SEC Filing | Biogen

View:

Download DOC

Download PDF

Download XLS

Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

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

FORM 10-Q

(Mark One)

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

/ /	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: 0-19311

IDEC PHARMACEUTICALS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

33-0112644
(I.R.S. Employer
Identification No.)

3030 Callan Road, San Diego, CA 92121
(Address of principal executive offices) (Zip code)

(858) 431-8500
(Registrant's telephone number, including area code)

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 / /

As of October 31, 2001 the Registrant had 152,508,055 shares of its common stock, $.0005 par value, issued and outstanding.

IDEC PHARMACEUTICALS CORPORATION
FORM 10-Q—QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations—Three months ended September 30, 2001 and 2000 and nine months ended September 30, 2001 and 2000	1
	Condensed Consolidated Balance Sheets—September 30, 2001 and December 31, 2000	2
	Condensed Consolidated Statements of Cash Flows—Nine months ended September 30, 2001 and 2000	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 2.	Changes in Securities	28
Item 3.	Defaults upon Senior Securities	28
Item 4.	Submission of Matters to a Vote of Stockholders	28
Item 5.	Other Information	28
Item 6.	Exhibits and Reports on Form 8-K	29

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.

IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

			Three months ended September 30,						Nine months ended September 30,
			2001			2000			2001			2000
						Restated						Restated
Revenues:
	Revenues from unconsolidated joint business		$	68,525		$	36,778		$	175,155		$	89,973
	Contract revenues			1,090			4,400			4,597			13,992
	License fees			—			1,625			11,250			4,875

		Total revenues		69,615			42,803			191,002			108,840
Operating costs and expenses:
	Manufacturing costs			—			—			—			2,134
	Research and development			20,751			18,008			63,912			49,768
	Selling, general and administrative			12,991			6,576			36,125			19,253

		Total operating costs and expenses		33,742			24,584			100,037			71,155

Income from operations				35,873			18,219			90,965			37,685
Interest income, net				6,977			2,788			24,957			7,053

Income before income tax provision and cumulative effect of accounting change				42,850			21,007			115,922			44,738
Income tax provision				(15,893	)		(3,609	)		(43,005	)		(7,718	)

Income before cumulative effect of accounting change				26,957			17,398			72,917			37,020
Cumulative effect of accounting change, net of income tax benefit of $487				—			—			—			(9,263	)

Net income			$	26,957		$	17,398		$	72,917		$	27,757

Basic earnings per share:
	Before cumulative effect of accounting change		$	0.18		$	0.13		$	0.49		$	0.28
	Cumulative effect of accounting change			—			—			—			(0.07	)

	Basic earnings per share		$	0.18		$	0.13		$	0.49		$	0.21

Diluted earnings per share:
	Before cumulative effect of accounting change		$	0.16		$	0.11		$	0.42		$	0.24
	Cumulative effect of accounting change			—			—			—			(0.06	)

	Diluted earnings per share		$	0.16		$	0.11		$	0.42		$	0.18

Shares used in calculation of earnings per share:
	Basic			152,061			134,856			150,142			132,915
	Diluted			167,394			158,628			181,278			157,497

See accompanying notes to unaudited condensed consolidated financial statements.

IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(unaudited)

			September 30, 2001		December 31, 2000
ASSETS
Current assets:
	Cash and cash equivalents		$	440,927	$	401,052
	Securities available-for-sale			135,442		180,286
	Contract revenue receivables, net			79		1,697
	Due from related parties, net			62,464		41,753
	Inventories			230		—
	Prepaid expenses and other current assets			6,825		6,470

		Total current assets		645,967		631,258
	Long-term securities available-for-sale			254,811		169,188
	Property and equipment, net			92,981		47,514
	Investment and other assets			9,294		8,446

			$	1,003,053	$	856,406

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of notes payable		$	—	$	743
	Accounts payable			1,726		1,737
	Accrued expenses			20,369		16,071
	Deferred revenue			350		4,494

		Total current liabilities		22,445		23,045
Notes payable, less current portion				134,193		128,888
Deferred rent				2,852		2,752
Deferred taxes and other long-term liabilities				7,623		7,102
Commitments
Stockholders' equity:
	Convertible preferred stock, $.001 par value			—		—
	Common stock, $.0005 par value			76		73
	Additional paid-in capital			747,600		680,602
	Accumulated other comprehensive income net unrealized gains on securities available-for-sale, net of taxes			1,920		517
	Retained earnings			86,344		13,427

		Total stockholders' equity		835,940		694,619

			$	1,003,053	$	856,406

See accompanying notes to unaudited condensed consolidated financial statements.

IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

			Nine Months ended September 30,
			2001			2000
Cash flows from operating activities:
		Net cash provided by operating activities	$	103,259		$	42,168

Cash flows from investing activities:
	Purchase of property and equipment			(49,903	)		(28,434	)
	Purchase of securities available-for-sale			(470,536	)		(125,204	)
	Sales and maturities of securities available-for-sale			433,688			132,340

		Net cash used in investing activities		(86,751	)		(21,298	)

Cash flows from financing activities:
	Payments on notes payable			(743	)		(1,117	)
	Proceeds from issuance of common stock			24,110			15,700

		Net cash provided by financing activities		23,367			14,583

Net increase in cash and cash equivalents				39,875			35,453
Cash and cash equivalents, beginning of period				401,052			61,404

Cash and cash equivalents, end of period			$	440,927		$	96,857

See accompanying notes to unaudited condensed consolidated financial statements.

IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation: The information at September 30, 2001, and for the three and nine months ended September 30, 2001 and 2000, is unaudited. In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for the interim periods presented. Interim results are not necessarily indicative of results for a full year or for any subsequent interim period. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2000.

Inventories: Inventories are stated at the lower of cost or market. Cost is determined in a manner that approximates the first-in, first-out, or FIFO method. Inventories at September 30, 2001 consist solely of raw materials.

Revenues from Unconsolidated Joint Business: Revenues from unconsolidated joint business consist of our share of the pretax copromotion profits generated from our copromotion arrangement with Genentech Inc., revenue from bulk Rituxan® sales to Genentech through March 2000, reimbursement from Genentech of our Rituxan-related sales force and development expenses and royalty revenue from F. Hoffmann-La Roche Ltd. on sales of Rituximab outside the United States. Revenue from bulk Rituxan sales was recognized when Genentech accepted the bulk Rituxan. Upon acceptance of bulk Rituxan by Genentech the right to return no longer existed and there were no further performance obligations related to bulk Rituxan. We record our royalty revenue from Roche with a one-quarter lag. Rituxan is the trade name in the United States and Japan for the compound Rituximab. Outside the United States and Japan, Rituximab is marketed as MabThera. In our notes to the condensed consolidated financial statements, we refer to Rituximab, Rituxan and MabThera collectively as Rituxan, except where otherwise indicated. Under the copromotion arrangement we share responsibility with Genentech for selling and continued development of Rituxan in the United States. Continued development of Rituxan includes conducting supportive research on Rituxan, post-approval clinical studies and obtaining potential approval of Rituxan for additional indications. Genentech provides the support functions for the commercialization of Rituxan in the United States including marketing, customer service, order entry, distribution, shipping and billing and, as of September 1999, all worldwide manufacturing responsibilities. Under the copromotion arrangement, all U.S. sales of Rituxan and associated costs and expenses are recognized by Genentech and we record our share of the pretax copromotion profits on a quarterly basis, as defined in our collaborative agreement with Genentech. Pretax copromotion profits under the copromotion arrangement are derived by taking the U.S. net sales of Rituxan to third-party customers less cost of sales, third-party royalty expenses, distribution, selling and marketing expenses and joint development expenses incurred by Genentech and us. Our profit-sharing formula with Genentech has two tiers; we earn a higher percentage of the pretax copromotion profits at the upper tier once a fixed pretax copromotion profit level is met. The profit-sharing formula resets annually at the beginning of each year to the lower tier. We began recording our profit share at the higher percentage during the first quarter of 2001 compared to the beginning of the second quarter of 2000.

