such date of incorporation into any
         Property. Lessee agrees that, subject to the terms of Article XIII
         relating to permitted contests, Lessee shall not directly or indirectly
         create or allow to remain, and shall promptly discharge at its sole
         cost and expense, any Lien, defect, attachment, levy, title retention
         agreement or claim upon any Property, any component thereof or any
         Modifications or any Lien, attachment, levy or claim with respect to
         the Rent or with respect to any amounts held by Lessor, the Agent, any
         Lender or any Holder pursuant to any Operative Agreement, other than
         Permitted Liens and Lessor Liens. Lessee shall promptly notify Lessor
         in the event it receives actual knowledge that a Lien other than a
         Permitted Lien or Lessor Lien has occurred with respect to a Property,
         the Rent or any other such amounts, and Lessee represents and warrants
         to, and covenants with, Lessor that the Liens in favor of Lessor and/or
         the Agent created by the Operative Agreements are (and until the
         Financing Parties under the Operative Agreements have been paid in full
         shall remain) first priority perfected Liens subject only to Permitted
         Liens and Lessor Liens. At all times subsequent to the Basic Term
         Commencement Date respecting a Property, Lessee shall (i) cause a
         valid, perfected, first priority Lien on each applicable Property to be
         in place in favor of the Agent (for the benefit of the Secured Parties)
         and (ii) file, or cause to be filed, all necessary documents under the
         applicable real property law and Article 9 of the Uniform Commercial
         Code to perfect such title and Liens.

                  (b)      Nothing contained in this Lease shall be construed as
         constituting the consent or request of Lessor, expressed or implied, to
         or for the performance by any contractor, mechanic, laborer,
         materialman, supplier or vendor of any labor or services or for the
         furnishing of any materials for any construction, alteration, addition,
         repair or demolition of or to any Property or any part thereof. NOTICE
         IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY
         LABOR,

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         SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO
         ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE,
         AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
         MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO
         ANY PROPERTY.

                                  ARTICLE XIII

         13.1     PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES.

         Except to the extent otherwise provided for in Section 11 of the
Participation Agreement, Lessee, on its own or on Lessor's behalf but at
Lessee's sole cost and expense, may contest, by appropriate administrative or
judicial proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Legal Requirement,
Imposition or utility charge payable pursuant to Section 4.1 or any Lien,
attachment, levy, encumbrance or encroachment, and Lessor agrees not to pay,
settle or otherwise compromise any such item, provided, that (a) the
commencement and continuation of such proceedings shall suspend the collection
of any such contested amount from, and suspend the enforcement thereof against,
the applicable Properties, Lessor, each Holder, the Agent and each Lender; (b)
there shall not be imposed a Lien (other than Permitted Liens and Lessor Liens)
on any Property and no part of any Property nor any Rent would be in any danger
of being sold, forfeited, lost or deferred; (c) at no time during the permitted
contest shall there be a risk of the imposition of criminal liability or
material civil liability on Lessor, any Holder, the Agent or any Lender for
failure to comply therewith; and (d) in the event that, at any time, there shall
be a material risk of extending the application of such item beyond the end of
the Term, then Lessee shall deliver to Lessor an Officer's Certificate
certifying as to the matters set forth in clauses (a), (b) and (c) of this
Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute and
deliver to Lessee such authorizations and other documents as may reasonably be
required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.

         13.2     IMPOSITIONS, UTILITY CHARGES, OTHER MATTERS; COMPLIANCE WITH
                  LEGAL REQUIREMENTS.

         Except with respect to Impositions, Legal Requirements, utility charges
and such other matters referenced in Section 13.1 which are the subject of
ongoing proceedings contesting the same in a manner consistent with the
requirements of Section 13.1, Lessee shall cause (a) all Impositions, utility
charges and such other matters to be timely paid, settled or compromised, as
appropriate, with respect to each Property and (b) each Property to comply with
all applicable Legal Requirements.

                                   ARTICLE XIV

         14.1     COMMERCIAL LIABILITY AND WORKERS' COMPENSATION INSURANCE.

         During the Term for each Property, Lessee shall procure and carry, at
Lessee's sole cost and expense, commercial general liability and umbrella
liability insurance for claims for injuries or death sustained by persons or
damage to property while on such Property or respecting the Equipment and such
other public liability coverages as are then customarily carried by similarly
situated companies conducting business similar to that conducted by Lessee. Such
insurance shall be on terms and in amounts that are no less favorable than
insurance maintained by Lessee with respect to similar properties and equipment
that it owns and are then carried by similarly situated companies conducting
business similar to that conducted by Lessee, and in no event shall have a
minimum combined single limit per occurrence coverage (i) for commercial general
liability of less than $1,000,000 and (ii) for umbrella liability of less than
$5,000,000. The policies shall name Lessee as the insured and shall be endorsed
to name Lessor, the Holders, the Agent and the Lenders as additional insureds.
The policies shall also specifically provide that such policies shall be
considered primary insurance which shall apply to any loss or claim before any
contribution by any insurance which Lessor, any Holder, the Agent or any Lender
may have in force. In the operation of the Properties, Lessee shall comply with
applicable workers' compensation laws and protect Lessor, each Holder, the Agent
and each Lender against any liability under such laws.

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         14.2     PERMANENT HAZARD AND OTHER INSURANCE.

                  (a)      During the Term for each Property, Lessee shall keep
         such Property insured against all risk of physical loss or damage by
         fire and all other risks and shall maintain builders' risk insurance
         during construction of any Improvements or Modifications in each case
         in amounts no less than the then current replacement value of such
         Property (assuming that such Property was in the condition required by
         the terms of this Lease immediately prior to such loss) and on terms
         that (i) are no less favorable than insurance covering other similar
         properties owned by Lessee and (ii) are then carried by similarly
         situated companies conducting business similar to that conducted by
         Lessee. The policies shall name Lessee as the insured and shall be
         endorsed to name Lessor and the Agent (on behalf of the Secured
         Parties) as a named additional insured and loss payee; provided, so
         long as no Event of Default exists, any loss payable under the
         insurance policies required by this Section for losses up to $1,000,000
         will be paid to Lessee.

                  (b)      If, during the Term with respect to a Property the
         area in which such Property is located is designated a "flood-prone"
         area pursuant to the Flood Disaster Protection Act of 1973, or any
         amendments or supplements thereto or is in a zone designated A or V,
         then Lessee shall comply with the National Flood Insurance Program as
         set forth in the Flood Disaster Protection Act of 1973. In addition,
         Lessee will fully comply with the requirements of the National Flood
         Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as
         each may be amended from time to time, and with any other Legal
         Requirement, concerning flood insurance to the extent that it applies
         to any such Property. During the Term, Lessee shall, in the operation
         and use of each Property, maintain workers' compensation insurance
         consistent with that carried by similarly situated companies conducting
         business similar to that conducted by Lessee and containing minimum
         liability limits of no less than $100,000. In the operation of each
         Property, Lessee shall comply with workers' compensation laws
         applicable to Lessee, and protect Lessor, each Holder, the Agent and
         each Lender against any liability under such laws.

         14.3     COVERAGE.

                  (a)      As of the date of this Lease and annually thereafter
         during the Term, Lessee shall furnish the Agent (on behalf of Lessor
         and the other beneficiaries of such insurance coverage) with
         certificates prepared by the insurers or insurance broker of Lessee
         showing the insurance required under Sections 14.1 and 14.2 to be in
         effect, naming (to the extent of their respective interests) Lessor,
         the Holders, the Agent and the Lenders as additional insureds and loss
         payees and evidencing the other requirements of this Article XIV. All
         such insurance shall be at the cost and expense of Lessee and provided
         by nationally recognized, financially sound insurance companies having
         an A or better rating by A.M. Best's Key Rating Guide. Lessee shall
         cause such certificates to include a provision for thirty (30) days'
         advance written notice by the insurer to the Agent (on behalf of Lessor
         and the other beneficiaries of such insurance coverage) in the event of
         cancellation or material alteration of such insurance. If an Event of
         Default has occurred and is continuing and the Agent (on behalf of
         Lessor and the other beneficiaries of such insurance coverage) so
         requests, Lessee shall deliver to the Agent (on behalf of Lessor and
         the other beneficiaries of such insurance coverage) copies of all
         insurance policies required by Sections 14.1 and 14.2.

                  (b)      Lessee agrees that the insurance policy or policies
         required by Sections 14.1, 14.2(a) and 14.2(b) shall include an
         appropriate clause pursuant to which any such policy shall provide that
         it will not be invalidated should Lessee or any Contractor, as the case
         may be, waive, at any time, any or all rights of recovery against any
         party for losses covered by such policy or due to any breach of
         warranty, fraud, action, inaction or misrepresentation by Lessee or any
         Person acting on behalf of Lessee. Lessee hereby waives any and all
         such rights against Lessor, the Holders, the Agent and the Lenders to
         the extent of payments made to any such Person under any such policy.

                  (c)      Neither Lessor nor Lessee shall carry separate
         insurance concurrent in kind or form or contributing in the event of
         loss with any insurance required under this Article XIV, except that
         Lessor may carry separate liability insurance at Lessor's sole cost so
         long as (i) Lessee's insurance is designated as primary and in no event
         excess or contributory to any insurance Lessor may have in force which
         would apply to a loss covered under Lessee's policy and (ii) each such
         insurance policy will not cause Lessee's insurance required under this
         Article XIV to be subject to a coinsurance exception of any kind.

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                  (d)      Lessee shall pay as they become due all premiums for
         the insurance required by Section 14.1 and Section 14.2, shall renew or
         replace each policy prior to the expiration date thereof or otherwise
         maintain the coverage required by such Sections without any lapse in
         coverage.

                  (e)      During the Construction Period (but in no event past
         the Construction Period Termination Date), the insurance coverage
         required herein shall be satisfied to the extent Lessee or the
         Construction Agent causes such coverage to be maintained by the general
         contractor hired to perform the construction work for the Property in
         question and such coverage otherwise complies with the requirements
         hereof. Also, during the Construction Period no self-insurance amounts
         shall be maintained or permitted with respect to such required
         coverage.

         14.4     ADDITIONAL INSURANCE REQUIREMENTS.

         Not in limitation of any provision of the Operative Agreements but in
addition thereto, Lessee shall obtain any and all additional insurance policies
(including without limitation with respect to Condemnation) with regard to the
Properties or otherwise with respect to the transactions contemplated by the
Operative Agreements as requested from time to time by Lessor.

                                   ARTICLE XV

         15.1     CASUALTY AND CONDEMNATION.

                  (a)      Subject to the provisions of the Agency Agreement and
         this Article XV and Article XVI (in the event Lessee delivers, or is
         obligated to deliver or is deemed to have delivered, a Termination
         Notice), and prior to the occurrence and continuation of a Default or
         an Event of Default, Lessee shall be entitled to receive (and Lessor
         hereby irrevocably assigns to Lessee all of Lessor's right, title and
         interest in) any condemnation proceeds, award, compensation or
         insurance proceeds under Sections 14.2(a) or 14.2(b) hereof to which
         Lessee or Lessor may become entitled by reason of their respective
         interests in a Property (i) if all or a portion of such Property is
         damaged or destroyed in whole or in part by a Casualty or (ii) if the
         use, access, occupancy, easement rights or title to such Property or
         any part thereof is the subject of a Condemnation; provided, however,
         if a Default or an Event of Default shall have occurred and be
         continuing or if such award, compensation or insurance proceeds shall
         exceed $1,000,000, then such award, compensation or insurance proceeds
         shall be paid directly to Lessor or, if received by Lessee, shall be
         held in trust for Lessor, and shall be paid over by Lessee to Lessor
         and held in accordance with the terms of this Article XV. All amounts
         held by Lessor hereunder from time to time on account of any award,
         compensation or insurance proceeds either paid directly to Lessor or
         turned over to Lessor (x) (respecting Properties for which the Rent
         Commencement Date has occurred as of the given date) shall be held as
         security for the performance of Lessee's obligations hereunder and
         under the other Operative Agreements and when all such obligations of
         Lessee with respect to such matters (and all other obligations of
         Lessee which should have been satisfied pursuant to the Operative
         Agreements as of such date) have been satisfied, all amounts so held by
         Lessor shall be paid over to Lessee and (y) (respecting Properties for
         which the Rent Commencement Date has not occurred as of the given date)
         shall be available to fund additional Work on the applicable Property
         if, and to the extent, the conditions precedent set forth in Section
         5.4 of the Participation Agreement are satisfied or waived.

                  (b)      Lessee may appear in any proceeding or action to
         negotiate, prosecute, adjust or appeal any claim for any award,
         compensation or insurance payment on account of any such Casualty or
         Condemnation and shall pay all expenses thereof. At Lessee's reasonable
         request, and at Lessee's sole cost and expense, Lessor and the Agent
         shall participate in any such proceeding, action, negotiation,
         prosecution or adjustment. Lessor and Lessee agree that this Lease
         shall control the rights of Lessor and Lessee in and to any such award,
         compensation or insurance payment.

                  (c)      If Lessee shall receive notice of a Casualty or a
         Condemnation of a Property or any interest therein where damage to the
         affected Property (when aggregated with damage to the other

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         Properties at any time from and after the Initial Closing Date) is
         estimated to equal or exceed fifty percent (50%) of the aggregate
         Property Cost of all Properties, Lessee shall give notice thereof to
         Lessor promptly after Lessee's receipt of such notice. In the event
         such a Casualty or Condemnation occurs (regardless of whether Lessee
         gives notice thereof), then Lessee shall be deemed to have delivered a
         Termination Notice to Lessor and the provisions of Sections 16.1 and
         16.2 shall apply.

                  (d)      In the event of a Casualty or a Condemnation
         (regardless of whether notice thereof must be given pursuant to
         paragraph (c)), this Lease shall terminate with respect to all
         Properties in accordance with Section 16.1 if Lessee, within thirty
         (30) days after such occurrence, delivers to Lessor a notice to such
         effect.

                  (e)      If pursuant to this Section 15.1 this Lease shall
         continue in full force and effect following a Casualty or Condemnation
         with respect to the affected Property, Lessee shall, at its sole cost
         and expense (subject to reimbursement in accordance with Section
         15.1(a)) promptly and diligently repair any damage to the applicable
         Property caused by such Casualty or Condemnation in conformity with the
         requirements of Sections 10.1 and 11.1, using the as-built Plans and
         Specifications or manufacturer's specifications for the applicable
         Improvements, Equipment or other components of the applicable Property
         (as modified to give effect to any subsequent Modifications, any
         Condemnation affecting the applicable Property and all applicable Legal
         Requirements), so as to restore the applicable Property to the same or
         a greater remaining economic value, useful life, utility, condition,
         operation and function as existed immediately prior to such Casualty or
         Condemnation (assuming all maintenance and repair standards have been
         satisfied). In such event, title to the applicable Property shall
         remain with Lessor.

                  (f)      In no event shall a Casualty or Condemnation affect
         Lessee's obligations to pay Rent pursuant to Article III.

                  (g)      Notwithstanding anything to the contrary set forth in
         Section 15.1(a) or Section 15.1(e), if during the Term with respect to
         a Property a Casualty occurs with respect to such Property or Lessee
         receives notice of a Condemnation with respect to such Property, and
         following such Casualty or Condemnation, the applicable Property cannot
         reasonably be restored, repaired or replaced on or before the day one
         hundred eighty (180) days prior to the Expiration Date or the date
         twelve (12) months after the occurrence of such Casualty or
         Condemnation (if such Casualty or Condemnation occurs during the Term)
         to the same or a greater remaining economic value, useful life,
         utility, condition, operation and function as existed immediately prior
         to such Casualty or Condemnation (assuming all maintenance and repair
         standards have been satisfied) or on or before such day such Property
         is not in fact so restored, repaired or replaced, then Lessee shall be
         required to exercise its Purchase Option for all Properties on the next
         Payment Date (notwithstanding the limits on such exercise contained in
         Section 20.2) and pay Lessor the Termination Value for all Properties;
         provided, if any Default or Event of Default has occurred and is
         continuing, Lessee shall also promptly (and in any event within three
         (3) Business Days) pay Lessor any award, compensation or insurance
         proceeds received on account of any Casualty or Condemnation with
         respect to any Property; provided, further, that if no Default or Event
         of Default has occurred and is continuing, any Excess Proceeds shall be
         paid to Lessee. If a Default or an Event of Default has occurred and is
         continuing and any Loans, Holder Advances or other amounts are owing
         with respect thereto, then any Excess Proceeds (to the extent of any
         such Loans, Holder Advances or other amounts owing with respect
         thereto) shall be paid to Lessor, held as security for the performance
         of Lessee's obligations hereunder and under the other Operative
         Agreements and applied to such obligations upon the exercise of
         remedies in connection with the occurrence of an Event of Default, with
         the remainder of such Excess Proceeds in excess of such Loans, Holder
         Advances and other amounts owing with respect thereto being distributed
         to the Lessee.

         15.2     ENVIRONMENTAL MATTERS.

         Promptly upon Lessee's actual knowledge (and in any event within thirty
(30) days of Lessee having acquired such actual knowledge) of the presence of
Hazardous Substances in any portion of any Property or Properties in
concentrations and conditions that constitute an Environmental Violation and
which, in the reasonable opinion of Lessee, the cost to undertake any legally
required response, clean up, remedial or other action will or

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might result in a cost to Lessee of more than $25,000, Lessee shall notify
Lessor in writing of such condition. In the event of any Environmental Violation
(regardless of whether notice thereof must be given), Lessee shall, not later
than thirty (30) days after Lessee has actual knowledge of such Environmental
Violation, either (a) deliver to Lessor a Termination Notice with respect to all
Properties pursuant to Section 16.1, if applicable, or (b) at Lessee's sole cost
and expense, promptly and diligently undertake and diligently complete any
response, clean up, remedial or other action (including without limitation the
pursuit by Lessee of appropriate action against any off-site or third party
source for contamination) necessary to remove, cleanup or remediate the
Environmental Violation in accordance with all Environmental Laws.

         Any such undertaking shall be timely completed in accordance with
prudent industry standards. If Lessee does not deliver a Termination Notice with
respect to all Properties pursuant to Section 16.1, Lessee shall, upon
completion of remedial action by Lessee, cause to be prepared by a reputable
environmental consultant acceptable to Lessor a report describing the
Environmental Violation and the actions taken by Lessee (or its agents) in
response to such Environmental Violation, and a statement by the consultant that
the Environmental Violation has been remedied in full compliance with applicable
Environmental Law. The Lessee shall also comply with its obligations regarding
the delivery of environmental site assessments in connection with its exercising
of the Sale Option (as set forth in Section 20.3) or its election of the
Walk-Away Option (as set forth in Section 20.4).

         15.3     NOTICE OF ENVIRONMENTAL MATTERS.

         Promptly, but in any event within five (5) Business Days from the date
Lessee has actual knowledge thereof, Lessee shall provide to Lessor written
notice of any pending or threatened claim, action or proceeding involving any
Environmental Law or any Release on or in connection with any Property or
Properties. All such notices shall describe in reasonable detail the nature of
the claim, action or proceeding and Lessee's proposed response thereto. In
addition, Lessee shall provide to Lessor, within five (5) Business Days of
receipt, copies of all material written communications with any Governmental
Authority relating to any Environmental Law in connection with any Property.
Lessee shall also promptly provide such detailed reports of any such material
environmental claims as may reasonably be requested by Lessor.

                                   ARTICLE XVI

         16.1     TERMINATION UPON CERTAIN EVENTS.

         If Lessee has delivered, or is deemed to have delivered, written notice
of a termination of this Lease with respect to one or more of the Properties to
Lessor in the form described in Section 16.2(a) (a "Termination Notice")
pursuant to the provisions of this Lease, then following the applicable
Casualty, Condemnation or Environmental Violation, this Lease shall terminate
with respect to all the Properties on the applicable Termination Date.

         16.2     PROCEDURES.

                  (a)      A Termination Notice shall contain: (i) notice of
         termination of this Lease with respect to all the Properties on a
         Payment Date not more than sixty (60) days after Lessor's receipt of
         such Termination Notice (the "Termination Date"); and (ii) a binding
         and irrevocable agreement of Lessee to pay the Termination Value for
         all the Properties and purchase all the Properties on such Termination
         Date.

                  (b)      On each Termination Date, Lessee shall pay to Lessor
         the Termination Value for all the Properties, and Lessor shall convey
         all the Properties to Lessee (or Lessee's designee), all in accordance
         with Section 20.2.

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                                  ARTICLE XVII

         17.1     LEASE EVENTS OF DEFAULT.

         If any one (1) or more of the following events (each a "Lease Event of
Default") shall occur:

                  (a)      Lessee shall fail to make payment of (i) any Basic
         Rent (except as set forth in clause (ii)) within three (3) days after
         the same has become due and payable or (ii) any Termination Value or
         Maximum Amount, on the date any such payment is due and payable, or any
         payment of Basic Rent or Supplemental Rent due on the due date of any
         such payment of Termination Value or Maximum Amount, or (iii) any
         amount due on the Expiration Date on such date;

                  (b)      Lessee shall fail to make payment of any Supplemental
         Rent (other than Supplemental Rent referred to in Section 17.1(a)(ii))
         which has become due and payable within five (5) days after receipt of
         notice that such payment is due to any Financing Party or within ten
         (10) Business Days after receipt of notice that such payment is due to
         any Person other than a Financing Party;

                  (c)      Lessee shall fail to maintain insurance as required
         by Article XIV of this Lease or to deliver any requisite annual
         certificate with respect thereto within ten (10) days of the date such
         certificate is due under the terms hereof;

                  (d)      (i) Lessee shall fail to observe or perform any term,
         covenant, obligation or condition of Lessee under this Lease or any
         other Operative Agreement to which Lessee is a party other than those
         set forth in Sections 17.1(a), (b) or (c) hereof, and such failure
         shall continue for twenty (20) days after notice thereof to the Lessee;
         provided, solely with respect to Sections 8.3(d), 8.3(g), 8.3(j),
         8.3(p), 8.3(u), 8.3A(a)(iv), 8.3A(a)(ix), 8.3A(d) or 8.3B(b) of the
         Participation Agreement or Sections 10.1(a), 10.1(c), 10.1(e), 15.1(e)
         or subsection (b) of Section 15.2 of this Lease, if any such failure is
         not capable of remedy within such twenty (20) day period but may be
         remedied with further diligence and if Lessee has and continues to
         diligently pursue such remedy, then Lessee shall be granted additional
         time to pursue such remedy but in no event more than an additional
         twenty (20) days beyond the expiration of the twenty (20) day period
         referenced immediately above, or (ii) any representation or warranty
         made by Lessee set forth in this Lease or in any other Operative
         Agreement or in any document entered into in connection herewith or
         therewith or in any document, certificate or financial or other
         statement delivered in connection herewith or therewith shall be false
         or inaccurate in any material way when made;

                  (e)      An Agency Agreement Event of Default shall have
         occurred and be continuing;

                  (f)      Lessee or any of its Subsidiaries shall default
         (beyond applicable periods of grace and/or notice and cure) in the
         payment when due of any principal of or interest on any Indebtedness
         having an outstanding principal amount of at least $5,000,000; or any
         other event or condition shall occur which results in a default of any
         such Indebtedness or enables the holder of any such Indebtedness or any
         Person acting on such holder's behalf to accelerate the maturity
         thereof;

                  (g)      The liquidation or dissolution of Lessee, or the
         suspension of the business of Lessee, or the filing by Lessee of a
         voluntary petition or an answer seeking reorganization, arrangement,
         readjustment of its debts or for any other relief under the United
         States Bankruptcy Code, as amended, or under any other insolvency act
         or law, state or federal, now or hereafter existing, or any other
         action of Lessee indicating its consent to, approval of or acquiescence
         in, any such petition or proceeding; the application by Lessee for, or
         the appointment by consent or acquiescence of Lessee of a receiver, a
         trustee or a custodian of Lessee for all or a substantial part of its
         property; the making by Lessee of any assignment for the benefit of
         creditors; the admission by Lessee in writing of its inability to pay
         its debts as they mature or Lessee is generally not paying its debts
         and other financial obligations as they become due and payable; or
         Lessee taking any corporate action to authorize any of the foregoing;

                  (h)      The filing of an involuntary petition against Lessee
         in bankruptcy or seeking reorganization, arrangement, readjustment of
         its debts or for any other relief under the United States

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         Bankruptcy Code, as amended, or under any other insolvency act or law,
         state or federal, now or hereafter existing; or the involuntary
         appointment of a receiver, a trustee or a custodian of Lessee for all
         or a substantial part of its property; or the issuance of a warrant of
         attachment, execution or similar process against any substantial part
         of the property of Lessee, and the continuance of any of such events
         for ninety (90) days undismissed or undischarged;

                  (i)      The adjudication of Lessee as bankrupt or insolvent;

                  (j)      The entering of any order in any proceedings against
         Lessee or any Subsidiary decreeing the dissolution, divestiture or
         split-up of Lessee or any Subsidiary, and such order remains in effect
         for more than sixty (60) days;

                  (k)      Any report, certificate, financial statement or other
         instrument delivered to Lessor by or on behalf of Lessee pursuant to
         the terms of this Lease or any other Operative Agreement is false or
         misleading in any material respect when made or delivered;

                  (l)      [RESERVED];

                  (m)      A final judgment or judgments for the payment of
         money shall be rendered by a court or courts against Lessee or any of
         its Subsidiaries or any of their assets in excess of $15,000,000 in the
         aggregate, and (i) the same shall not be discharged (or provision shall
         not be made for such discharge), or a stay of execution thereof shall
         not be procured, within thirty (30) days from the date of entry
         thereof, or (ii) Lessee or such Subsidiary shall not, within said
         period of thirty (30) days, or such longer period during which
         execution of the same shall have been stayed, appeal therefrom and
         cause the execution thereof to be stayed during such appeal, or (iii)
         such judgment or judgments shall not be discharged (or provisions shall
         not be made for such discharge) within thirty (30) days after a
         decision has been reached with respect to such appeal and the related
         stay has been lifted;

                  (n)      Lessee or any member of the Controlled Group shall
         fail to pay when due an amount or amounts aggregating in excess of
         $2,000,000 which it shall have become liable to pay to the PBGC or to a
         Pension Plan under Title IV of ERISA; or notice of intent to terminate
         a Pension Plan or Pension Plans having aggregate Unfunded Liabilities
         in excess of $2,000,000 shall be filed under Title IV of ERISA by
         Lessee or any member of the Controlled Group, any plan administrator or
         any combination of the foregoing; or the PBGC shall institute
         proceedings under Title IV of ERISA to terminate or to cause a trustee
         to be appointed to administer any such Pension Plan or Pension Plans or
         a proceeding shall be instituted by a fiduciary of any such Pension
         Plan or Pension Plans against Lessee or any member of the Controlled
         Group to enforce Section 515 or 4219(c)(5) of ERISA; or a condition
         shall exist by reason of which the PBGC would be entitled to obtain a
         decree adjudicating that any such Pension Plan or Pension Plans must be
         terminated;

                  (o)      (i) As a result of one (1) or more transactions after
         the date of this Lease, any "person" or "group" of persons (x) which
         does not have a rating then assigned by Standard and Poor's Rating
         Services, a division of The McGraw Hill Companies, Inc., or any
         successors thereto of AA or better (for purposes of this Section
         17.1(o), the "Required S&P Rating") or (y) which does have the Required
         S&P Rating but is determined by the Agent, in the exercise of its
         reasonable discretion, to be otherwise unacceptable: shall have (in the
         case of the foregoing subsections (x) or (y)) "beneficial ownership"
         (within the meaning of Section 13(d) or 14(d) of the Securities
         Exchange Act of 1934, as amended, and the applicable rules and
         regulations thereunder) of fifty percent (50%) or more of the
         outstanding Voting Stock of Lessee; or (ii) without limiting the
         generality of the foregoing, during any period of twelve (12)
         consecutive months, commencing after the date of this Lease,
         individuals who at the beginning of such period of twelve (12) months
         were directors of Lessee shall cease for any reason to constitute a
         majority of the board of directors of Lessee, provided, that the
         relationships among the respective shareholders of Lessee on the
         Initial Closing Date shall not be deemed to constitute all or any
         combination of them as a "group" for purposes of clause (o)(i);

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                  (p)      Any Operative Agreement shall cease to be in full
force and effect due to the actions or inactions of any Person other than a
Financing Party; or

                  (q)      the Lessee or any of its Subsidiaries shall have
         committed any material Environmental Violation;

then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Article XVII and in Section 18.1, terminate this
Lease by giving Lessee five (5) days notice of such termination; provided,
notwithstanding the foregoing, this Lease shall be deemed to be automatically
terminated without the giving of notice upon the occurrence of a Lease Event of
Default under Sections 17.1(g), (h), (i) or (j), and this Lease shall terminate,
and all rights of Lessee under this Lease shall cease. Lessee shall, to the
fullest extent permitted by law, pay as Supplemental Rent all costs and expenses
incurred by or on behalf of Lessor or any other Financing Party, including
without limitation reasonable fees and expenses of counsel, as a result of any
Lease Event of Default hereunder.

         A POWER OF SALE HAS BEEN GRANTED IN THIS LEASE. A POWER OF SALE MAY
ALLOW LESSOR TO TAKE THE PROPERTIES AND SELL THE PROPERTIES WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF A LEASE EVENT OF DEFAULT.

         17.2     SURRENDER OF POSSESSION.

         If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessee shall, upon thirty (30) days written notice, surrender to Lessor
possession of the Properties. Lessor may enter upon and repossess the Properties
by such means as are available at law or in equity, and may remove Lessee and
all other Persons and any and all personal property and Lessee's equipment and
personalty and severable Modifications from the Properties. Lessor shall have no
liability by reason of any such entry, repossession or removal performed in
accordance with applicable law. Upon the written demand of Lessor, Lessee shall
return the Properties promptly to Lessor, in the manner and condition required
by, and otherwise in accordance with the provisions of, Section 22.1(c) hereof.

         17.3     RELETTING.

         If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessor may, but shall be under no obligation to, relet any or all of the
Properties, for the account of Lessee or otherwise, 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 purposes as Lessor may determine, and
Lessor may collect, receive and retain the rents resulting from such reletting.
Lessor shall not be liable to Lessee for any failure to relet any Property or
for any failure to collect any rent due upon such reletting.

         17.4     DAMAGES.

         Neither (a) the termination of this Lease as to all or any of the
Properties pursuant to Section 17.1; (b) the repossession of all or any of the
Properties; nor (c) the failure of Lessor to relet all or any of the Properties,
the reletting of all or any portion thereof, nor the failure of Lessor to
collect or receive any rentals due upon any such reletting, shall relieve Lessee
of its liabilities and obligations hereunder, all of which shall survive any
such termination, repossession or reletting. If any Lease Event of Default shall
have occurred and be continuing and notwithstanding any termination of this
Lease pursuant to Section 17.1, Lessee shall forthwith pay to Lessor all Rent
and other sums due and payable hereunder to and including without limitation the
date of such termination. Thereafter, on the days on which the Basic Rent or
Supplemental Rent, as applicable, are payable under this Lease or would have
been payable under this Lease if the same had not been terminated pursuant to
Section 17.1 and until the end of the Term hereof or what would have been the
Term in the absence of such termination, Lessee shall pay Lessor, as current
liquidated damages (it being agreed that it would be impossible accurately to
determine actual damages) an amount equal to the Basic Rent and Supplemental
Rent that are payable under this Lease or would have been payable by Lessee
hereunder if this Lease had not been terminated pursuant to Section 17.1, less
the net proceeds, if any, which are actually received by Lessor with respect to
the period in question of any reletting of any

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Property or any portion thereof; provided, that Lessee's obligation to make
payments of Basic Rent and Supplemental Rent under this Section 17.4 shall
continue only so long as Lessor shall not have received the amounts specified in
Section 17.6. In calculating the amount of such net proceeds from reletting,
there shall be deducted all of Lessor's, any Holder's, the Agent's and any
Lender's reasonable expenses in connection therewith, including without
limitation repossession costs, brokerage or sales commissions, fees and expenses
for counsel and any necessary repair or alteration costs and expenses incurred
in preparation for such reletting. To the extent Lessor receives any damages
pursuant to this Section 17.4, such amounts shall be regarded as amounts paid on
account of Rent. Lessee specifically acknowledges and agrees that its
obligations under this Section 17.4 shall be absolute and unconditional under
any and all circumstances and shall be paid and/or performed, as the case may
be, without notice or demand and without any abatement, reduction, diminution,
setoff, defense, counterclaim or recoupment whatsoever.

         17.5     POWER OF SALE.

         Without limiting any other remedies set forth in this Lease, Lessor and
Lessee agree that Lessee has granted, pursuant to Section 7.1(b) hereof and each
Lease Supplement, a Lien against the Properties WITH POWER OF SALE, and that,
upon the occurrence and during the continuance of any Lease Event of Default,
Lessor (acting through Lea Stromire Johnson, a resident of Mecklenburg County,
North Carolina, as trustee) shall have the power and authority, to the extent
provided by law, after prior notice and lapse of such time as may be required by
law, to foreclose its interest (or cause such interest to be foreclosed) in all
or any part of the Properties. Lessor is authorized and permitted to accomplish
a foreclosure sale by following the procedures permitted or required by Section
51.002 of the Texas Property Code, as same may be amended from time to time.
Lessor may also appoint in writing at any time a substitute trustee, succeeding
to all rights and interests of the aforementioned Lea Stromire Johnson, as
trustee.

         17.6     FINAL LIQUIDATED DAMAGES.

         If a Lease Event of Default shall have occurred and be continuing,
whether or not this Lease shall have been terminated pursuant to Section 17.1
and whether or not Lessor shall have collected any current liquidated damages
pursuant to Section 17.4, Lessor shall have the right to recover, by demand to
Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for
final liquidated damages, but exclusive of the indemnities payable under Section
11 of the Participation Agreement (which, if requested, shall be paid
concurrently), and in lieu of all current liquidated damages beyond the date of
such demand (it being agreed that it would be impossible accurately to determine
actual damages) the Termination Value. Upon payment of the amount specified
pursuant to the first sentence of this Section 17.6, Lessee shall be entitled to
receive from Lessor, either at Lessee's request or upon Lessor's election, in
either case at Lessee's cost, an assignment of Lessor's entire right, title and
interest in and to the Properties, Improvements, Fixtures, Modifications,
Equipment and all components thereof, in each case in recordable form and
otherwise in conformity with local custom and free and clear of the Lien of this
Lease (including without limitation the release of any memoranda of Lease and/or
the Lease Supplement recorded in connection therewith) and any Lessor Liens. The
Properties shall be conveyed to Lessee "AS-IS, WHERE-IS" and in their then
present physical condition. If any statute or rule of law shall limit the amount
of such final liquidated damages to less than the amount agreed upon, Lessor
shall be entitled to the maximum amount allowable under such statute or rule of
law; provided, however, Lessee shall not be entitled to receive an assignment of
Lessor's interest in the Properties, the Improvements, Fixtures, Modifications,
Equipment or the components thereof unless Lessee shall have paid in full the
Termination Value. Lessee specifically acknowledges and agrees that its
obligations under this Section 17.6 shall be absolute and unconditional under
any and all circumstances and shall be paid and/or performed, as the case may
be, without notice or demand and without any abatement, reduction, diminution,
setoff, defense, counterclaim or recoupment whatsoever.

         17.7     ENVIRONMENTAL COSTS.

         If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessee shall pay directly to any third party (or at Lessor's election, reimburse
Lessor) for the cost of any environmental testing and/or remediation work
undertaken respecting any Property, as such testing or work is deemed
appropriate in the reasonable judgment of Lessor, and shall indemnify and hold
harmless Lessor and each other Indemnified Person therefrom. Lessee shall pay
all amounts referenced in

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the immediately preceding sentence within ten (10)
days of any request by Lessor for such payment. The provisions of this Section
17.7 shall not limit the obligations of Lessee under any Operative Agreement
regarding indemnification obligations, environmental testing, remediation and/or
work.

         17.8     WAIVER OF CERTAIN RIGHTS.

         If this Lease shall be terminated pursuant to Section 17.1, Lessee
waives, to the fullest extent permitted by Law, (a) any notice of re-entry or
the institution of legal proceedings to obtain re-entry or possession; (b) any
right of redemption, re-entry or possession; (c) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt; and
(d) any other rights which might otherwise limit or modify any of Lessor's
rights or remedies under this Article XVII.

         17.9     ASSIGNMENT OF RIGHTS UNDER CONTRACTS.

         If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessee shall upon Lessor's demand immediately assign, transfer and set over (to
the fullest extent assignable) to Lessor all of Lessee's right, title and
interest in and to each agreement executed by Lessee in connection with the
acquisition, installation, testing, use, development, construction, operation,
maintenance, repair, refurbishment and restoration of the Properties (including
without limitation all right, title and interest of Lessee with respect to all
warranty, performance, service and indemnity provisions), as and to the extent
that the same relate to the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Properties or any of them.