Cumulative Effect of Accounting Change (Restatement): In the fourth quarter of 2000, we implemented the Securities and Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," or SAB No. 101, effective as of January 1, 2000. SAB No. 101 established new guidelines in applying generally accepted accounting principles to revenue recognition in financial statements. SAB No. 101 provides that nonrefundable up-front fees received under

collaborative agreements be recorded as deferred revenue upon receipt and recognized as revenue over future periods. Prior to the implementation of SAB No. 101, we recognized certain nonrefundable up-front fees upon receipt as license fee revenue. The cumulative effect of this accounting change on years prior to 2000 resulted in a charge of $9,263,000 (net of a $487,000 income tax effect), of which $3,250,000 was recorded as deferred revenue as of December 31, 2000. For the nine months ended September 30, 2001, we recognized $3,250,000 of the related deferred revenue. The results for the three and nine months ended September 30, 2000 have been restated to reflect the adoption of SAB No. 101 as of January 1, 2000 which resulted in $1,625,000 and $4,875,000 being recognized as license fee revenue for the three and nine months ended September 30, 2000, respectively. This accounting change is directly related to the $13,000,000 up-front license fee received from Schering Aktiengesellschaft and recognized as license fee revenue in 1999.

Earnings Per Share: Earnings per share are calculated in accordance with Statement of Financial Accounting Standards No. 128 "Earnings per Share." Basic earnings per share excludes the dilutive effects of options and other convertible securities compared to diluted earnings per share which reflects the potential dilution of options and other convertible securities that could share in our earnings. Calculations of basic and diluted earnings per share use the weighted average number of shares outstanding during the period. All share and earnings per share amounts for the three and nine months ended September 30, 2000 have been restated to reflect our three-for-one stock split effected in January 2001.

			Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share data)			Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share data)			2001		2000		2001		2000
Numerator:
	Net income		$	26,957	$	17,398	$	72,917	$	27,757
	Adjustments for interest, net of income tax effect			—		—		3,434		—

		Net income, adjusted	$	26,957	$	17,398	$	76,351	$	27,757
Denominator:
	Weighted-average shares outstanding			152,061		134,856		150,142		132,915
	Effect of dilutive securities:
		Dilutive options		12,452		17,498		13,670		17,667
		Convertible preferred		2,881		6,274		3,527		6,915
		Convertible promissory notes due 2019		—		—		13,939		—

	Dilutive potential common shares			15,333		23,772		31,135		24,582

	Weighted-average shares and dilutive potential common shares			167,394		158,628		181,278		157,497

Basic earnings per share			$	0.18	$	0.13	$	0.49	$	0.21
Diluted earnings per share			$	0.16	$	0.11	$	0.42	$	0.18

Excluded from the calculation of diluted earnings per share for the three months ended September 30, 2001 were 13,939,000 shares of common stock from the assumed conversion of our 20-year zero coupon subordinated convertible notes, or convertible promissory notes, and 2,871,000 shares of common stock from options because their effect is antidilutive. Excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2001 was 2,371,000 shares of common stock from options because their effect is antidilutive. Excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2000 was 13,939,000 shares of common stock from the assumed conversion of our convertible promissory notes and 213,000 shares of common stock from options for the nine months ended September 30, 2000 because their effect was antidilutive.

Comprehensive Income: Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net income, such as unrealized holding gains and losses on available-for-sale marketable securities, net of tax. Comprehensive income for the three months ended September 30, 2001 and 2000 was $28,047,000 and $17,720,000, respectively. Comprehensive income for the nine months ended September 30, 2001 and 2000 was $74,319,000 and $37,422,000, respectively.

Note 2. Related Party Arrangements

In March 1995, we entered into a collaborative agreement with Genentech for the clinical development and commercialization of our anti-CD20 monoclonal antibody, Rituxan, for the treatment of certain B-cell non-Hodgkin's lymphomas. Under the agreement, we may be reimbursed by Genentech for other development and regulatory approval expenses under the terms of the collaborative agreement. Genentech may terminate this agreement for any reason, which would result in a loss of Genentech's Rituxan product rights.

We copromote Rituxan in the United States with Genentech under a joint business arrangement whereby we receive a share of the pretax copromotion profits. In September 1999, we transferred all worldwide manufacturing responsibilities for bulk Rituxan to Genentech.