         17.10    REMEDIES CUMULATIVE.

         The remedies herein provided shall be cumulative and in addition to
(and not in limitation of) any other remedies available at law, equity or
otherwise, including without limitation any mortgage foreclosure remedies.

         17.11    LESSEE'S RIGHT TO CURE BY PURCHASE OF ALL PROPERTIES.

         Notwithstanding anything in this Lease or in any of the other Operative
Agreements to the contrary, upon the occurrence and continuation of a Lease
Event of Default, Lessee may, but shall not be obligated to, cure such Lease
Event of Default by purchasing all the Properties for an amount equal to the
Termination Value, such purchase to be consummated as provided in Sections 19.1,
20.1 and 20.2 (provided, that to the extent a monetary Lease Default exists and
is continuing (whether or not related to any Property) such monetary Lease
Default shall also be cured (concurrently with and in addition to the purchase
of all the Properties) by the payment of the outstanding amounts giving rise to
such monetary Lease Default). In order to cure such Lease Event of Default,
Lessee must provide (within three (3) Business Days after notice of the
occurrence of such Lease Event of Default from the Agent or Lessor) the Agent
and Lessor with written notice of the intent of Lessee to effect such a cure.
Thereafter, the purchase of all Properties and payment of other amounts (if any)
shall occur on a Business Day specified by the Agent (upon direction from the
Agent) or Lessor to Lessee that is not earlier than fifteen (15) days nor later
than sixty (60) days after the delivery of the above-referenced notice to
Lessee.

                                  ARTICLE XVIII

         18.1     LESSOR'S RIGHT TO CURE LESSEE'S LEASE DEFAULTS.

         Lessor, without waiving or releasing any obligation or Lease Event of
Default, may (but shall be under no obligation to) remedy any Lease Event of
Default for the account and at the sole cost and expense of Lessee, including
without limitation the failure by Lessee to maintain the insurance required by
Article XIV, and may, to the fullest extent permitted by law, and
notwithstanding any right of quiet enjoyment in favor of Lessee, enter upon any
Property, and take all such action thereon as may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of any lessee. All
out-of-pocket costs and expenses so incurred (including without limitation fees
and expenses of counsel), together with interest thereon at the Overdue Rate
from the date on which such sums or expenses are paid by Lessor, shall be paid
by Lessee to Lessor on demand.

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                                   ARTICLE XIX

         19.1     PROVISIONS RELATING TO LESSEE'S EXERCISE OF ITS PURCHASE
                  OPTION.

         Subject to Section 19.2, in connection with any termination of this
Lease with respect to all the Properties pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date on
which this Lease is to terminate with respect to all the Properties, and upon
tender by Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as
applicable, Lessor shall execute and deliver to Lessee (or to Lessee's designee)
at Lessee's cost and expense an assignment (by special warranty deed, bill of
sale and/or other appropriate instruments) of Lessor's entire interest in all
the Properties together with an assignment of any rights of Lessor under the
Earnest Money Contract for the purchase of all the Properties from The Woodlands
Land Development Company, L.P., pursuant to which Lessor first acquired the
Properties in each case in recordable form and otherwise in conformity with
local custom and free and clear of this Lease and any Lessor Liens attributable
to Lessor but without any other warranties (of title or otherwise) from Lessor.
Such Property shall be conveyed to Lessee "AS-IS, "WHERE-IS" and in then present
physical condition. Additionally, Lessor shall cause all Mortgage Instruments
and other Security Documents executed in connection herewith (with respect to
all the Properties) to be released.

         19.2     NO PURCHASE OR TERMINATION WITH RESPECT TO LESS THAN ALL OF A
                  PROPERTY.

         Lessee shall not be entitled to exercise its Purchase Option or the
Sale Option separately with respect to a portion of any Property consisting of
Land, Equipment, Improvements and/or any interest pursuant to a Ground Lease but
shall be required to exercise its Purchase Option or the Sale Option with
respect to an entire Property.

                                   ARTICLE XX

         20.1     PURCHASE OPTION, SALE OPTION OR WALK-AWAY OPTION - GENERAL
                  PROVISIONS.

         Not less than one hundred twenty (120) days and no more than one
hundred eighty (180) days prior to the Expiration Date or (respecting the
Purchase Option only) not less than thirty (30) days nor more than one hundred
eighty (180) days prior to any Purchase Option Date, Lessee may give Lessor
irrevocable written notice (the "Election Notice") that Lessee is electing to
exercise either (a) the option to purchase all, but not less than all, the
Properties on the Purchase Option Date specified in the Election Notice or cause
its nominee to complete such purchase (the "Purchase Option"), (b) with respect
to an Election Notice given in connection with the Expiration Date only, the
option to remarket all, but not less than all, the Properties to a Person other
than Lessee or any Affiliate of Lessee and cause a sale of such Properties to
occur on the Expiration Date pursuant to the terms of Section 22.1 (the "Sale
Option") or (c) with respect to an Election Notice given in connection with the
Expiration Date only, the option to pay the Maximum Residual Guarantee Amount on
the Expiration Date and surrender, or cause to be surrendered, all, but not less
than all, of the Properties in accordance with the terms and conditions of
Section 10.1(g) (the "Walk-Away Option"). If Lessee does not give an Election
Notice indicating the Purchase Option, the Sale Option or the Walk-Away Option
at least one hundred twenty (120) days and not more than one hundred eighty
(180) days prior to the Expiration Date, then, unless such Expiration Date is
the final Expiration Date to which the Term may be extended, the Lessee shall be
deemed to have requested an extension of the Term in accordance with Section 2.2
hereof; if such Expiration Date is the final Expiration Date, then Lessee shall
be deemed to have elected the Purchase Option. If Lessee shall either (i) elect
(or be deemed to have elected) to exercise the Purchase Option, (ii) elect the
Sale Option and fail to cause all, but not less than all, the Properties to be
sold in accordance with the terms of Section 22.1 on the Expiration Date or
(iii) elect the Walk-Away Option and fail to either pay the Maximum Residual
Guarantee Amount on the Expiration Date or to surrender, or cause to be
surrendered, each of the Properties in accordance with the terms and conditions
of Section 10.1(g) on the Expiration Date, then in any such case Lessee shall
pay to Lessor on the date on which such purchase or sale is scheduled to occur
an amount equal to the Termination Value for all, but not less than all, the
Properties (which the parties do not intend to be a "bargain" purchase price)
and, upon receipt of such amounts and satisfaction of such obligations, Lessor
shall transfer to Lessee all of Lessor's right, title and interest in and to
all, but not less than all, the Properties in accordance with Sections 19.1 and
20.2.

                                       21
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         20.2     LESSEE PURCHASE OPTION.

         Provided, that the Election Notice has been appropriately given
specifying the Purchase Option, Lessee shall or shall cause its nominee to
purchase all the Properties on the specified Purchase Option Date at a price
equal to the Termination Value for all the Properties (which the parties do not
intend to be a "bargain" purchase price).

         Subject to Section 19.2, in connection with any termination of this
Lease with respect to all the Properties pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date on
which this Lease is to terminate with respect to all of the Properties, and upon
tender by Lessee of the amounts set forth in Section 16.2(b) or this Section
20.2, as applicable, Lessor shall execute, acknowledge (where required) and
deliver to Lessee, at Lessee's cost and expense, each of the following together
with the items set forth in Section 19.1: (a) a termination or assignment (as
requested by the Lessee) of each applicable Ground Lease and a Deed conveying
each Property (to the extent it is real property not subject to a Ground Lease)
to Lessee free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens (but without any other representation as to title
or any other matter); (b) a Bill of Sale conveying each Property (to the extent
it is personal property) to Lessee free and clear of the Lien of this Lease, the
Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax
affidavit or other document required by law to be executed and filed in order to
record the applicable Deed and/or the applicable Ground Lease termination; (d)
Foreign Investment in Real Property Tax Act (FIRPTA) affidavits; and (e) closing
or settlement statements and other such documents as may be reasonably required
by any title company closing such transaction (but, except for the
representations and warranties referenced in the foregoing clauses (a) and (b)
of this Section 20.2, without any other representations or warranties as to
title or any other matter). All of the foregoing documentation must be in form
and substance reasonably satisfactory to Lessor. Each Property shall be conveyed
to Lessee "AS-IS, WHERE-IS" and in then present physical condition.

         If any Property is the subject of remediation efforts respecting
Hazardous Substances at the Expiration Date which could materially and adversely
impact the Fair Market Sales Value of such Property (with materiality determined
in Lessor's discretion), then Lessee shall be obligated to purchase each such
Property pursuant to Section 20.2.

         On the Expiration Date and/or any Purchase Option Date on which Lessee
has elected to exercise its Purchase Option, Lessee shall pay (or cause to be
paid) to Lessor, the Agent and all other parties, as appropriate, the sum of all
costs and expenses incurred by any such party in connection with the election by
Lessee to exercise its Purchase Option and all Rent and all other amounts then
due and payable or accrued under this Lease and/or any other Operative
Agreement.

         20.3     THIRD PARTY SALE OPTION.

                  (a)      Provided, that (i) no Default or Event of Default
         shall have occurred and be continuing and (ii) the Election Notice has
         been appropriately given specifying the Sale Option, Lessee shall
         undertake to cause a sale of the Properties on the Expiration Date (all
         as specified in the Election Notice) in accordance with the provisions
         of Section 22.1 hereof.

                  (b)      In the event Lessee exercises the Sale Option then,
         as soon as practicable and in all events not less than sixty (60) days
         and not more than one hundred eighty (180) days prior to the date of
         delivery, Lessee shall cause to be delivered to Lessor a Phase I
         environmental site assessment for each of the Properties recently
         prepared (no more than thirty (30) days old prior to the date of
         delivery) by an independent recognized professional reasonably
         acceptable to Lessor and in form, scope and content reasonably
         satisfactory to Lessor. Lessor (at the direction of the Agent) shall
         elect whether the costs incurred respecting the above-referenced Phase
         I environmental site assessment shall be paid by either (i) sales
         proceeds from the Properties, (ii) Lessor (but only the extent amounts
         are available therefor with respect to the Available Commitments and
         the Available Holder Commitments or each Lender and each Holder
         approves the necessary increases in the Available Commitments and the
         Available Holder Commitments to fund such costs) or (iii) Lessee;
         provided, amounts funded by the Lenders and the Holders with respect to
         the foregoing shall be added to the Property Cost of each applicable
         Property; provided, further, amounts funded by Lessee with respect to
         the foregoing shall be a part of (and limited by) the

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         Maximum Residual Guarantee Amount. In the event that Lessor shall not
         have received such environmental site assessment (or, if remediation
         has been undertaken to address any Environmental Violation or potential
         Environmental Violation, an addition environmental site assessment
         prepared on the same basis as referenced above in this paragraph) by
         the date sixty (60) days prior to the Expiration Date or in the event
         that such environmental site assessment (or, if remediation has been
         undertaken to address any Environmental Violation or potential
         Environmental Violation, an addition environmental site assessment
         prepared on the same basis as referenced above in this paragraph) shall
         reveal the existence of any material violation of Environmental Laws,
         other material Environmental Violation or potential material
         Environmental Violation (with materiality determined in each case by
         Lessor in its reasonable discretion), then Lessee on the Expiration
         Date shall pay to Lessor an amount equal to the Termination Value for
         all the Properties and any and all other amounts due and owing
         hereunder. Upon receipt of such payment and all other amounts due under
         the Operative Agreements, Lessor shall transfer to Lessee all of
         Lessor's right, title and interest in and to all the Properties in
         accordance with Sections 19.1 and 20.2.

         20.4     WALK-AWAY OPTION.

                  (a)      Provided, that (i) no Lease Default or Lease Event of
         Default shall have occurred and be continuing and (ii) the Election
         Notice has been appropriately given specifying the Walk-Away Option,
         Lessee shall pay the Maximum Residual Guarantee Amount and all other
         amounts then due and owing by Lessee pursuant to the operative
         Agreements on the Expiration Date and surrender, or cause to be
         surrendered, each of the Properties in accordance with the terms of
         Section 10.1(g).

                  (b)      In the event Lessee exercises the Walk-Away Option
         then, as soon as practicable and in all events not less than sixty (60)
         days and not more than one hundred eighty (180) days prior to the
         Expiration Date, Lessee shall cause to be delivered to Lessor a Phase I
         environmental site assessment for each of the Properties recently
         prepared (no more than one hundred eighty (180) days prior to the
         Expiration Date) by an independent recognized professional reasonably
         acceptable to Lessor and in form, scope and content reasonably
         satisfactory to Lessor. Lessor (at the direction of the Agent) shall
         elect whether the costs incurred respecting the above-referenced Phase
         I environmental site assessment shall be paid by either (i) sales
         proceeds from the Properties (to the extent a sale has been arranged at
         such time), (ii) Lessor (but only to the extent the Majority Secured
         Parties elect to fund such costs) or (iii) Lessee; provided, amounts
         funded by the Lenders and the Holders with respect to the foregoing
         shall be added to the Property Cost of each applicable Property;
         provided, further, amounts funded by Lessee with respect to the
         foregoing shall be a part of (and limited by) the Maximum Residual
         Guarantee Amount. In the event that Lessor shall not have received such
         environmental site assessment (or, if remediation has been undertaken
         to address any Environmental Violation or potential Environmental
         Violation, an additional environmental site assessment prepared on the
         same basis as referenced above in this paragraph) by the date sixty
         (60) days prior to the Expiration Date or in the event that such
         environmental site assessment (or, if remediation has been undertaken
         to address any Environmental Violation or potential Environmental
         Violation, an additional environmental site assessment prepared on the
         same basis as referenced above in this paragraph) shall reveal the
         existence of any material violation of Environmental Laws, other
         material Environmental Violation or potential material Environmental
         Violation (with materiality determined in each case by Lessor in its
         reasonable discretion), then Lessee on the Expiration Date shall pay to
         Lessor an amount equal to the Termination Value for all the Properties
         and any and all other amounts due and owing hereunder. Upon receipt of
         such payment and all other amounts due under the Operative Agreements,
         Lessor shall transfer to Lessee all of Lessor's right, title and
         interest in and to all Properties in accordance with Sections 19.1 and
         20.2.

                                   ARTICLE XXI

         21.1     [INTENTIONALLY OMITTED].

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                                  ARTICLE XXII

         22.1     SALE PROCEDURE.

                  (a)      Nothing in this Article XXII shall adversely affect
         Lessee's rights with respect to the Walk-Away Option to the extent
         exercised in accordance with Section 20.4. During the Marketing Period,
         Lessee, on behalf of Lessor, shall obtain bids for the cash purchase of
         all the Properties in connection with a sale to one (1) or more third
         party purchasers to be consummated on the Expiration Date or such
         earlier date as is acceptable to the Agent and the Lessee (the "Sale
         Date") for the highest price available, shall notify Lessor promptly of
         the name and address of each prospective purchaser and the cash price
         which each prospective purchaser shall have offered to pay for each
         such Property and shall provide Lessor with such additional information
         about the bids and the bid solicitation procedure as Lessor may
         reasonably request from time to time. All such prospective purchasers
         must be Persons other than Lessee or any Affiliate of Lessee. On the
         Sale Date, Lessee shall pay (or cause to be paid) to Lessor and all
         other parties, as appropriate, all Rent and all other amounts then due
         and payable or accrued under this Lease and/or any other Operative
         Agreement and Lessor (at the direction of the Agent) shall elect
         whether the costs and expenses incurred by Lessor and/or the Agent
         respecting the sale of one or more Properties shall be paid by either
         (i) sales proceeds from the Properties, (ii) Lessor (but only the
         extent amounts are available therefor with respect to the Available
         Commitments and the Available Holder Commitments or each Lender and
         each Holder approves the necessary increases in the Available
         Commitments and the Available Holder Commitments to fund such costs and
         expenses) or (iii) Lessee; provided, amounts funded by the Lenders and
         the Holders with respect to such costs and expenses shall be added to
         the Property Cost of each applicable Property; provided, further,
         amounts funded by Lessee with respect to such costs and expenses shall
         be a part of (and limited by) the Maximum Residual Guarantee Amount.

                  Lessor may reject any and all bids and may solicit and obtain
         bids by giving Lessee written notice to that effect; provided, however,
         that notwithstanding the foregoing, Lessor may not reject the bids
         submitted by Lessee if such bids, in the aggregate, are greater than or
         equal to the sum of the Limited Recourse Amount for all the Properties,
         and represent bona fide offers from one (1) or more third party
         purchasers. If the highest price which a prospective purchaser or the
         prospective purchasers shall have offered to pay for all the Properties
         on the Sale Date is less than the sum of the Limited Recourse Amount
         for all the Properties or if such bids do not represent bona fide
         offers from one or more third parties or if there are no bids, Lessor
         may elect to retain all the Properties by giving Lessee prior written
         notice of Lessor's election to retain the same, and promptly upon
         receipt of such notice, Lessee shall surrender, or cause to be
         surrendered, all the Properties in accordance with the terms and
         conditions of Section 10.1(g). Upon acceptance of any bid, Lessor
         agrees, at Lessee's request and expense, to execute a contract of sale
         with respect to such sale, so long as the same is consistent with the
         terms of this Article 22 and provides by its terms that it is
         nonrecourse to Lessor.

                  Unless Lessor shall have elected to retain all the Properties
         pursuant to the provisions of the preceding paragraph, Lessee shall
         arrange for Lessor to sell all the Properties free and clear of the
         Lien of this Lease, any Lessor Liens attributable to Lessor and the
         Lien of the Credit Documents, but without any other representation or
         warranty (of title or otherwise), for cash on the Sale Date to the
         purchaser or purchasers offering the highest cash sales price, as
         identified by Lessee or Lessor, as the case may be; provided, however,
         solely as to Lessor or the Trust Company, in its individual capacity,
         any Lessor Lien shall not constitute a Lessor Lien so long as Lessor or
         the Trust Company, in its individual capacity, is diligently and in
         good faith contesting, at the cost and expense of Lessor or the Trust
         Company, in its individual capacity, such Lessor Lien by appropriate
         proceedings in which event the applicable Sale Date, all without
         penalty or cost to Lessee, shall be delayed for the period of such
         contest (but in no event shall such delay be in excess of sixty (60)
         days). To effect such transfer and assignment, Lessor shall execute,
         acknowledge (where required) and deliver to the appropriate purchaser
         each of the following: (a) a Deed conveying each Property (to the
         extent it is real property titled to Lessor) and an assignment of the
         Ground Lease conveying the leasehold interest of Lessor in each
         Property (to the extent it is real property and subject to a Ground
         Lease) to the appropriate purchaser free and clear of the Lien of this
         Lease, the Lien of the Credit Documents and any Lessor Liens (but
         without any other representation or warranty of title or otherwise);
         (b) a Bill of Sale conveying each Property (to the extent it is
         personal property) titled to Lessor

                                       24
   235

         to the appropriate purchaser free and clear of the Lien of this Lease,
         the Lien of the Credit Documents and any Lessor Liens (but without any
         other representation or warranty of title or otherwise); (c) any real
         estate tax affidavit or other document required by law to be executed
         and filed in order to record each Deed and/or each Ground Lease
         assignment; (d) FIRPTA affidavits, as appropriate; and (e) closing or
         settlement statements and other such documents as may be reasonably
         required by any title company closing such transaction (but, except for
         the representations and warranties referenced in clauses (a) and (b) of
         Section 20.2, without any other representations or warranties as to
         title or any other matter). All of the foregoing documentation must be
         in form and substance reasonably satisfactory to Lessor. Lessee shall
         surrender the Properties so sold or subject to such documents to each
         purchaser in the condition specified in Section 10.1(g), or in such
         other condition as may be agreed between Lessee and such purchaser.
         Lessee shall not take or fail to take any action which would have the
         effect of unreasonably discouraging bona fide third party bids for any
         Property. If each of the Properties is not either (i) sold on the Sale
         Date in accordance with the terms of this Section 22.1, or (ii)
         retained by Lessor pursuant to an affirmative election made by Lessor
         pursuant to the second sentence of the second paragraph of this Section
         22.1(a), then (x) Lessee shall be obligated to pay Lessor on the Sale
         Date an amount equal to the aggregate Termination Value for all the
         Properties less any sales proceeds received by the Lessor, and (y)
         Lessor shall transfer each applicable Property to Lessee in accordance
         with Sections 19.1 and 20.2.

                  (b)      If the Properties are sold on a Sale Date to one (1)
         or more third party purchasers in accordance with the terms of Section
         22.1(a) and the aggregate purchase price paid for all the Properties is
         less than the sum of the aggregate Property Cost for all the Properties
         (hereinafter such difference shall be referred to as the "Deficiency
         Balance"), then Lessee hereby unconditionally promises to pay to Lessor
         on the Sale Date all Rent and all other amounts then due and owing
         pursuant to the Operative Agreements and the lesser of (i) the
         Deficiency Balance, or (ii) the Maximum Residual Guarantee Amount for
         all the Properties. On a Sale Date if (x) Lessor receives the aggregate
         Termination Value for all the Properties from one (1) or more third
         party purchasers, (y) Lessor and such other parties receive all other
         amounts specified in the last sentence of the first paragraph of
         Section 22.1(a) and (z) the aggregate purchase price paid for all the
         Properties on such date exceeds the sum of the aggregate Property Cost
         for all the Properties, then Lessee may retain such excess. If one or
         more of the Properties are retained by Lessor pursuant to an
         affirmative election made by Lessor pursuant to the provisions of
         Section 22.1(a), then Lessee hereby unconditionally promises to pay to
         Lessor on the Sale Date all Rent and all other amounts then due and
         owing pursuant to the Operative Agreements and an amount equal to the
         Maximum Residual Guarantee Amount for the Properties so retained. Any
         payment of the foregoing amounts described in this Section 22.1(b)
         shall be made together with a payment of all other amounts referenced
         in the last sentence of the first paragraph of Section 22.1(a).

                  (c)      In the event that all the Properties are either sold
         to one (1) or more third party purchasers on the Sale Date or retained
         by Lessor in connection with an affirmative election made by Lessor
         pursuant to the provisions of Section 22.1(a), then in either case on
         the applicable Sale Date Lessee shall provide Lessor or such third
         party purchaser (unless otherwise agreed by such third party purchaser)
         with (i) all permits, certificates of occupancy, governmental licenses
         and authorizations necessary to use, operate, repair, access and
         maintain each such Property for the purpose it is being used by Lessee,
         and (ii) such manuals, permits, easements, licenses, intellectual
         property, know-how, rights-of-way and other rights and privileges in
         the nature of an easement as are reasonably necessary or desirable in
         connection with the use, operation, repair, access to or maintenance of
         each such Property for its intended purpose or otherwise as Lessor or
         such third party purchaser(s) shall reasonably request (and a
         royalty-free license or similar agreement to effectuate the foregoing
         on terms reasonably agreeable to Lessor or such third party
         purchaser(s), as applicable) but excluding trade secrets or other
         technical information relating to Lessee's business activities. All
         assignments, licenses, easements, agreements and other deliveries
         required by clauses (i) and (ii) of this paragraph (c) shall be in form
         reasonably satisfactory to Lessor or such third party purchaser(s), as
         applicable, and shall be fully assignable (including without limitation
         both primary assignments and assignments given in the nature of
         security) without payment of any fee, cost or other charge. Lessee
         shall also execute any documentation requested by Lessor or such third
         party purchaser(s), as applicable, evidencing the continuation or
         assignment of each Ground Lease.

                                       25
   236

         22.2     APPLICATION OF PROCEEDS OF SALE.

         In the event Lessee receives any proceeds of sale of any Property, such
proceeds shall be deemed to have been received in trust on behalf of Lessor and
Lessee shall promptly remit such proceeds to Lessor. Lessor shall apply the
proceeds of sale of any Property in the following order of priority:

                  (a)      FIRST, to pay or to reimburse Lessor (and/or the
         Agent, as the case may be) for the payment of all reasonable costs and
         expenses incurred by Lessor (and/or the Agent, as the case may be) in
         connection with the sale (to the extent Lessee has not satisfied its
         obligation to pay such costs and expenses);

                  (b)      SECOND, so long as the Credit Agreement is in effect
         and any Loans or Holder Advances or any amount is owing to the
         Financing Parties under any Operative Agreement, to the Agent to be
         applied pursuant to intercreditor provisions among Lessor, the Lenders
         and the Holders contained in the Operative Agreements; and

                  (c)      THIRD, to Lessee.

         22.3     INDEMNITY FOR EXCESSIVE WEAR.

         If the proceeds of the sale described in Section 22.1 with respect to
the Properties shall be less than the Limited Recourse Amount with respect to
the Properties, and at the time of such sale it shall have been reasonably
determined (pursuant to the Appraisal Procedure) that the Fair Market Sales
Value of the Properties shall have been impaired by greater than expected wear
and tear during the term of the Lease, Lessee shall pay to Lessor within ten
(10) days after receipt of Lessor's written statement (i) the amount of such
excess wear and tear determined by the Appraisal Procedure or (ii) the amount of
the Sale Proceeds Shortfall, whichever amount is less.

         22.4     APPRAISAL PROCEDURE.

         For determining the Fair Market Sales Value of the Properties or any
other amount which may, pursuant to any provision of any Operative Agreement, be
determined by an appraisal procedure, Lessor and Lessee shall use the following
procedure (the "Appraisal Procedure"). Lessor and Lessee shall endeavor to reach
a mutual agreement as to such amount for a period of ten (10) days from
commencement of the Appraisal Procedure under the applicable section of the
Lease, and if they cannot agree within ten (10) days, then two (2) qualified
appraisers, one (1) chosen by Lessee and one (1) chosen by Lessor, shall
mutually agree thereupon, but if either party shall fail to choose an appraiser
within twenty (20) days after notice from the other party of the selection of
its appraiser, then the appraisal by such appointed appraiser shall be binding
on Lessee and Lessor. If the two (2) appraisers cannot agree within twenty (20)
days after both shall have been appointed, then a third appraiser shall be
selected by the two (2) appraisers or, failing agreement as to such third
appraiser within thirty (30) days after both shall have been appointed, by the
American Arbitration Association. The decisions of the three (3) appraisers
shall be given within twenty (20) days of the appointment of the third appraiser
and the decision of the appraiser most different from the average of the other
two (2) shall be discarded and such average shall be binding on Lessor and
Lessee; provided, that if the highest appraisal and the lowest appraisal are
equidistant from the third appraisal, the third appraisal shall be binding on
Lessor and Lessee. The fees and expenses of the appraiser appointed by Lessee
shall be paid by Lessee; the fees and expenses of the appraiser appointed by
Lessor shall be paid by Lessor (such fees and expenses not being indemnified
pursuant to Section 11 of the Participation Agreement); and the fees and
expenses of the third appraiser shall be divided equally between Lessee and
Lessor.

         22.5      CERTAIN OBLIGATIONS CONTINUE.

         During the Marketing Period, the obligation of Lessee to pay Rent with
respect to the Properties (including without limitation the installment of Basic
Rent due on the Expiration Date) shall continue undiminished until payment in
full to Lessor of the sale proceeds, if any, the lesser of the Deficiency
Balance and the Maximum Residual Guarantee Amount, the amount due under Section
22.3, if any, and all other amounts due to Lessor or any other Person with
respect to all Properties or any Operative Agreement. Lessor shall have the
right, but shall be

                                       26
   237

under no duty, to solicit bids, to inquire into the efforts of Lessee to obtain
bids or otherwise to take action in connection with any such sale, other than as
expressly provided in this Article XXII.

                                  ARTICLE XXIII

         23.1     HOLDING OVER.

         If Lessee shall for any reason remain in possession of a Property after
the expiration or earlier termination of this Lease as to such Property (unless
such Property is conveyed to Lessee), such possession shall be as a tenancy at
sufferance during which time Lessee shall continue to pay Supplemental Rent that
would be payable by Lessee hereunder were the Lease then in full force and
effect with respect to such Property and Lessee shall, subject to Section 30.14
hereof, continue to pay Basic Rent at one hundred ten percent (110%) of the last
payment of Basic Rent due with respect to such Property prior to such expiration
or earlier termination of this Lease. Such Basic Rent shall be payable from time
to time upon demand by Lessor and such additional amount of Basic Rent shall be
applied by Lessor ratably to the Lenders and the Holders based on their relative
amounts of the then outstanding aggregate Property Cost for all Properties.
During any period of tenancy at sufferance, Lessee shall, subject to the second
preceding sentence, be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder other
than the right, to the extent given by law to tenants at sufferance, to continue
their occupancy and use of such Property. Nothing contained in this Article
XXIII shall constitute the consent, express or implied, of Lessor to the holding
over of Lessee after the expiration or earlier termination of this Lease as to
any Property and nothing contained herein shall be read or construed as
preventing Lessor from maintaining a suit for possession of such Property or
exercising any other remedy available to Lessor at law or in equity.

                                  ARTICLE XXIV

         24.1     RISK OF LOSS.

         During the Term, unless Lessee shall not have been in occupancy of any
Property in question, the risk of loss or decrease in the enjoyment and
beneficial use of such Property as a result of the damage or destruction thereof
by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed
by Lessee, and Lessor shall in no event be answerable or accountable therefor.

                                   ARTICLE XXV

         25.1     ASSIGNMENT.

                  (a)      Subject to Section 25.1(b), Lessee may assign its
         Purchase Option and its rights under Section 17.11 to any Person
         without the consent of the Agent, the Lenders, the Holders or Lessor.
         Except as described in the preceding sentence, Lessee may not otherwise
         assign this Lease or any of its rights or obligations hereunder or with
         respect to any Property in whole or in part to any Person without the
         prior written consent of the Agent, the Lenders, the Holders and
         Lessor, which consent shall be in the sole discretion of the Agent, the
         Lenders, the Holders and Lessor.

                  (b)      No assignment by Lessee (referenced in this Section
         25.1 or otherwise) or other relinquishment of possession to any
         Property shall in any way discharge or diminish any of the obligations
         of Lessee to Lessor hereunder and Lessee shall remain directly and
         primarily liable under the Operative Agreements as to any rights or
         obligations assigned by Lessee or regarding any Property in which
         rights or obligations have been assigned or otherwise transferred.

                                       27
   238

         25.2     SUBLEASES.

                  (a)      Promptly, but in any event within five (5) Business
         Days, following the execution and delivery of any sublease permitted by
         this Article XXV, Lessee shall notify Lessor of the execution of such
         sublease. As of the date of each Lease Supplement, Lessee shall lease
         the respective Property described in such Lease Supplement from Lessor,
         and any existing tenant respecting such Property shall automatically be
         deemed to be a subtenant of Lessee and not a tenant of Lessor.

                  (b)      Without the prior written consent of the Agent, any
         Lender, any Holder or Lessor, but subject to the other provisions of
         this Section 25.2, Lessee may sublet any Property or portion thereof to
         any Person provided that any subleasing (i) shall be done on market
         terms and (ii) shall in no way diminish the fair market value or useful
         life of any applicable Property.

                  (c)      No sublease (referenced in this Section 25.2 or
         otherwise) or other relinquishment of possession to any Property shall
         in any way discharge or diminish any of Lessee's obligations to Lessor
         hereunder and Lessee shall remain directly and primarily liable under
         this Lease as to such Property, or portion thereof, so sublet. During
         the Basic Term, the term of any such sublease shall not extend beyond
         the Basic Term. During any Renewal Term, the term of any such sublease
         shall not extend beyond such Renewal Term. Each sublease shall be
         expressly subject and subordinate to this Lease.

                                  ARTICLE XXVI

         26.1     NO WAIVER.

         No failure by Lessor or Lessee to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy upon a default
hereunder, and no acceptance of full or partial payment of Rent during the
continuance of any such default, shall constitute a waiver of any such default
or of any such term. To the fullest extent permitted by law, no waiver of any
default shall affect or alter this Lease, and this Lease shall continue in full
force and effect with respect to any other then existing or subsequent default.

                                  ARTICLE XXVII

         27.1     ACCEPTANCE OF SURRENDER.

         No surrender to Lessor of this Lease or of all or any portion of any
Property or of any part of any thereof or of any interest therein shall be valid
or effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or the Agent or any representative or agent of Lessor or the Agent, other
than a written acceptance, shall constitute an acceptance of any such surrender.

         27.2     NO MERGER OF TITLE.

         There shall be no merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same Person may acquire, own or
hold, directly or indirectly, in whole or in part, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate, (b) any right, title or interest in any Property, (c) any Notes, or (d)
a beneficial interest in Lessor.

                                 ARTICLE XXVIII

         28.1     [INTENTIONALLY OMITTED].

                                       28
   239

                                  ARTICLE XXIX

         29.1     NOTICES.

         All notices required or permitted to be given under this Lease shall be
in writing and delivered as provided in the Participation Agreement.

                                   ARTICLE XXX

         30.1     MISCELLANEOUS.

         Anything contained in this Lease to the contrary notwithstanding, all
claims against and liabilities of Lessee or Lessor arising from events
commencing prior to the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination. If any provision of this Lease
shall be held to be unenforceable in any jurisdiction, such unenforceability
shall not affect the enforceability of any other provision of this Lease and
such jurisdiction or of such provision or of any other provision hereof in any
other jurisdiction.

         30.2     AMENDMENTS AND MODIFICATIONS.

         Neither this Lease nor any Lease Supplement may be amended, waived,
discharged or terminated except in accordance with the provisions of Section
12.4 of the Participation Agreement.

         30.3     SUCCESSORS AND ASSIGNS.

         All the terms and provisions of this Lease shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.

         30.4     HEADINGS AND TABLE OF CONTENTS.

         The headings and table of contents in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

         30.5     COUNTERPARTS.

         This Lease may be executed in any number of counterparts, each of which
shall be an original, but all of which shall together constitute one (1) and the
same instrument.

         30.6     GOVERNING LAW.

         THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF
THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF REMEDIES WITH RESPECT TO ONE
OR MORE LEASE EVENTS OF DEFAULT, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. WITHOUT LIMITING THE FOREGOING,
IN THE EVENT THAT THIS LEASE IS DEEMED TO CONSTITUTE A FINANCING, WHICH IS THE
INTENTION OF THE PARTIES, THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND
PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT ANY LIEN CREATED HEREBY AND
THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS.

                                       29
   240

         30.7     CALCULATION OF RENT.

         All calculation of Rent payable hereunder shall be computed based on
the actual number of days elapsed over a year of three hundred sixty (360) days
or, to the extent such Rent is based on the Prime Lending Rate, three hundred
sixty-five (365) (or three hundred sixty-six (366), as applicable) days.

         30.8     MEMORANDA OF LEASE AND LEASE SUPPLEMENTS.

         This Lease shall not be recorded; provided, Lessor and Lessee shall
promptly record (a) a memorandum of this Lease and the applicable Lease
Supplement (in substantially the form of Exhibit B attached hereto) or a short
form lease (in form and substance reasonably satisfactory to Lessor) regarding
each Property promptly after the acquisition thereof in the local filing office
with respect thereto and as required under applicable law to sufficiently
evidence this Lease and any such Lease Supplement in the applicable real estate
filing records. Lessor (at the direction of the Agent) shall elect whether the
costs and expenses incurred by Lessor and/or the Agent respecting the
recordation of the above-referenced items shall be paid by either (i) Lessor
(but only the extent amounts are available therefor with respect to the
Available Commitments and the Available Holder Commitments or each Lender and
each Holder approves the necessary increases in the Available Commitments and
the Available Holder Commitments to fund such costs and expenses) or (ii)
Lessee; provided, amounts funded by the Lenders and the Holders with respect to
such costs and expenses shall be added to the Property Cost of each applicable
Property; provided, further, amounts funded by Lessee with respect to such costs
and expenses shall be a part of (and limited by) the Maximum Residual Guarantee
Amount.

         30.9     ALLOCATIONS BETWEEN THE LENDERS AND THE HOLDERS.

         Notwithstanding any other term or provision of this Lease to the
contrary, the allocations of the proceeds of the Properties and any and all
other Rent and other amounts received hereunder shall be subject to the
inter-creditor provisions between the Lenders and the Holders contained in the
Operative Agreements (or as otherwise agreed among the Lenders and the Holders
from time to time).

         30.10    LIMITATIONS ON RECOURSE.

         Notwithstanding anything contained in this Lease to the contrary,
Lessee agrees to look solely to Lessor's estate and interest in the Properties
(and in no circumstance to the Agent, the Lenders, the Holders or otherwise to
Lessor) for the collection of any judgment requiring the payment of money by
Lessor in the event of liability by Lessor, and no other property or assets of
Lessor or any shareholder, owner or partner (direct or indirect) in or of
Lessor, or any director, officer, employee, beneficiary, Affiliate of any of the
foregoing shall be subject to levy, execution or other enforcement procedure for
the satisfaction of the remedies of Lessee under or with respect to this Lease,
the relationship of Lessor and Lessee hereunder or Lessee's use of the
Properties or any other liability of Lessor to Lessee. Nothing in this Section
shall be interpreted so as to limit the terms of Sections 6.1 or 6.2 or the
provisions of Section 12.9 of the Participation Agreement.