Revenues from unconsolidated joint business for the three and nine months ended September 30, 2001 and 2000 consist of the following (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2001		2000		2001		2000
Copromotion profits	$	62,836	$	32,761	$	159,034	$	74,979
Bulk Rituxan sales		—		—		—		2,078
Reimbursement of selling and development expenses		1,953		2,082		6,453		7,101
Royalty income on sales of Rituximab outside the U.S.		3,736		1,935		9,668		5,815

Total revenues from unconsolidated joint business	$	68,525	$	36,778	$	175,155	$	89,973

Amounts due from related parties, net at September 30, 2001 and December 31, 2000 consist of the following (in thousands):

	2001		2000
Due from Genentech, copromotion profits	$	60,318	$	37,459
Due from Genentech, bulk Rituxan sales		—		2,047
Due from Genentech, selling and development expenses		2,119		2,221
Due from Roche		27		26

Total due from related parties, net	$	62,464	$	41,753

During the first quarter of 2000, we recognized the remaining revenues and related manufacturing costs from bulk Rituxan sales to Genentech. Under the terms of separate agreements with Genentech, commercialization of Rituxan outside the United States is the responsibility of Roche, except in Japan where Zenyaku Kogyo Co. Ltd. is responsible for product development, marketing and sales. We receive royalties on Rituxan sales outside the United States.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

We are primarily engaged in the commercialization, research and development of targeted therapies for the treatment of cancer and autoimmune and inflammatory diseases.

In December 2000, the Food and Drug Administration, or FDA, accepted our filing of a Biological License Application, or BLA, seeking marketing approval for ZEVALIN™ (Ibritumomab Tiuxetan) radioimmunotherapy for the treatment of low grade, follicular, CD20-positive transformed, relapsed or refractory, B-cell non-Hodgkin's lymphoma, or NHL. In May 2001 we received a Complete Review Letter from the FDA regarding our ZEVALIN BLA. In the Complete Review Letter the FDA outlined additional information and analysis we were required to submit as a result of their review. The information requested related to two areas: Clinical and Chemistry, Manufacturing and Controls, or CMC. The FDA also requested imaging with indium-111 as a part of the ZEVALIN commercial protocol. If approved, we now expect to market ZEVALIN as one product which will be comprised of two components, an imaging component for use with indium-111 and a therapeutic component for use with yttrium-90.

On July 9, 2001, we submitted documentation and analysis to the FDA in response to the May 2001 Complete Review Letter. In August 2001, the FDA acknowledged receipt of our July 2001 resubmission and characterized the resubmission as complete. The FDA noted that the resubmission of our license application was a Class II response to our Complete Review Letter of May 2001. As a Class II response under FDA guidelines, the FDA may approve, not approve, or raise additional questions regarding the BLA at any time within six months from the resubmission date.

In September 2001, the Oncologic Drugs Advisory Committee, or ODAC, of the FDA recommended approval of ZEVALIN for the proposed treatment of rituximab-refractory follicular, B-cell NHL. Members of ODAC also recommended that the FDA consider approval of ZEVALIN for treatment of patients that are not rituximab-refractory; that is, patients with relapsed or refractory, low grade, follicular or CD20-positive transformed, B-cell NHL under the FDA's accelerated approval regulations. The recommendation of ODAC is not binding on the FDA.

The FDA's request from their CMC review included, among other items, pre-approval inspections of our ZEVALIN radioisotope supplier and fill/finish provider. As a result of these inspections, we, along with our radioisotope supplier and fill/finish provider, were required to submit additional documentation and analysis to the FDA. In addition, our fill/finish provider, Catalytica Pharmaceuticals, Inc., a subsidiary of DSM N.V., is subject to a warning letter from the FDA with respect to current Good Manufacturing Practices, or cGMP, not specifically related to ZEVALIN. However, in order to manufacture ZEVALIN, Catalytica must address issues identified in the warning letter and subsequent inspections to the FDA's satisfaction and maintain compliance with cGMP. Catalytica is working with the FDA to implement the necessary improvements to resolve these issues. While we are providing support and consultation to Catalytica, the timing and nature of Catalytica's resolution of cGMP issues will depend on its ability to demonstrate to the FDA's satisfaction the quality and reliability of its manufacturing controls and procedures.