         30.11    WAIVERS OF JURY TRIAL.

         EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE
         FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVE TRIAL BY JURY IN ANY
         LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE AND FOR ANY
         COUNTERCLAIM THEREIN.

         30.12    EXERCISE OF LESSOR RIGHTS.

         Lessee hereby acknowledges and agrees that the rights and powers of
Lessor under this Lease have been assigned to the Agent pursuant to the terms of
the Security Agreement and the other Operative Agreements. Lessor and Lessee
hereby acknowledge and agree that (a) the Agent shall, in its discretion, direct
and/or act on behalf of Lessor pursuant to the provisions of Sections 8.2(h) and
8.6 of the Participation Agreement, (b) all notices to be given to Lessor shall
be given to the Agent and (c) all notices to be given by Lessor may be given by
the Agent, at its election.

                                       30
   241

         30.13    SUBMISSION TO JURISDICTION; VENUE.

         THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION, VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
MUTANDIS.

         30.14    USURY SAVINGS PROVISION.

                  (a)      IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO
         AND CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME
         TO TIME IN EFFECT. TO THE EXTENT ANY RENT OR PAYMENTS HEREUNDER ARE
         HEREINAFTER CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE
         REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS SECTION 30.14 SHALL
         APPLY. ANY SUCH RENT OR PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE
         REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES
         HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH
         SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR
         HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY
         EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR
         ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST
         TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS LEASE
         OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER
         APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE
         OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD
         OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY
         SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH
         AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE
         AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER
         APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR
         NEW DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF
         VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT TO THE
         OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD,
         APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT,
         AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST
         SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF
         PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR
         REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT
         SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF
         PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY
         AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE
         THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON
         THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT INTEND TO CHARGE OR
         RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST
         PAID OR AGREED TO BE PAID TO LESSOR SHALL, TO THE EXTENT PERMITTED BY
         APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD
         THROUGHOUT THE FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY
         RENEWAL OR EXTENSION) OF THIS LEASE SO THAT THE AMOUNT OF INTEREST ON
         ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT
         PERMITTED BY APPLICABLE LAW.

                  (b)      AS STATED ABOVE, IT IS THE INTENTION OF THE PARTIES
         HERETO TO COMPLY STRICTLY WITH ALL APPLICABLE USURY LAWS. IN
         FURTHERANCE OF THE FOREGOING, IF, CONTRARY TO THE INTENTION OF THE
         PARTIES HERETO, ANY MATTERS (OTHER THAN THOSE RELATING TO THE CREATION
         OF THE LEASEHOLD ESTATES UNDER THIS LEASE AND THE EXERCISE OF REMEDIES
         WITH RESPECT TO ONE OR MORE LEASE EVENTS OF DEFAULT), INCLUDING THE
         PAYMENT OF ANY RENT (REGARDLESS OF HOW CHARACTERIZED) OR ANY OTHER
         AMOUNT PURSUANT TO THIS LEASE OR ANY OF THE

                                       31
   242

         OTHER OPERATIVE AGREEMENTS IS DETERMINED TO BE GOVERNED BY THE LAWS OF
         THE STATE OF TEXAS OR IF THIS LEASE, ALONE OR IN COMBINATION WITH THE
         OTHER OPERATIVE AGREEMENTS, IS DETERMINED TO CONSTITUTE NOT A LEASE BUT
         A FINANCING GOVERNED BY THE LAWS OF THE STATE OF TEXAS SECURED BY THE
         PROPERTY THEN, AND IN ANY SUCH EVENT, EACH OF THE PARTIES HERETO AGREES
         THAT IT IS ITS INTENTION TO COMPLY WITH ALL USURY LAWS APPLICABLE TO IT
         REGARDING THE CONTRACTING FOR, AND THE TAKING, RESERVING, CHARGING,
         COLLECTION, PAYMENT AND RECEIPT OF, INTEREST (WHICH, FOR PURPOSES OF
         THIS SECTION 30.14, SHALL BE DEEMED TO INCLUDE ANY COMPENSATION
         RECEIVED BY LESSOR FOR THE USE, FORBEARANCE OR DETENTION OF MONEY (AS
         SUCH TERMS ARE USED IN THE TEXAS FINANCE CODE) UNDER OR IN CONNECTION
         WITH THIS LEASE AND THE OTHER OPERATIVE AGREEMENTS), WHETHER SUCH LAWS
         ARE NOW OR HEREAFTER IN EFFECT AND WHETHER SUCH LAWS ARE THOSE OF THE
         UNITED STATES, OR OF THE STATE OF TEXAS OR ANY OTHER APPLICABLE
         JURISDICTION. IN THIS CONNECTION, INSOFAR AS TEXAS LAW IS ULTIMATELY
         DETERMINATIVE OF THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER
         APPLICABLE LAW, SAME SHALL BE COMPUTED ON THE BASIS OF THE "WEEKLY
         CEILING" FROM TIME TO TIME IN EFFECT REFERRED TO IN SECTIONS 303.002,
         303.003 AND 303.009 OF THE TEXAS FINANCE CODE; PROVIDED, HOWEVER, THAT
         TO THE FULLEST EXTENT PERMITTED BY THE TEXAS FINANCE CODE LESSOR
         RESERVES THE RIGHT TO CHANGE FROM TIME TO TIME THE CEILING ON WHICH THE
         MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW IS BASED
         UNDER SUCH TEXAS LAWS BY GIVING WRITTEN NOTICE THEREOF TO THE LESSEE IN
         THE MANNER AND TO THE EXTENT REQUIRED BY SUCH TEXAS LAWS.

                            [signature page follows]

   243

         IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.

                                    FIRST SECURITY BANK,
                                    NATIONAL ASSOCIATION, as
                                    Owner Trustee under the
                                    Lexi Trust 2000-1, as
                                    Lessor

                                    By:    /s/ C. Scott Nielsen
                                           ------------------------------------
                                    Name:      C. Scott Nielsen
                                           ------------------------------------
                                    Title:     Vice President
                                           ------------------------------------

                                    LEXICON GENETICS INCORPORATED, as Lessee

                                    By:    /s/ Julia P. Gregory
                                           ------------------------------------
                                    Name:      Julia P. Gregory
                                           ------------------------------------
                                    Title:     EVP & CFO
                                           ------------------------------------

Receipt of this original counterpart of the foregoing
Lease is hereby acknowledged as the date hereof

BANK OF AMERICA, N.A.,
as the Agent

By:    /s/ Wade Morgan
       ------------------------------------
Name:      Wade Morgan
       ------------------------------------
Title:     Vice President
       ------------------------------------

   244

                                                          EXHIBIT A TO THE LEASE

                            LEASE SUPPLEMENT NO. ___

         THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of
_____________, 200___ between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, as Owner Trustee under the Lexi Trust 2000-1, as
lessor (the "Lessor"), and LEXICON GENETICS INCORPORATED, a Delaware
corporation, as lessee (the "Lessee").

         WHEREAS, Lessor is the owner or will be the owner of the Property
described on Schedule 1 hereto (the "Leased Property") and wishes to lease the
same to Lessee;

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

         SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Participation Agreement,
dated as of October 19, 2000, among Lessee, Lessor, not individually, except as
expressly stated therein, but solely as the Owner Trustee under the Lexi Trust
2000-1, the various banks and other lending institutions which are parties
thereto from time to time, as the Holders, the various banks and other lending
institutions which are parties thereto from time to time, as the Lenders, and
Bank of America, N.A., as the Agent for the Lenders and respecting the Security
Documents, as the Agent for the Secured Parties, as such may be amended,
modified, extended, supplemented, restated and/or replaced from time to time.

         SECTION 2. THE PROPERTIES. Attached hereto as Schedule 1 is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule 1-A, an Improvement Schedule attached hereto as Schedule 1-B and [A
LEGAL DESCRIPTION OF THE LAND / A COPY OF THE GROUND LEASE] attached hereto as
Schedule 1-C. Effective upon the execution and delivery of this Lease Supplement
by Lessor and Lessee, the Leased Property shall be subject to the terms and
provisions of the Lease. Without further action, any and all additional
Equipment funded under the Operative Agreements and any and all additional
Improvements made to the Land shall be deemed to be titled to the Lessor and
subject to the terms and conditions of the Lease and this Lease Supplement.

         This Lease Supplement together with the provisions of the Lease shall
constitute a mortgage, deed of trust, security agreement and financing statement
under the laws of the state in which the Leased Property is situated. The
maturity date of the obligations secured hereby shall be October 19, 2006 unless
extended to not later than October 19, 2013. Lessee hereby ratifies the
provisions of Section 7.1(b) and 17.5 of the Lease and grants liens and security
interests in the Leased Property in accordance with such provisions.

         For purposes of provisions of the Lease and this Lease Supplement
related to the creation and enforcement of the Lease and this Lease Supplement
as a security agreement and a fixture filing, Lessee is the debtor and Lessor is
the secured party. The mailing addresses of the debtor (Lessee herein) and of
the secured party (Lessor herein) from which information concerning security
interests hereunder may be obtained are set forth on the signature pages hereto.
A carbon, photographic or other reproduction of the Lease and this Lease
Supplement or of any financing statement related to the Lease and this Lease
Supplement shall be sufficient as a financing statement for any of the purposes
referenced herein.

         SECTION 3. USE OF PROPERTY. At all times during the Term with respect
to each Property, Lessee will comply with all obligations under and (to the
extent no Event of Default exists and provided, that such exercise will not
impair the value of such Property) shall be permitted to exercise all rights and
remedies under, all operation and easement agreements and related or similar
agreements applicable to such Property.

         SECTION 4. RATIFICATION; INCORPORATION BY REFERENCE. Except as
specifically modified hereby, the terms and provisions of the Lease and the
Operative Agreements are hereby ratified and confirmed and remain in full force
and effect. The Lease is hereby incorporated herein by reference as though
restated herein in its entirety.

                                      A-1
   245

         SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.

         SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS
RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF
REMEDIES WITH RESPECT TO ONE OR MORE LEASE EVENTS OF DEFAULT, WHICH SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THE LEASE AS MODIFIED BY THIS
LEASE SUPPLEMENT IS DEEMED TO CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF
THE PARTIES, THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF
THE INDEBTEDNESS EVIDENCED HEREBY, BUT ANY LIEN CREATED HEREBY AND THE
ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS.

         SECTION 7. MORTGAGE; POWER OF SALE. Without limiting any other remedies
set forth in the Lease, in the event that a court of competent jurisdiction
rules that the Lease constitutes a mortgage, deed of trust or other secured
financing as is the intent of the parties, then Lessor and Lessee agree that
Lessee hereby grants a Lien against the Leased Property WITH POWER OF SALE, and
that, upon the occurrence of any Lease Event of Default, Lessor shall have the
power and authority, to the extent provided by law, after prior notice and lapse
of such time as may be required by law, to foreclose its interest (or cause such
interest to be foreclosed) in all or any part of the Leased Property.

         SECTION 8. COUNTERPART EXECUTION. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.

         For purposes of the provisions of this Lease Supplement concerning this
Lease Supplement constituting a security agreement and fixture filing, the
addresses of the debtor (Lessee herein) and the secured party (Lessor herein),
from whom information may be obtained about this Lease Supplement, are as set
forth on the signature pages hereto.

         [The remainder of this page has been intentionally left blank.]

                                      A-2
   246

         IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.

                                    FIRST SECURITY BANK,
                                    NATIONAL ASSOCIATION, as
                                    Owner Trustee under the
                                    Lexi Trust 2000-1, as
                                    Lessor

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

                                    First Security Bank, National Association
                                    79 South Main Street
                                    Salt Lake City, Utah 84111
                                    Attn:    Val T. Orton
                                             Vice President

                                    LEXICON GENETICS INCORPORATED, as Lessee

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

                                    4000 Research Forest Drive
                                    The Woodlands, Texas 77381
                                    Attn:  John M. Dodson

Receipt of this original counterpart
of the foregoing Lease Supplement
is hereby acknowledged as the date hereof.

BANK OF AMERICA, N.A., as the Agent

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

Bank of America Tower
Mailcode: TX9-329-11-01
515 Congress Avenue
Austin, Texas  78701-3503
Attn:  Wade Morgan

                                      A-3
   247

                                   SCHEDULE 1
                          TO LEASE SUPPLEMENT NO. ____

                      (Description of the Leased Property)

                                      A-4
   248

                                  SCHEDULE 1-A
                          TO LEASE SUPPLEMENT NO. ____

                                   (Equipment)

                                      A-5
   249

                                  SCHEDULE 1-B
                          TO LEASE SUPPLEMENT NO. ____

                                 (Improvements)

                                      A-6
   250

                                  SCHEDULE 1-C
                          TO LEASE SUPPLEMENT NO. ____

                                    [(LAND)/
                                 (GROUND LEASE)]

                                      A-7
   251

                                                          EXHIBIT B TO THE LEASE

                    [MODIFY OR SUBSTITUTE SHORT FORM LEASE AS
                      NECESSARY FOR LOCAL LAW REQUIREMENTS]

Recordation requested by:

Moore & Van Allen, PLLC

After recordation return to:

Moore & Van Allen, PLLC (WMA)
100 North Tryon Street, Floor 47
Charlotte, NC  28202-4003

                                        Space above this line for Recorder's use

- --------------------------------------------------------------------------------
                          MEMORANDUM OF LEASE AGREEMENT
                                       AND
                           LEASE SUPPLEMENT NO. ____

         THIS MEMORANDUM OF LEASE AGREEMENT AND LEASE SUPPLEMENT NO. ___
("Memorandum"), dated as of _____________, 200___, is by and between FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Owner
Trustee under the Lexi Trust 2000-1, with an office at 79 South Main Street,
Salt Lake City, Utah 84111 (hereinafter referred to as "Lessor") and LEXICON
GENETICS INCORPORATED, a Delaware corporation, with an office at 4000 Research
Forest Drive, The Woodlands, Montgomery County, Texas, 77381 (hereinafter
referred to as "Lessee").

                                   WITNESSETH:

         That for value received, Lessor and Lessee do hereby covenant, promise
and agree as follows:

         1. DEMISED PREMISES AND DATE OF LEASE. Lessor has leased to Lessee, and
Lessee has leased from Lessor, for the Term (as hereinafter defined), certain
real property and other property located in ________________, which is described
in the attached Schedule 1 (the "Property"), pursuant to the terms of a Lease
Agreement between Lessor and Lessee dated as of October 19, 2000 (as such may be
amended, modified, extended, supplemented, restated and/or replaced from time to
time, "Lease") and a Lease Supplement No. _____ between Lessor and Lessee dated
as of ______________ (the "Lease Supplement").

         The Lease and the Lease Supplement shall constitute a mortgage, deed of
trust and security agreement and financing statement under the laws of the state
in which the Property is situated. The maturity date of the obligations secured
thereby shall be October 19, 2006, unless extended to not later than October 19,
2013.

         For purposes of provisions of the Lease and the Lease Supplement
related to the creation and enforcement of the Lease and the Lease Supplement as
a security agreement and a fixture filing, Lessee is the debtor and Lessor is
the secured party. The mailing addresses of the debtor (Lessee herein) and of
the secured party (Lessor herein) from which information concerning security
interests hereunder may be obtained are as set forth on the signature pages
hereof. A carbon, photographic or other reproduction of this Memorandum or of
any financing statement related to the Lease and the Lease Supplement shall be
sufficient as a financing statement for any of the purposes referenced herein.

                                      B-1
   252

         2.       TERM, RENEWAL, EXTENSION AND PURCHASE OPTION. The term of the
Lease for the Property ("Term") commenced as of [__________, 200__] and shall
end as of [_________, 200__], unless the Term is extended or earlier terminated
in accordance with the provisions of the Lease. The Lease contains provisions
for renewal and extension. The tenant has a purchase option under the Lease.

         3.       TAX PAYER NUMBERS.

                  Lessor's tax payer number:  __________________.

                  Lessee's tax payer number:  __________________.

         4.       MORTGAGE; POWER OF SALE. Without limiting any other remedies
set forth in the Lease, in the event that a court of competent jurisdiction
rules that the Lease constitutes a mortgage, deed of trust or other secured
financing as is the intent of the parties, then Lessor and Lessee agree that
Lessee has granted, pursuant to the terms of the Lease and the Lease Supplement,
a Lien against the Property WITH POWER OF SALE, and that, upon the occurrence
and during the continuance of any Lease Event of Default, Lessor shall have the
power and authority, to the extent provided by law, after prior notice and lapse
of such time as may be required by law, to foreclose its interest (or cause such
interest to be foreclosed) in all or any part of the Property.

         5.       EFFECT OF MEMORANDUM. The purpose of this instrument is to
give notice of the Lease and the Lease Supplement and their respective terms,
covenants and conditions to the same extent as if the Lease and the Lease
Supplement were fully set forth herein. This Memorandum shall not modify in any
manner the terms, conditions or intent of the Lease or the Lease Supplement and
the parties agree that this Memorandum is not intended nor shall it be used to
interpret the Lease or the Lease Supplement or determine the intent of the
parties under the Lease or the Lease Supplement.

         [The remainder of this page has been intentionally left blank.]

                                      B-2
   253

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

                                    LESSOR:

                                    FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                                    as Owner Trustee under the Lexi Trust 2000-1

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

                                    First Security Bank, National Association
                                    79 South Main Street
                                    Salt Lake City, Utah 84111
                                    Attn:    Val T. Orton
                                             Vice President

                                    LESSEE:

                                    LEXICON GENETICS INCORPORATED, as Lessee

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

                                    4000 Research Forest Drive
                                    The Woodlands, Texas 77381
                                    Attn:  John M. Dodson

                                      B-3
   254

                                   SCHEDULE 1

                            (Description of Property)

                                      B-4
   255

                       [CONFORM TO STATE LAW REQUIREMENTS]

STATE OF _______________                             )
                                                     )        ss:
COUNTY OF ______________                             )

         The foregoing Memorandum of Lease Agreement and Lease Supplement No.
_____ was acknowledged before me, the undersigned Notary Public, in the County
of _________________ this _____ day of ______________, by ________________, as
__________________ of FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, as Owner Trustee under the Lexi Trust 2000-1, on behalf of
the Owner Trustee.

[Notarial Seal]
                                                     ---------------------------
                                                     Notary Public

My commission expires: ____________

STATE OF _______________                             )
                                                     )        ss:
COUNTY OF ______________                             )

         The foregoing Memorandum of Lease Agreement and Lease Supplement No.
_____ was acknowledged before me, the undersigned Notary Public, in the County
of _________________ this _____ day of ______________, by ________________, as
__________________ of LEXICON GENETICS INCORPORATED, a Delaware corporation, on
behalf of the corporation.

[Notarial Seal]
                                                     ---------------------------
                                                     Notary Public

My commission expires:____________

                                      B-5

   256

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

                               SECURITY AGREEMENT

                          Dated as of October 19, 2000

                                     between

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                  as Owner Trustee under the Lexi Trust 2000-1,

                                       and

                             BANK OF AMERICA, N.A.,
                  as the Agent for the Lenders and the Holders

                          and accepted and agreed to by

                         LEXICON GENETICS INCORPORATED,
                        as Lessee and Construction Agent

- --------------------------------------------------------------------------------
   257

                                TABLE OF CONTENTS

        1. Definitions.......................................................................1
        2. Grant of Security Interest........................................................3
        3. Payment of Obligations............................................................5
        4. Other Covenants...................................................................5
        5. Default; Remedies.................................................................5
        6. Remedies Not Exclusive............................................................6
        7. Performance by the Agent of the Borrower's Obligations............................6
        8. Duty of the Agent.................................................................6
        9. Powers Coupled with an Interest...................................................7
        10.Execution of Financing Statements.................................................7
        11.Security Agreement Under Uniform Commercial Code..................................7
        12.Authority of the Agent............................................................8
        13.Notices...........................................................................8
        14.Severability......................................................................8
        15.Amendment in Writing; No Waivers; Cumulative Remedies.............................8
        16.Section Headings..................................................................9
        17.Successors and Assigns............................................................9
        18.The Borrower's Waiver of Rights...................................................9
        19.GOVERNING LAW.....................................................................9
        20.Obligations Are Without Recourse.................................................10
        21.Partial Release; Full Release....................................................10
        22.Miscellaneous....................................................................10
        23.Conflicts with Participation Agreement...........................................11
        24.LESSEE as a Party................................................................11

                                       i
   258

                               SECURITY AGREEMENT

        This SECURITY AGREEMENT, dated as of October 19, 2000 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Security Agreement"), is made between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, as Owner Trustee under the Lexi
Trust 2000-1 (the "Borrower"), and BANK OF AMERICA, N.A., a national banking
association ("Bank"), as agent for (a) the Lenders (hereinafter defined) under
the Credit Agreement dated as of October 19, 2000 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the "Credit
Agreement") by and among the Borrower, the lending institutions from time to
time parties thereto (the "Lenders") and Bank as the agent for the Lenders and
(b) the holders of the certificates issued pursuant to the Trust Agreement dated
as of October 19, 2000 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Trust Agreement") among the holders from
time to time parties thereto (the "Holders") and the Borrower, in its individual
capacity thereunder and in its capacity as Owner Trustee thereunder. The Agent,
the Lenders and the Holders, together with their successors and permitted
assigns, are collectively referred to hereinafter as the "Secured Parties",
Bank, in its capacity as agent for the Secured Parties is referred to
hereinafter as the "Agent", and this Security Agreement is accepted and agreed
to by LEXICON GENETICS INCORPORATED, a Delaware corporation.

                              Preliminary Statement

        Pursuant to the Credit Agreement, the Lenders have severally agreed to
make Loans to the Borrower in an aggregate amount not to exceed the aggregate
Commitments upon the terms and subject to the conditions set forth therein, to
be evidenced by the Notes issued by the Borrower under the Credit Agreement.
Pursuant to the Trust Agreement, the Holders have agreed to purchase the
ownership interests of the Trust created thereby in an aggregate amount not to
exceed the aggregate Holder Commitments upon the terms and subject to the
conditions set forth therein, to be evidenced by the Certificates issued by the
Borrower under the Trust Agreement. The Borrower is, or shall be upon the date
of the initial Advance with respect to each Property, the legal and beneficial
owner of such Property (except the Borrower may have a ground leasehold interest
in certain Properties pursuant to one or more Ground Leases).

        It is a condition, among others, to the obligation of the Lenders to
make their respective Loans to the Borrower under the Credit Agreement and the
Holders to make their respective Holder Advances under the Trust Agreement that
the Borrower shall have executed and delivered this Security Agreement to the
Agent, for the benefit of the Secured Parties.

        NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to make their respective Loans under the Credit Agreement and to induce
the Holders to make their respective Holder Advances under the Trust Agreement,
the Borrower hereby agrees with the Agent, for the benefit of the Secured
Parties, as follows:

        1.      DEFINITIONS.

        (a)     As used herein, the following terms shall have the following
                respective meanings:

   259

                "Accounts" shall mean all "accounts," as such term is defined in
        the Uniform Commercial Code, now owned or hereafter acquired by the
        Borrower.

               "Chattel Paper" shall mean any and all "chattel paper," as such
        term is defined in the Uniform Commercial Code, now owned or hereafter
        acquired by the Borrower, wherever located.

               "Collateral Account" shall mean, the securities collateral
        account (including without limitation the Cash Equivalents and other
        securities in such accounts) which is the subject of the Collateral
        Agreement and held with the Securities Intermediary as account number
        873-758.

               "Collateral Agreement" shall mean the Assignment of Collateral
        Account dated on or about the Initial Closing Date executed by Lexicon
        Genetics Incorporated and agreed and accepted by Bank of America, N.A.

               "Documents" shall mean any and all "documents", as such term is
        defined in the Uniform Commercial Code, now owned or hereafter acquired
        by the Borrower, wherever located.

               "General Intangibles" shall mean any and all "general
        intangibles," as such term is defined in the Uniform Commercial Code,
        now owned or hereafter acquired by the Borrower.

               "Holders" shall have the meaning specified in the first paragraph
        of this Security Agreement.

               "Instruments" shall mean any and all "instruments", as such term
        is defined in the Uniform Commercial Code, now owned or hereafter
        acquired by the Borrower, wherever located.

               "Investment Property" shall mean any and all "investment
        property," as such term is defined in the Uniform Commercial Code, now
        owned or hereafter acquired by the Borrower, wherever located.

               "Lenders" shall have the meaning specified in the first paragraph
        of this Security Agreement.

               "Lessee" shall mean Lexicon Genetics Incorporated, a Delaware
        corporation, its successors, permitted assigns and permitted
        transferees.

               "Obligations" shall mean any and all obligations now existing or
        hereafter arising under the Credit Agreement, the Notes, the Trust
        Agreement, the Certificates and/or any other Operative Agreement.

               "Proceeds" shall mean any and all "proceeds," as such term is
        defined in the Uniform Commercial Code, at any time received or acquired
        by the Borrower with respect to the Trust Property.

                                       2
   260

                (b)     Capitalized terms used but not otherwise defined in this
        Security Agreement shall have the respective meanings specified in the
        Credit Agreement or Appendix A to the Participation Agreement dated as
        of October 19, 2000 (as amended, modified, extended, supplemented,
        restated and/or replaced from time to time in accordance with the
        applicable provisions thereof, the "Participation Agreement") among
        Lessee, the Borrower, the Holders, the Lenders and BANK OF AMERICA, N.A.
        as agent for the Lenders and, respecting the Security Documents, as the
        agent for the Secured Parties.

                (c)     The rules of usage set forth in Appendix A to the
        Participation Agreement shall apply to this Agreement.

        2.      GRANT OF SECURITY INTEREST.

        To secure payment of all the amounts advanced under the Credit Agreement
in connection with the Notes, all the amounts advanced or contributed under the
Trust Agreement in connection with the Certificates and all other amounts now or
hereafter owing to the Lenders, the Holders or the Agent thereunder or under any
other Operative Agreement, THE BORROWER HEREBY CONVEYS, GRANTS, ASSIGNS,
TRANSFERS, HYPOTHECATES, MORTGAGES AND SETS OVER TO THE AGENT FOR THE BENEFIT OF
THE SECURED PARTIES, A FIRST PRIORITY SECURITY INTEREST IN AND LIEN ON THE TRUST
ESTATE, WHETHER NOW EXISTING OR HEREAFTER ACQUIRED INCLUDING WITHOUT LIMITATION
THE FOLLOWING:

                (a)     all right, title and interest of the Borrower in and to
        the Operative Agreements now existing or hereafter acquired by the
        Borrower (including without limitation all rights to payment and
        indemnity rights of the Borrower under the Participation Agreement) (all
        of the foregoing in this paragraph (a) being referred to as the "Rights
        in Operative Agreements");

                (b)     all right, title and interest of the Borrower in and to
        all of the Equipment;

                (c)     all right, title and interest of the Borrower in and to
        all of the Fixtures;

                (d)     all the estate, right, title, claim or demand whatsoever
        of the Borrower, in possession or expectancy, in and to each Property,
        Fixture or Equipment or any part thereof;

                (e)     all right, title and interest of the Borrower in and to
        all substitutes, modifications and replacements of, and all additions,
        accessions and improvements to, the Fixtures and Equipment, subsequently
        acquired or leased by the Borrower or constructed, assembled or placed
        by the Borrower on any Property, immediately upon such acquisition,
        lease, construction, assembling or placement, and in each such case,
        without any further conveyance, assignment or other act by the Borrower;

                (f)     all right, title and interest of the Borrower in, to and
        under books and records relating to or used in connection with the
        operation of one (1) or more Properties

                                       3
   261

        or any part thereof; all rights of the Borrower to the payment of money
        and all property; and all rights in and to any causes of action or
        choses in action now or hereafter existing in favor of the Borrower and
        all rights to any recoveries therefrom;

                (g)     all right, title and interest of the Borrower in and to
        all unearned premiums under insurance policies now held or subsequently
        obtained by the Lessee relating to one or more Properties and the
        Borrower's interest in and to all proceeds of any insurance policies
        maintained by or for the benefit of the Borrower, including without
        limitation any right to collect and receive such proceeds; and all
        awards and other compensation, including without limitation the interest
        payable thereon and any right to collect and receive the same, made to
        the present or any subsequent owner of any Property for the taking by
        eminent domain, condemnation or otherwise, of all or any part of any
        Property or any easement or other right therein;

                (h)     all right, title and interest of the Borrower in and to
        (i) all consents, licenses, certificates and other governmental
        approvals relating to construction, completion, use or operation of any
        Property or any part thereof and (ii) all Plans and Specifications
        relating to any Property;

                (i)     all right, title and interest of the Borrower in and to
        all Rent and all other rents, payments, purchase prices, receipts,
        revenues, issues and profits payable under the Lease or pursuant to any
        other lease with respect to any Property;

                (j)     all right, title and interest of the Borrower in and to
        all Instruments and Documents;

                (k)     all right, title and interest of the Borrower in and to
        all General Intangibles;

                (l)     all right, title and interest of the Borrower in and to
        all Chattel Paper (including without limitation all rights under the
        Lease) and each Ground Lease;

                (m)     all right, title and interest of the Borrower in and to
        all money, cash or cash equivalent and bank accounts;

                (n)     all right, title and interest of the Borrower in and to
        all Accounts;

                (o)     all right, title and interest of the Borrower in and to
        all proceeds of letters of credit issued in favor of the Borrower in
        connection with any Property;

                (p)     all right, title and interest of the Borrower in and to
        all Proceeds, both cash and noncash, of any of the foregoing.

        (All of the foregoing property and rights and interests now owned or
held or subsequently acquired by the Borrower and described in the foregoing
clauses (a) through (p) are collectively referred to as the "Trust Property").

                                       4
   262

        TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto the Agent (for the benefit of the Secured Parties) its
successors and assigns for the uses and purposes set forth, until all of the
obligations owing to the Lenders, the Holders and the Agent under the Operative
Agreements are paid in full; provided, that EXCLUDED from the Trust Property at
all times and in all respects shall be all Excepted Payments.

        3.      PAYMENT OF OBLIGATIONS.

        The Borrower shall pay all Obligations in accordance with the terms of
the Credit Agreement, the Notes, the Trust Agreement, the Certificates and the
other Operative Agreements and perform each term to be performed by it under the
Credit Agreement, the Notes, the Trust Agreement, the Certificates and the other
Operative Agreements.

        4.      OTHER COVENANTS.

        At any time and from time to time, upon the written request of the
Agent, and at the expense of the Borrower (with funds provided by the Lessee for
such purpose), the Borrower will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the Agent
reasonably may request for the purposes of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers granted by this
Security Agreement.

        5.      DEFAULT; REMEDIES.

                (a)     If a Credit Agreement Event of Default has occurred and
        is continuing:

                                (i)     the Agent, in addition to all other
                remedies available at law or in equity, shall have the right
                forthwith to enter upon any Trust Property (or any other place
                where any component of any Trust Property is located at such
                time) without charge, and take possession of all or any portion
                of the Trust Property, and to sell, re-let or otherwise
                dispossess itself of the Trust Property and receive the rents,
                issues and profits thereof, to make repairs and to apply said
                rentals and profits, after payment of all necessary or proper
                charges and expenses, on account of the amounts hereby secured
                (subject to the Excepted Payments); and

                                (ii)    the Agent, shall, as a matter of right,
                be entitled to the appointment of a receiver for the Trust
                Property, and the Borrower hereby consents to such appointment
                and waives notice of any application therefor.

                (b)     If a Credit Agreement Event of Default has occurred and
        is continuing, the Agent may proceed by an action at law, suit in equity
        or other appropriate proceeding, to protect and enforce its rights,
        whether for the foreclosure of the Lien of this Security Agreement, or
        for the specific performance of any agreement contained herein or for an
        injunction against the violation of any of the terms hereof. The
        proceeds of any sale of any of the Trust Property shall be applied
        pursuant to Section 8.7 of the Participation Agreement. In addition, the
        Agent may proceed under Section 11 hereof.

                                       5
   263

                (c)     The Borrower hereby waives the benefit of all
        appraisement, valuation, stay, extension and redemption laws now or
        hereafter in force and all rights of marshalling in the event of any
        sale of the Trust Property or any portion thereof or interest therein.

        6.      REMEDIES NOT EXCLUSIVE.

        The Agent shall be entitled to enforce payment of the indebtedness and
performance of the Obligations and to exercise all rights and powers under this
Security Agreement or under any of the other Operative Agreements or other
agreements or any laws now or hereafter in force, notwithstanding some or all of
the Obligations may now or hereafter be otherwise secured, whether by deed of
trust, mortgage, security agreement, pledge, Lien, assignment or otherwise.
Neither the acceptance of this Security Agreement nor its enforcement, shall
prejudice or in any manner affect the Agent's right to realize upon or enforce
any other security now or hereafter held by the Agent, it being agreed that the
Agent shall be entitled to enforce this Security Agreement and any other
security now or hereafter held by the Agent in such order and manner as the
Agent may determine in its absolute discretion. No remedy conferred hereunder or
under any other Operative Agreement upon or reserved to the Agent is intended to
be exclusive of any other remedy herein or therein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or thereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given by any of the Operative
Agreements to the Agent or to which it may otherwise be entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by the Agent. In no event shall the Agent, in the exercise
of the remedies provided in this Security Agreement (including without
limitation in connection with the assignment of Rents to the Agent, or the
appointment of a receiver and the entry of such receiver onto all or any part of
the Land), be deemed a "mortgagee in possession" or a "pledgee in possession",
and the Agent shall not in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.

        7.      PERFORMANCE BY THE AGENT OF THE BORROWER'S OBLIGATIONS.

        If the Borrower fails to perform or comply with any of its agreements
contained herein the Agent, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement. The expenses of the Agent incurred in connection with actions
undertaken as provided in this Section 7, together with interest thereon at a
rate per annum equal to the Overdue Rate, from the date of payment by the Agent
to the date reimbursed by the Borrower, shall be payable by the Borrower (with
funds provided by the Lessee for such purpose) to the Agent on demand and
constitutes part of the Obligations secured hereby.

        8.      DUTY OF THE AGENT.

        The Agent's sole duty with respect to the custody, safekeeping and
physical preservation of any Trust Property in its possession, under Section
9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in
the same manner as the Agent deals with similar property for its own account.
Neither the Agent, any Lender, any Holder nor any of their respective directors,
officers, employees, shareholders, partners or agents shall be liable for
failure to demand, collect

                                       6
   264

or realize upon any of the Trust Property or for any delay in doing so or shall
be under any obligation to sell or otherwise dispose of any Trust Property upon
the request of the Borrower or any other Person or to take any other action
whatsoever with regard to the Trust Property or any part thereof.

        9.      POWERS COUPLED WITH AN INTEREST.

        All powers, authorizations and agencies contained in this Security
Agreement are coupled with an interest and are irrevocable until this Security
Agreement is terminated and the Liens created hereby are released.

        10.     EXECUTION OF FINANCING STATEMENTS.

        Pursuant to Section 9-402 of the Uniform Commercial Code, the Borrower
authorizes the Agent at the expense of the Borrower (such amounts to be paid
with funds provided by the Lessee for such purpose) to file financing statements
with respect to the Trust Property under this Security Agreement without the
signature of the Borrower in such form and in such filing offices as the Agent
reasonably determines appropriate to perfect the security interests of the Agent
under this Security Agreement. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction. For purposes of such financing statement, the Borrower
shall be deemed to be the debtor, and the Agent shall be deemed to be the
secured party. The address of the Borrower is 79 South Main Street, Salt Lake
City, Utah 84111, Attention: Val T. Orton, Vice President, and the address of
the Agent is Bank of America, N.A., Bank of America Tower, Mailcode:
TX9-329-11-01, 515 Congress Avenue, Austin, Texas, 78701-3503, Attention: Wade
Morgan.

        11.     SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE.

                (a)     It is the intention of the parties hereto that this
        Security Agreement as it relates to matters of the grant, perfection and
        priority of security interests the subject hereof, shall constitute a
        security agreement within the meaning of the Uniform Commercial Code of
        the States in which the Trust Property is located. If a Credit Agreement
        Event of Default shall occur, then in addition to having any other right
        or remedy available at law or in equity, the Agent may proceed under the
        applicable Uniform Commercial Code and exercise such rights and remedies
        as may be provided to a secured party by such Uniform Commercial Code
        with respect to all or any portion of the Trust Property which is
        personal property (including without limitation taking possession of and
        selling such property). If the Agent shall elect to proceed under the
        Uniform Commercial Code, then fifteen (15) days' notice of sale of the
        personal property shall be deemed reasonable notice and the reasonable
        expenses of retaking, holding, preparing for sale, selling and the like
        incurred by the Agent shall include, but not be limited to, attorneys'
        fees and legal expenses. At the Agent's request, the Borrower shall
        assemble such personal property and make it available to the Agent at a
        place designated by the Agent which is reasonably convenient to both
        parties.