We have retained all U.S. marketing and distribution rights for ZEVALIN and have granted marketing and distribution rights for ZEVALIN outside the U.S. to Schering AG. We are currently responsible for worldwide manufacturing of the ZEVALIN antibody and kits. In January 2001, Schering AG had its Marketing Authorization Application, or MAA, for ZEVALIN accepted for review by the European Medicines Evaluation Agency.

In November 1997, we received FDA approval to market our first product, Rituxan, in the United States. In May 2001, we announced that the FDA approved a supplemental BLA, or sBLA, for Rituxan. The new product labeling includes:

•: retreatment with Rituxan after a prior course of Rituxan therapy;
•: initial treatment with eight weekly infusions of Rituxan, compared to the prior approved labeling of four weekly infusions; and
•: treatment of NHL patients with bulky disease (tumors greater than 10 centimeters).

The sBLA also amended our package insert to update safety information. In addition, a Dear Healthcare Provider letter was sent to physicians to enhance their understanding of adverse events that may be associated with Rituxan use.

In June 1998, Roche, our European marketing partner for Rituxan, was granted marketing authorization for Rituximab in all European Union countries. In May 2001, Roche submitted an application with the European Medicines Evaluation Agency for use of Rituximab in combination with standard chemotherapy, or CHOP, to treat patients with aggressive NHL. In October 2001, the European Committee for Proprietary Medicinal Products, or CPMP, issued a positive opinion recommending the granting of a marketing authorization for Rituximab for this treatment. While the CPMP's recommendation is not binding, its opinions usually serve as the basis for European Commission approvals. In June 2001, Zenyaku, our Japanese marketing partner for Rituxan, was granted marketing authorization for Rituxan in Japan. Rituxan is the trade name in the United States and Japan for the compound Rituximab. Outside the United States and Japan, Rituximab is marketed as MabThera. In this quarterly report, we refer to Rituximab, Rituxan and MabThera collectively as Rituxan, except where we have otherwise indicated.

Rituxan is being copromoted in the United States under a joint business arrangement with Genentech, where we receive a share of the pretax copromotion profits. Under the copromotion arrangement we share responsibility with Genentech for the sale and continued development of Rituxan in the United States. Continued development of Rituxan includes conducting supportive research on Rituxan, post-approval clinical studies and obtaining approval of Rituxan for potential additional indications. Genentech provides the support functions for the commercialization of Rituxan in the United States including marketing, customer service, order entry, distribution, shipping and billing. Since September 1999, Genentech has been responsible for all worldwide manufacturing. Under the terms of separate agreements with Genentech, Roche is responsible for the commercialization of Rituxan outside the United States, except in Japan where Zenyaku is responsible for product development, marketing and sales. We receive royalties on Rituxan sales outside the United States.

Our revenues include revenues from unconsolidated joint business, contract revenues and license fees. Until the commercialization of Rituxan, a substantial portion of our revenues had been derived from contract revenues and license fees. However, since the commercialization of Rituxan in November 1997, our revenues have depended primarily upon the sale of Rituxan.

Revenues from unconsolidated joint business include our share of the pretax copromotion profits generated from our copromotion arrangement with Genentech, revenue from bulk Rituxan sales to Genentech through March 2000, reimbursement from Genentech of our Rituxan-related sales force and development expenses and royalty revenue from Roche on sales of Rituximab outside the United States. Revenue from bulk Rituxan sales was recognized when Genentech accepted the bulk Rituxan. We record our royalty revenue from Roche with a one-quarter lag. Under the copromotion arrangement, all U.S. sales of Rituxan and associated costs and expenses are recognized by Genentech and we record our share of the pretax copromotion profits on a quarterly basis, as defined in our collaborative agreement with Genentech. Pretax copromotion profits under the copromotion arrangement are derived by taking U.S. net sales of Rituxan to third-party customers less cost of sales,

third-party royalty expenses, distribution, selling and marketing expenses and joint development expenses incurred by Genentech and us. Our profit-sharing formula with Genentech has two tiers; we earn a higher percentage of the pretax copromotion profits at the upper tier once a fixed pretax copromotion profit level is met. The profit-sharing formula resets annually at the beginning of each year to the lower tier. We began recording our profit share at the higher percentage during the first quarter of 2001 compared to the beginning of the second quarter of 2000.