                (b)     The Borrower, upon request by the Agent from time to
        time, shall execute, acknowledge and deliver to the Agent one or more
        separate security agreements, in form satisfactory to the Agent,
        covering all or any part of the Trust Property and will further

                                       7
   265

        execute, acknowledge and deliver, or cause to be executed, acknowledged
        and delivered, any financing statement, affidavit, continuation
        statement or certificate or other document as the Agent may request in
        order to perfect, preserve, maintain, continue or extend the security
        interest under, and the priority of the Liens granted by, this Security
        Agreement and such security instrument. The Borrower further agrees to
        pay to the Agent (with funds provided by the Lessee for such purpose) on
        demand all costs and expenses incurred by the Agent in connection with
        the preparation, execution, recording, filing and re-filing of any such
        document and all reasonable costs and expenses of any record searches
        for financing statements the Agent shall reasonably require. The filing
        of any financing or continuation statements in the records relating to
        personal property or chattels shall not be construed as in any way
        impairing the right of the Agent to proceed against any property
        encumbered by this Security Agreement.

        12.     AUTHORITY OF THE AGENT.

        The Borrower acknowledges that the rights and responsibilities of the
Agent under this Security Agreement with respect to any action taken by the
Agent or the exercise or non-exercise by the Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall be governed by the Credit Agreement
and Section 8.6 of the Participation Agreement and by such other agreements with
respect thereto as may exist from time to time (until such time as all amounts
due and owing to the Secured Parties and the Agent under the Operative
Agreements have been paid in full), but the Agent shall be conclusively presumed
to be acting as agent for the Secured Parties with full and valid authority so
to act or refrain from acting, and the Borrower shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.

        13.     NOTICES.

        All notices required or permitted to be given under this Security
Agreement shall be in writing and delivered as provided in Section 12.2 of the
Participation Agreement.

        14.     SEVERABILITY.

        Any provision of this Security Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.

        15.     AMENDMENT IN WRITING; NO WAIVERS; CUMULATIVE REMEDIES.

                (a)     None of the terms or provisions of this Security
        Agreement may be waived, amended, supplemented or otherwise modified
        except in accordance with the terms of Section 12.4 of the Participation
        Agreement.

                (b)     No failure to exercise, nor any delay in exercising, on
        the part of the Agent, any right, power or privilege hereunder shall
        operate as a waiver thereof. No single or partial exercise of any right,
        power or privilege hereunder shall preclude any other or further
        exercise thereof or the exercise of any other right, power or privilege.
        A waiver by the Agent of any right or remedy hereunder on any one
        occasion shall not be

                                       8
   266

        construed as a bar to any right or remedy which the Agent would
        otherwise have on any future occasion.

                (c)     The rights and remedies herein provided are cumulative,
        may be exercised singly or concurrently and are not exclusive of any
        other rights or remedies provided by law.

        16.     SECTION HEADINGS.

        The section headings used in this Security Agreement are for convenience
of reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.

        17.     SUCCESSORS AND ASSIGNS.

        This Security Agreement shall be binding upon the successors of the
Borrower, and the Borrower shall not assign any of its rights or obligations
hereunder or with respect to any of the Trust Property without the prior written
consent of the Agent. This Security Agreement shall inure to the benefit of the
Agent, the Lenders, the Holders and their respective successors and assigns, in
accordance with their respective interest herein.

        18.     THE BORROWER'S WAIVER OF RIGHTS.

        Except as otherwise set forth herein, to the fullest extent permitted by
law, the Borrower waives the benefit of all laws now existing or that may
subsequently be enacted providing for (a) any appraisement before sale of any
portion of the Trust Property, (b) any extension of the time for the enforcement
of the collection of the indebtedness or the creation or extension of a period
of redemption from any sale made in collecting such debt and (c) exemption of
any portion of the Trust Property from attachment, levy or sale under execution
or exemption from civil process. Except as otherwise set forth herein, to the
fullest extent the Borrower may do so, the Borrower agrees that the Borrower
will not at any time insist upon, plead, claim or take the benefit or advantage
of any law now or hereafter in force providing for any appraisement, valuation,
stay, exemption, extension or redemption, or requiring foreclosure of this
Security Agreement before exercising any other remedy granted hereunder and the
Borrower, for the Borrower and its successors and assigns, and for any and all
Persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the Obligations and marshalling in the event of
foreclosure of the Liens hereby created.

        19.     GOVERNING LAW.

        EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 11(a) HEREOF, THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

                                       9
   267

        20.     OBLIGATIONS ARE WITHOUT RECOURSE.

The provisions of the Participation Agreement relating to limitations on
liability are hereby incorporated by reference herein, Mutatis Mutandis.

        21.     PARTIAL RELEASE; FULL RELEASE.

        The Agent may release for such consideration as it may require any
portion of the Trust Property without (as to the remainder of the Trust
Property) in any way impairing or affecting the Lien, security interest and
priority herein provided for the Agent compared to any other Lien holder or
secured party. Further, the Agent shall execute and deliver to the Borrower such
documents and instruments as may be required to release the Lien and security
interest created by this Security Agreement with respect to the Properties as
provided in Section 8.8 of the Participation Agreement or to grant the easements
and permit the other matters provided for in Section 8.5 of the Participation
Agreement.

        22.     MISCELLANEOUS.

                (a)     This Security Agreement is one (1) of the documents
        which create Liens and security interests that secure payment and
        performance of the Obligations. The Agent, at its election, may commence
        or consolidate in a single action all proceedings to realize upon all
        such Liens and security interests. The Borrower hereby waives (i) any
        objections to the commencement or continuation of an action to foreclose
        the Lien of this Security Agreement or exercise of any other remedies
        hereunder based on any action being prosecuted or any judgment entered
        with respect to the Obligations or any Liens or security interests that
        secure payment and performance of the Obligations and (ii) any
        objections to the commencement of, continuation of, or entry of a
        judgment in any such other action based on any action or judgment
        connected to this Security Agreement. In case of a foreclosure sale, the
        Trust Property may be sold, at the Agent's election, in one parcel or in
        more than one parcel and the Agent is specifically empowered (without
        being required to do so, and in its sole and absolute discretion) to
        cause successive sales of portions of the Trust Property to be held.

                (b)     This Security Agreement may not be amended, waived,
        discharged or terminated except in accordance with Section 12.4 of the
        Participation Agreement. Upon the prior written consent of the Majority
        Secured Parties and unless such matter is a Unanimous Vote Matter, the
        Agent may release any portion of the Trust Property or any other
        security, and grant such extensions and indulgences in relation to the
        Obligations secured hereby without in any manner affecting the priority
        of the Lien hereof on any part of the Trust Property.

                (c)     THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING
        TO SUBMISSION TO JURISDICTION, VENUE ARE HEREBY INCORPORATED BY
        REFERENCE HEREIN, MUTATIS MUTANDIS.

                                       10
   268

        23.     CONFLICTS WITH PARTICIPATION AGREEMENT.

        Notwithstanding any other provision hereof, in the event of any conflict
between the terms of this Security Agreement and the Participation Agreement,
the terms of the Participation Agreement shall govern.

        24.     LESSEE AS A PARTY.

        LESSEE HAS EXECUTED THIS SECURITY AGREEMENT FOR THE PURPOSE OF
SUBJECTING TO THE SECURITY INTERESTS GRANTED HEREUNDER ALL OF ITS RIGHT, TITLE,
ESTATE AND INTEREST, IF ANY, IN AND TO THE TRUST PROPERTY TO SECURE ITS
OBLIGATIONS UNDER THE OPERATIVE AGREEMENTS. ACCORDINGLY, LESSEE HEREBY GRANTS TO
THE AGENT (FOR THE BENEFIT OF THE SECURED PARTIES) A SECURITY INTEREST IN AND TO
ALL OF ITS RIGHT, TITLE, ESTATE AND INTEREST, IF ANY, IN AND TO THE TRUST
PROPERTY (TO THE EXTENT LESSEE HAS ANY RIGHT, TITLE OR INTEREST THEREIN AND
WITHOUT REGARD TO ANY LANGUAGE IN SECTION 2 OR THE DEFINITION OF "TRUST
PROPERTY" OR ANY DEFINITION OF ANY ITEM CONSTITUTING THE TRUST PROPERTY WHICH
OTHERWISE WOULD LIMIT THE TRUST PROPERTY TO THE RIGHT, TITLE AND INTEREST OF THE
BORROWER THEREIN) TO SECURE ITS OBLIGATIONS UNDER THE OPERATIVE AGREEMENTS.
LESSEE ACKNOWLEDGES AND AGREES THAT, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT,
THE AGENT SHALL HAVE THE RIGHT TO EXERCISE ANY OR ALL OF ITS REMEDIES HEREUNDER
AS AGAINST ANY SUCH RIGHT, TITLE, ESTATE OR INTEREST OF LESSEE IN OR TO THE
TRUST PROPERTY.

                                   [signature page follows]

                                       11
   269

        IN WITNESS WHEREOF, each of the undersigned has caused the Security
Agreement to be duly executed and delivered as of the date first above written.

                              FIRST SECURITY BANK, NATIONAL ASSOCIATION, as
                              Owner Trustee under the Lexi Trust 2000-1

                              By:    /s/ C. Scott Nielsen
                                     ------------------------------------
                              Name:      C. Scott Nielsen
                                     ------------------------------------
                              Title:     Vice President
                                     ------------------------------------

                              BANK OF AMERICA, N.A., as the Agent for the
                              Lenders and the Holders

                              By:    /s/ Wade Morgan
                                     ------------------------------------
                              Name:      Wade Morgan
                                     ------------------------------------
                              Title:     Vice President
                                     ------------------------------------

Accepted and Agreed to:

LEXICON GENETICS INCORPORATED, as Lessee

By:    /s/ Julia P. Gregory
       ------------------------------------
Name:      Julia P. Gregory
       ------------------------------------
Title:     EVP & CFO
       ------------------------------------

   270

                        ASSIGNMENT OF COLLATERAL ACCOUNT
                             AND SECURITY AGREEMENT

        THIS ASSIGNMENT OF COLLATERAL ACCOUNT AND SECURITY AGREEMENT (as
amended, modified, supplemented, restated and/or replaced from time to time,
this "Assignment") is made as of October 19, 2000, by LEXICON GENETICS
INCORPORATED, a Delaware corporation (the "Pledgor"), to BANK OF AMERICA, N.A.,
a national banking association ("Bank") as agent for the Lenders and, respecting
the Security Documents, as agent for the Secured Parties (Bank, in such
capacity, may be referred to herein as the "Agent").

                                    RECITALS

        1.      The Pledgor is a party to the Participation Agreement dated as
of October 19, 2000 (as amended, modified, supplemented, restated and/or
replaced from time to time, the "Participation Agreement") among Pledgor, as
Lessee and Construction Agent, First Security Bank, National Association, in its
capacity as Owner Trustee under the Lexi Trust 2000-1 (the "Owner Trustee"), the
various banks and other lending institutions which are parties thereto, as
lenders (the "Lenders"), the various banks and other lending institutions which
are parties thereto, as holders (the "Holders") and the Agent. Capitalized terms
used herein but not otherwise defined shall have the meanings provided in
Appendix A the Participation Agreement.

        2.      A synthetic lease financing facility has been extended in favor
of the Pledgor pursuant to the Participation Agreement and the other Operative
Agreements.

        3.      The Pledgor shall from time to time make deposits of Account
Collateral (as hereinafter defined) into the Collateral Account as required by
the terms of the Participation Agreement.

        4.      The Pledgor shall from time to time purchase certificates of
deposit of Bank of America, N.A., pursuant to the terms of the Participation
Agreement, which certificates of deposit shall be pledged to the Agent as CD
Collateral (as hereinafter defined) pursuant to the terms of this Assignment.

        5.      The Financing Parties have required Pledgor, and the Pledgor has
agreed, to execute this Assignment in favor of the Agent with respect to the
Account Collateral, the CD Collateral and the deposits of Account Collateral by
the Pledgor into the Collateral Account, and to comply with the other
requirements of this Assignment.

        NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

   271

                                    ARTICLE I

                  Creation and Perfection of Security Interests

        Section 1.1     Creation of Security Interest. To secure the prompt
payment and performance in full when and as due, whether by lapse of time or
otherwise, of the obligations of the Pledgor and the Owner Trustee under the
Operative Agreements (the "Secured Obligations"), the Pledgor hereby assigns,
mortgages, conveys, pledges, hypothecates and delivers to the Agent, for the
benefit of the Secured Parties, and hereby grants to the Agent, for the benefit
of the Secured Parties, a security interest in, all right, title and interest of
the Pledgor in and to:

                (a)     Account number 873-758 maintained by the Securities
        Intermediary in the name of Pledgor or for the benefit of Pledgor, and
        all successor and replacement accounts, regardless of the numbers of
        such accounts or the offices at which such accounts are maintained and
        all rights of Pledgor in connection with the Account, and all property
        of every kind and character, including all financial assets and
        securities entitlements from time to time carried in, credited to or
        held by the Securities Intermediary, in the Collateral Account,
        including, without limitation, all United States Treasury Bills, all
        shares of stock or other equity interests (whether certificated or
        uncertificated), all instruments, all general intangibles, and all other
        investments or property of any sort now or hereafter carried in,
        credited to or held by the Securities Intermediary in the Account
        (collectively, any or all of the foregoing may be referred to herein as
        the "Account" or the "Collateral Account");

                (b)     All U.S. dollar denominated, non-negotiable certificates
        of deposit issued by Bank of America, N.A., now owned or hereafter
        acquired (the "CDs");

                (c)     All rollovers, renewals or reinvestments of any of the
        foregoing property;

                (d)     All rights to interest, interest payments, dividends,
        rights under hedge or derivative transactions, equity swaps, caps,
        floors or collars, new securities or other property which Pledgor is or
        may hereafter become entitled to receive on account of or related to any
        of the foregoing property; and

                (e)     The proceeds (including, without limitation, insurance
        proceeds from the Federal Deposit Insurance Corporation, the Federal
        Savings and Loan Insurance Corporation or the Securities Investor
        Protection Corporation or any other insurance company), increase and
        products of any of the foregoing or replacements thereof or
        substitutions therefor (the Account, all rights and property described
        in the foregoing subsections (c) and (d) with respect thereto and the
        proceeds thereof being hereinafter referred to as the "Account
        Collateral" and the CDs, all rights and property described in the
        foregoing subsections (c) and (d) with respect thereto and the proceeds
        thereof being hereinafter referred to as the "CD Collateral" and,
        together with the Account Collateral, the "Securities Collateral");

provided, that (i) prior to the Construction Period Termination Date and subject
to Section 5.16 of the Participation Agreement, the CD Collateral shall only
secure the prompt payment and performance in full when and as due, whether by
lapse of time or otherwise, of the Secured Obligations regarding Properties for
which the Rent Commencement Date has occurred at such time and (ii) on and after
the Construction Period Termination Date, the CD Collateral shall secure the
prompt payment and performance of all of the Secured Obligations.

                                       2
   272

        Section 1.2     The Pledgor:

                (a)     shall, immediately upon receipt thereof, deliver to the
        Agent any certificate, receipt, written confirmation of book entry or
        other writing evidencing any CD or other CD Collateral received by the
        Pledgor from Bank of America, N.A.;

                (b)     acknowledges and agrees that, in order to perfect the
        security interest of the Agent in the CDs and the other CD Collateral,
        the Agent may request Bank of America, N.A., and the Pledgor hereby
        authorizes Bank of America, N.A., to place a restriction on withdrawals,
        "stop order", "hold" or other restriction on the accounts, books and/or
        records of Bank of America, N.A. in which the CDs and the other CD
        Collateral are recorded; and

                (c)     shall execute and deliver to the Agent concurrently with
        the execution of this Assignment, and at any time or times hereafter at
        the request of Agent, all assignments, conveyances, assignment
        statements, financing statements, renewal financing statements, security
        agreements, affidavits, notices and all other agreements, instruments
        and documents, and all continuations and amendments of the same, that
        the Agent may reasonably request, and will execute all necessary
        endorsements and take all other actions necessary in order to perfect
        and maintain the security interests and liens granted herein by the
        Pledgor to the Agent and in order to fully consummate all of the
        transactions contemplated herein and under the Operative Agreements. In
        furtherance of the foregoing, the Pledgor hereby appoints the Agent as
        its attorney-in-fact for the purpose of making any of the foregoing
        endorsements, executing any such financing statements, documents and
        agreements and taking any such other actions. The foregoing power of
        attorney is a power coupled with an interest and shall be irrevocable
        until payment in full of the Secured Obligations.

                                   ARTICLE II

                         Priority of Security Interests

        Section 2.1     The Pledgor warrants and represents that the pledge and
security interest created in Section 1.1 hereof is a first-priority security
interest in favor of the Agent, for the benefit of the Secured Parties, and
shall constitute at all times a valid and perfected security interest in and
upon all of the Securities Collateral and that said security interest in the
Securities Collateral shall not become subordinate or junior to the security
interests, liens or claims of any other person, firm or corporation, including
without limitation the United States or any department, agency or
instrumentality thereof, or any state, county or local governmental agency. The
Pledgor shall not (without the prior written approval of the Agent) grant a
security interest in or permit a lien or encumbrance upon the Securities
Collateral to anyone except the Agent as long as all or any portion of the
Secured Obligations remain unsatisfied.

                                   ARTICLE III

                              Default and Remedies

        Section 3.1     Default. An event of default shall exist under the terms
of this Assignment

                                       3
   273

upon the occurrence of an Event of Default, other than a Credit Agreement Event
of Default (except for any Credit Agreement Event of Default relating directly
to the Lessee and/or its obligations pursuant to the Operative Agreements) (each
such occurrence may be referred to herein as a "Collateral Agreement Event of
Default").

        Section 3.2     Remedies Generally. It is the intention of the parties
hereto that this Assignment as it relates to matters of the grant, perfection
and priority of security interests the subject hereof, and the rights and
remedies of the Agent with respect thereto, shall constitute a security
agreement within the meaning of the Uniform Commercial Code as in effect in the
State of Texas (the "UCC"). In respect of the Securities Collateral generally,
upon the occurrence of a Collateral Agreement Event of Default and during the
continuation thereof, the Agent, for and on behalf of the Secured Parties, shall
have all of the following rights and remedies, all of which shall be cumulative
to the extent permitted by law:

                (a)     the right, immediately and without further action by the
        Agent, to set off against the outstanding Secured Obligations (i) all
        amounts in the Account and (ii) all amounts represented by the CDs;

                (b)     all the rights and remedies contained in this
        Assignment, the Operative Agreements or otherwise available at law or in
        equity;

                (c)     all the rights and remedies of a secured party under the
        UCC; and

                (d)     the right to proceed by an action at law, suit in equity
        or other appropriate proceeding, to protect and enforce its rights,
        whether for the foreclosure of the security interest granted herein
        against the Securities Collateral, or for the specific performance of
        any agreement contained herein or for an injunction against the
        violation of any of the terms hereof.