Contract revenues include nonrefundable research and development funding under collaborative agreements with our strategic partners and other funding under contractual arrangements with other parties. Contract research and development funding generally compensates us for discovery, preclinical and clinical expenses related to our collaborative development programs for our products and is recognized at the time research and development activities are performed under the terms of the collaborative agreements.

License fees include nonrefundable fees from product development milestone payments and nonrefundable fees from the sale of product rights under collaborative development and license agreements with our strategic partners. Nonrefundable up-front fees from the sale of product rights are recorded as deferred revenue upon receipt and recognized as revenue over future periods as required by SAB No. 101. Included in license fees are nonrefundable product development milestone payments which are recognized upon the achievement of product development milestone objectives as stipulated in agreements with our strategic partners. Product development milestone objectives vary in each of our agreements. The achievement of product development milestone objectives that may lead to the recognition of license fee revenues include:

•: the achievement of preclinical research and development objectives;
•: the initiation of various phases of clinical trials;
•: the filing of a BLA, an Investigational New Drug application, or IND, or a New Drug Application, or NDA;
•: the filing of drug license applications in foreign territories; and
•: obtaining United States or foreign regulatory product approvals.

Contract revenues and license fees may vary from period to period and are in part dependent upon achievement of research and development objectives or the consummation of new corporate alliances. The magnitude and timing of contract revenues and license fees may influence our achievement and level of profitability.

The cost of bulk Rituxan sold to Genentech was recorded as manufacturing costs in our condensed consolidated statements of operations. In September 1999, we transferred all worldwide manufacturing responsibilities for bulk Rituxan to Genentech. Since the transfer of bulk Rituxan manufacturing to Genentech in September 1999, we have been using our manufacturing capacity for production of specification-setting lots and pre-commercial inventory of ZEVALIN antibodies and production of other proteins for clinical trials.

We have incurred increasing annual operating expenses and, with the commercialization of Rituxan and preparation for potential commercialization of ZEVALIN, we expect such trends to continue. Since our inception in 1985 through 1997, we incurred annual operating losses. Our ongoing profitability will be dependent upon the continued commercial success of Rituxan, product development, revenues from the achievement of product development objectives and licensing transactions. As of September 30, 2001, we had retained earnings of $86.3 million.

RESULTS OF OPERATIONS

Revenues from unconsolidated joint business for the three and nine months ended September 30, 2001 and 2000, consist of the following (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2001		2000		2001		2000
Copromotion profits	$	62,836	$	32,761	$	159,034	$	74,979
Bulk Rituxan sales		—		—		—		2,078
Reimbursement of selling and development expenses		1,953		2,082		6,453		7,101
Royalty income on sales of Rituximab outside the U.S.		3,736		1,935		9,668		5,815

Total revenues from unconsolidated joint business	$	68,525	$	36,778	$	175,155	$	89,973

Under our agreement with Genentech, our pretax copromotion profit-sharing formula has two tiers. We earn a higher percentage of the pretax copromotion profits at the upper tier once a fixed pretax copromotion profit level is met. The profit-sharing formula resets annually at the beginning of each year to the lower tier. We began recording our profit share at the higher percentage during the first quarter of 2001 compared to the beginning of the second quarter of 2000.

Rituxan net sales to third-party customers in the United States recorded by Genentech for the three and nine months ended September 30, 2001 amounted to $205.0 million and $553.0 million, respectively, compared to $115.5 million and $290.2 million for the comparable periods in 2000. This increase was primarily due to increased market penetration in treatments of B-cell NHL and chronic lymphocytic leukemia, or CLL.

Our royalty revenue on sales of Rituximab outside the U.S. is based on Roche's end-user sales and is recorded with a one-quarter lag.