        The Pledgor hereby waives the benefit of all appraisement, valuation,
stay, extension and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale or other disposition of the Securities
Collateral or any portion thereof or interest therein.

        Section 3.3     Sale of Securities Collateral. Upon the occurrence of a
Collateral Agreement Event of Default, and during the continuation thereof, the
Agent, for and on behalf of the Secured Parties, shall have the right, in
addition to any other right or remedy under this Assignment, at law or in
equity, upon proper notice provided in accordance with the UCC, forthwith to
sell, transfer or otherwise dispose of any of the Securities Collateral, to
receive the proceeds from such disposition, and to apply said proceeds, after
payment of all necessary or proper charges and expenses, on account of the
Secured Obligations. If the Agent shall elect to proceed to a sale of any of the
Securities Collateral under the UCC, then fifteen (15) days' notice of the date
of any public sale or the date after which any private sale of such Securities
Collateral shall be deemed reasonable notice and the reasonable expenses of
retaking, holding, preparing for sale, selling and the like incurred by the
Agent shall include, but not be limited to, attorneys' fees and legal expenses.

        Section 3.4     Deficiency. The proceeds of any sale or other
disposition of any of the Securities Collateral shall be applied pursuant to
Section 8.7 of the Participation Agreement. In the event that the proceeds of
any sale or collection of, set-off against, realization upon or other
disposition of any Securities Collateral are insufficient to pay all of the
Secured Obligations, Pledgor shall be liable for the deficiency, together with
interest thereon. Any surplus remaining after the full payment and satisfaction
of the Secured Obligations shall be returned to the Pledgor or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.

        Section 3.5     Attorney Costs. If at any time or times hereafter the
Agent employs counsel

                                       4
   274

to prepare or consider waivers or consents or to intervene, file a petition,
answer, motion or other pleading in any suit or proceeding related to this
Assignment or the other Operative Agreements, or relating to any Securities
Collateral, or to protect, take possession of, or liquidate any Securities
Collateral, to attempt to enforce any Lien in any Securities Collateral, to
enforce any rights of the Agent, or to collect upon any deficiency with respect
thereto, then in any of such events, all of the reasonable attorneys' fees
arising from such services, and any expenses, costs and charges relating
thereto, shall become a part of the Secured Obligations secured by the
Securities Collateral and payable on demand.

        Section 3.6     No Waiver. The Agent's failure at any time or times
hereafter to require strict performance by the Pledgor of any of the provisions,
warranties, terms and conditions contained in this Assignment shall not waive,
affect or diminish any right of the Agent at any time or times thereafter to
demand strict performance therewith and with respect to any other provisions,
warranties, terms and conditions contained in this Assignment. Exercise by the
Agent of any of the remedies contained herein shall not limit or affect any
other remedies available to the Agent.

                                   ARTICLE IV

               Access to Account/Release of Securities Collateral

        Section 4.1     Although the Account and the CDs will be maintained in
the name of the Pledgor, the Pledgor shall not have access to the funds and
other Securities Collateral in the Account or to the CDs, and the Agent shall
have exclusive control and authority over such Securities Collateral except as
expressly provided in the Operative Agreements.

                                    ARTICLE V

           Investment Parameters for Securities Collateral in Account

        The Agent shall consult from time to time with the Pledgor regarding the
investment of all amounts in the Account and shall invest such amounts as
Pledgor or its designated representatives may request in writing from time to
time; provided, that all such amounts shall be invested at all times in Cash
Equivalents. In addition, so long as no Collateral Agreement Event of Default
shall have occurred and be continuing, no securities or other investment held in
the Account will be sold or otherwise disposed of without the prior written
approval of Pledgor.

                                   ARTICLE VI

                                 Miscellaneous

        Section 6.1     This Assignment shall be governed by and construed in
accordance with the laws of the State of Texas.

        Section 6.2     Any notice, request or other communication required or
permitted to be given under this Assignment shall be in writing and deemed to
have been properly given when delivered in person, or when sent by telecopy or
other electronic means and electronic confirmation of error free receipt is
received or upon receipt of notice sent by certified or registered United States
mail, return receipt requested, postage prepaid, addressed to the

                                       5
   275

party at the address set forth on the signature pages attached hereto. Any party
may change its contact information by providing such information in writing to
each other party to this Assignment.

        Section 6.3     This Assignment shall be binding upon and inure to the
benefit of the Pledgor, the Agent and their respective successors and assigns
permitted in accordance with the provisions of this Assignment and the other
Operative Agreements.

        Section 6.4     This Assignment may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Assignment to produce or account
for more than one such counterpart.

        Section 6.5     If any provision of this Assignment is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions hereof shall remain in full force and effect and shall
be construed without giving effect to the illegal, invalid or unenforceable
provision.

        Section 6.6     Notwithstanding any provision to the contrary contained
herein or in any of the other Operative Agreements, the Agent may only apply
proceeds realized from its security interest in the Securities Collateral to
satisfy the Secured Obligations.

                  [remainder of page intentionally left blank]

                                       6
   276

        The Pledgor has caused a counterpart of this Assignment to be duly
executed and delivered as of the date first above written.

                                            LEXICON GENETICS INCORPORATED,
                                            as the Pledgor

                                            By:    /s/ Julia P. Gregory
                                                   -----------------------
                                            Name:      Julia P. Gregory
                                                   -----------------------
                                            Title:     EVP & CFO
                                                   -----------------------

                                            Address:
                                            Lexicon Genetics Incorporated
                                            4000 Research Forest Drive
                                            The Woodlands, Texas  77381
                                            Attention:    John M. Dodson
                                            Telephone:    (281) 364-3222
                                            Facsimile:    (281) 414-9125

Accepted and agreed as of the date first above written.

BANK OF AMERICA, N.A.,
as the Agent

By:    /s/ Wade Morgan
       ------------------------------------
Name:      Wade Morgan
       ------------------------------------
Title:     Vice President
       ------------------------------------

Address:
Bank of America, N.A.
Bank of America Tower
Mailcode:  TX9-329-11-01
515 Congress Avenue
Austin, Texas  78701-3503
Attention:     Wade Morgan
Telephone:     (512) 397-2241
Facsimile:     (512) 397-2052

                                       7
   277

                                CONTROL AGREEMENT

        THIS CONTROL AGREEMENT (this "Agreement") is dated as of October 19,
2000 and is by and among BANK OF AMERICA, N.A., in its capacity as agent (in
such capacity, the "Agent") for the benefit of the financial institutions
identified as "Secured Parties" (the "Secured Parties") in the Assignment (as
defined below), LEXICON GENETICS INCORPORATED, a Delaware corporation (the
"Lessee") and BANK OF AMERICA, N.A., in its capacity as Securities Intermediary
with respect to the Collateral Account (in such capacity, the "Securities
Intermediary").

                                 R E C I T A L S

        WHEREAS, the Lessee has granted a security interest to the Agent, for
the benefit of the Secured Parties, in a certain account, bearing account number
873-758 (the "Collateral Account") maintained by the Lessee with the Securities
Intermediary pursuant to that certain Assignment of Collateral Account and
Security Agreement dated as of the date hereof (the "Assignment").

        WHEREAS, the parties hereto are entering into this Agreement to provide
for the control of the Collateral Account and to perfect the security interest
of Agent in the Collateral Account.

        NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

                                A G R E E M E N T

        SECTION 1. The Account. The Securities Intermediary hereby represents
and warrants to the Agent, and acknowledges and agrees, that (a) the Collateral
Account has been established in the name of the Lessee as recited above and
bears account number 873-758 and (b) except for the claims and interest of the
Agent and the Lessee in the Collateral Account, the Securities Intermediary does
not know of any claim to or interest in the Collateral Account. The Securities
Intermediary further agrees that (i) the Collateral Account is and shall be
maintained by the Securities Intermediary as a "securities account" (within the
meaning of Section 8.501 of the Uniform Commercial Code of the State of Texas
(the "UCC")), (ii) the Securities Intermediary's "jurisdiction" (within the
meaning of Chapter 8 of the UCC) is the State of Texas, (iii) all property in
the Collateral Account will be treated by the Securities Intermediary as
"financial assets" (as defined in Section 8.102(a)(9) of the UCC), (iv) except
as a result of computer system or accounting changes affecting accounts of the
Securities Intermediary generally (in which case, the Securities Intermediary
shall provide prompt notice of such change to the Agent), the Securities
Intermediary shall not change the name or account number of the Collateral
Account without the prior written consent of the Agent and at least five
Business Days prior notice to the Lessee and the Agent, and shall not change the
entitlement holder thereof and (v) the Securities Intermediary shall act as a
"securities intermediary" (within the meaning of Section 8.102(a)(14) of the
UCC) in maintaining the Collateral Account and shall credit to the Collateral
Account each financial asset that is delivered to it by the Agent with a
certification that such asset is to be held in or credited to the Collateral
Account pursuant to the Assignment; provided that all such financial assets
shall be of a type eligible to be held by a Federal Reserve Bank and/or the
Depository Trust Company. Further, all terms used in this Agreement shall be
construed in accordance and consistent with the UCC. For the purposes hereof,
"Business Day" shall mean a day other than a Saturday, Sunday or other day on
which commercial banks in North Carolina, Utah or Texas are authorized or
required by law to close.

        SECTION 2. Priority of Lien. The Securities Intermediary hereby
acknowledges the security interest granted to the Agent, for benefit of the
Secured Parties, by the Lessee in the Collateral Account. The Securities
Intermediary hereby waives and releases all liens, encumbrances, claims and
rights of setoff it may have or hereafter acquire against the Collateral Account
or any financial asset carried in the Collateral Account and agrees that it will
not assert any lien, encumbrance, claim or right against the Collateral Account
or any financial asset carried in the Collateral Account except for any lien,
claim, encumbrance, or right against the Collateral Account or any financial
asset carried in the Collateral Account resulting from transactions in the
Collateral Account (including payment of

   278

Securities Intermediary's customary fees and commissions). Without the prior
written consent of the Agent and the Lessee, the Securities Intermediary will
not execute and deliver, or otherwise become bound by, any agreement during the
term of this Agreement under which the Securities Intermediary agrees with any
third party that the Securities Intermediary will comply with entitlement orders
concerning the Collateral Account originated by such third party.

        SECTION 3. Control. The Securities Intermediary will comply with
entitlement orders originated by the Agent concerning the Collateral Account
without further consent by the Lessee; provided, however, that any entitlement
order from the Agent to pay, deliver over, or transfer to the Agent any or all
financial assets in the Collateral Account may only be submitted after or
together with delivery by the Agent of a written certification to the Securities
Intermediary that an Event of Default has occurred and is continuing; the
Securities Intermediary may rely on such certification and shall have no
obligation to verify the any statement contained therein. For the purposes
hereof, "Event of Default" shall have the meaning ascribed to such term in the
Assignment. All entitlement orders from the Agent must be in writing on bank
letterhead signed by an authorized officer of Agent. For purposes of this
Agreement, "authorized officer of Agent" shall refer in the singular to any
person holding the title of Assistant Vice President or higher. Except as
permitted by Section 4 hereof, the Securities Intermediary shall neither accept
nor comply with any entitlement order from the Lessee withdrawing or making a
free delivery of any financial assets from the Collateral Account nor deliver
any such financial assets to the Lessee without the specific prior written
consent of the Agent. Notwithstanding the foregoing and subject to the
provisions of the next succeeding sentence, Securities Intermediary may comply
with (a) oral or written purchase orders from the Lessee and (b) oral or written
entitlement orders from Lessee to sell financial assets in the Collateral
Account so long as the proceeds thereof are reinvested in financial assets held
in the Collateral Account. After such time when Agent delivers a written notice
to Securities Intermediary that it is exercising exclusive control over the
Collateral Account ("Exclusive Control Notice"), Securities Intermediary shall
cease complying with entitlement orders from Lessee within three Business Days
of receipt of such Exclusive Control Notice. An Exclusive Control Notice shall
designate the account, person or other location to which the financial assets in
the Collateral Account, or cash dividends or interest in connection therewith,
shall thereafter be delivered.

        SECTION 4. Payment of Interest and Dividends to Lessee. Agent agrees
that Securities Intermediary is authorized pay to Lessee any interest, interest
equivalent or dividends received by Securities Intermediary with respect to any
financial asset in the Collateral Account until three Business Days following
receipt by the Securities Intermediary of an Exclusive Control Notice. Agent
further agrees that for any non-interest bearing financial asset held in the
Collateral Account "interest equivalent" shall mean the amount of any discount
earned on such asset at the maturity date of such asset.

        SECTION 5. Statements, Confirmations and Notices of Adverse Claims. The
Securities Intermediary will send copies of all statements and confirmations
concerning the Collateral Account to the Agent at the address therefor set forth
on the signature pages hereto. Upon receipt of written notice of any lien,
encumbrance or adverse claim against the Collateral Account, the Securities
Intermediary will promptly notify the Agent thereof in writing. Agent shall
promptly deliver copies of such statements, confirmations and notices to the
Lessee, except where such delivery would conflict with the terms of the
Assignment.

        SECTION 6. Limited Responsibility of Securities Intermediary. The
Securities Intermediary shall have no responsibility or liability to the Agent
or the Lessee with respect to the value of the Collateral Account or any
property held therein. The Securities Intermediary shall have no duty to
investigate or make any determination as to whether a default or an event of
default exists under any agreement between the Lessee and the Agent with respect
to the Collateral Account. This Agreement does not create any obligation or duty
of the Securities Intermediary other than those expressly set forth herein.

        SECTION 7. Release from Liability. Except for any liability arising from
the gross negligence or willful misconduct of the Securities Intermediary,
Lessee and Agent each agree to release Securities Intermediary and its
directors, officers, and employees from and against any and all liability in any
way related to or arising out of or in connection with this Agreement, including
without limitation any liability that may result from Securities Intermediary
complying with entitlement orders from the Agent without the consent of Lessee.

                                       2
   279

        SECTION 8. Conflict. In the event of a conflict between this Agreement
and any other agreement between the Securities Intermediary and the Lessee, the
terms of this Agreement shall prevail. Regardless of any provision in any such
agreement relating to the law governing the Collateral Account, the parties
hereto agree that the establishment and maintenance of the Collateral Account,
and all interests, duties and obligations with respect thereto, shall be
governed by the law of the State of Texas.

        SECTION 9. Termination. The obligations of the Securities Intermediary
hereunder shall continue in effect until (a) the Agent has notified the
Securities Intermediary in writing that this Agreement is to be terminated or
(b) the Securities Intermediary has given the Agent and the Lessee at least 30
Business Days' prior written notice that the Securities Intermediary will no
longer be in the business of managing securities accounts and is thus
terminating this Agreement.

        SECTION 10. ENTIRE AGREEMENT. THIS AGREEMENT REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
REGARDING THE SUBJECT MATTER HEREOF.

        SECTION 11. Amendments. No amendment, modification or (except as
otherwise specified in Section 9 above) termination of this Agreement, nor any
assignment of any rights hereunder, shall be binding on any party hereto unless
it is in writing and is signed by each of the parties hereto, and any attempt to
so amend, modify, terminate or assign except pursuant to such a writing shall be
null and void. No waiver of any rights hereunder shall be binding on any party
hereto unless such waiver is in writing and signed by the party against whom
enforcement is sought.

        SECTION 12. Severability. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement,
and the application of such terms or provisions to persons or circumstances,
other than that which is held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.

        SECTION 13. Notices. Except as otherwise permitted in Section 3, any
notice, request or other communication required or permitted to be given under
this Agreement shall be in writing and deemed to have been properly given when
delivered in person, or when sent by telecopy or other electronic means and
electronic confirmation of error free receipt is received or upon receipt of
notice sent by certified or registered United States mail, return receipt
requested, postage prepaid, addressed to the party at the address set forth on
the signature pages attached hereto; provided that the Securities Intermediary
may deliver any such documents via regular United States mail in accordance with
its established policies. Any party may change its contact information by
providing such information in writing to each other party to this Agreement.

        SECTION 14. Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing and delivering one or
more counterparts.

        SECTION 15. Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.

                  [remainder of page intentionally left blank]

                                       3
   280

        IN WITNESS WHEREOF, this Agreement has been executed by a duly
authorized officer of each of the parties set forth below.

                                    LEXICON GENETICS INCORPORATED, as Lessee

                                    By:    /s/ Julia P. Gregory
                                           ------------------------------------
                                    Name:      Julia P. Gregory
                                           ------------------------------------
                                    Title:     EVP & CFO
                                           ------------------------------------

                                    Address:

                                    Lexicon Genetics Incorporated
                                    4000 Research Forest Drive
                                    The Woodlands, Texas  77381
                                    Attention:    John M. Dodson
                                    Telephone:    (281) 364-3222
                                    Facsimile:    (281) 414-9125

   281

                              BANK OF AMERICA, N.A., as Agent

                              By:    /s/ Wade Morgan
                                     ------------------------------------
                              Name:      Wade Morgan
                                     ------------------------------------
                              Title:     Vice President
                                     ------------------------------------

                              Address:

                              Bank of America, N.A.
                              Bank of America Tower
                              Mailcode:  TX9-329-11-01
                              515 Congress Avenue
                              Austin, Texas  78701-3503
                              Attention:    Wade Morgan
                              Telephone:    (512) 397-2241
                              Facsimile:    (512) 397-2052

                              BANK OF AMERICA, N.A., as Securities Intermediary

                              By:    /s/ Elissa Parsons
                                     ------------------------------------
                              Name:      Elissa Parsons
                                     ------------------------------------
                              Title:     Vice President
                                     ------------------------------------

                              Address:

                              Bank of America, N.A.
                              Bank of America Plaza
                              Mailcode:  TX1-492-6305
                              901 Main Street
                              Dallas, Texas  75202-3714
                              Attention:    Mark S. Tranchina
                              Telephone:    (214) 209-2816
                              Facsimile:    (214) 209-2067

                              Bank of America, N.A.
                              NC1-004-03-42
                              200 North College Street
                              Charlotte, North Carolina 28202
                              Attention:    Kathryn Armet
                              Telephone:    (704) 387-1172
                              Facsimile:    (704) 386-6544
   1
                                                                    EXHIBIT 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K into Lexicon Genetics Incorporated's
previously filed Registration Statement on Form S-8 (Registration No. 333-41532)
dated July 14, 2000.

ARTHUR ANDERSEN LLP

Houston, Texas
March 12, 2001