Contract revenues for the three and nine months ended September 30, 2001 totaled $1.1 million and $4.6 million, respectively, compared to $4.4 million and $14.0 million for the comparable periods in 2000. The decrease in contract research revenues for the three and nine months ended September 30, 2001 is primarily the result of decreased funding under our collaboration and license agreements with Schering AG and Taisho Pharmaceuticals Co. Ltd. of Tokyo.

License fees for the nine months ended September 30, 2001 totaled $11.3 million compared to $4.9 million for the comparable period in 2000. The increase in license fee revenue for the nine months ended September 30, 2001 is due to payments received from Eisai Co. Ltd. and Schering AG for the achievement of product development milestone objectives and the receipt of a $5.0 million milestone payment from Schering AG when the European Medicines Evaluation Agency accepted for filing the submission of a MAA for approval of ZEVALIN in Europe. License fees for the three and nine months ended September 30, 2000 is $1.6 million and $4.9 million, respectively, recognized as a result of our adoption of SAB No. 101. The results for the three and nine months ended September 30, 2000 have been restated to reflect the adoption of SAB No. 101 as of January 1, 2000. This accounting change is directly related to the $13.0 million up-front license fee received from Schering AG and recognized as license fee revenue in 1999.

Contract revenues and license fees may vary from period to period and are, in part, dependent upon achievement of certain research and development objectives. The magnitude and timing of contract revenues and license fees may influence our achievement and level of profitability. We continue to pursue other collaborative and license arrangements; however, no assurance can be given that any such arrangements will be realized.

There was no manufacturing costs recorded for the nine months ended September 2001 compared to $2.1 million for the comparable period in 2000. Our manufacturing costs recorded in 2000 relate to production of bulk Rituxan sold to Genentech and were recognized when Genentech accepted the bulk Rituxan inventory. The decrease in manufacturing costs from 2000 is due to the transfer of all worldwide manufacturing responsibilities for bulk Rituxan to Genentech in September 1999. The final lots of bulk Rituxan manufactured by us during the third quarter of 1999 were accepted by Genentech during the first quarter of 2000. Since the transfer of all worldwide manufacturing responsibilities for bulk Rituxan to Genentech, we have been using our manufacturing capacity for production of specification setting lots and pre-commercial inventory of ZEVALIN antibodies and production of other proteins for clinical trials. Those manufacturing expenses have been recorded as research and development expenses.

Research and development expenses totaled $20.8 million and $63.9 million for the three and nine months ended September 30, 2001, respectively, compared to $18.0 million and $49.8 million for the comparable periods in 2000. The increase in research and development expenses in 2001 is primarily due to increased clinical testing of our various products under development, development costs for ZEVALIN, personnel expenses and expansion of our facilities. We expect to continue incurring substantial manufacturing-related expenses as we have begun using our manufacturing capacity for production of pre-commercial inventory of ZEVALIN antibodies and production of other proteins for clinical trials. In the future we expect to continue incurring substantial additional research and development expenses due to:

•: completion of our primary development program for ZEVALIN;
•: the expansion or addition of research and development programs;
•: technology in-licensing;
•: regulatory-related expenses;
•: the expansion of clinical manufacturing capabilities;
•: facilities expansion; and
•: preclinical and clinical testing of our various products under development.

Selling, general and administrative expenses totaled $13.0 million and $36.1 million for the three and nine months ended September 30, 2001, respectively, compared to $6.6 million and $19.3 million for the comparable periods in 2000. Selling, general and administrative expenses increased in 2001 primarily due to increased marketing and administrative expenses related to the potential commercialization of ZEVALIN, sales expenses to support Rituxan and general increases in general and administrative expenses to support overall organizational growth. Selling, general and administrative expenses are expected to increase in the foreseeable future to support the following:

•: expanded growth of our sales force;
•: marketing and administration related to the potential commercialization of ZEVALIN;
•: manufacturing capacity;
•: clinical trials; and
•: research and development.

Interest income totaled $8.8 million and $30.5 million for the three and nine months ended September 30, 2001, respectively, compared to $4.6 million and $12.4 million for the comparable periods in 2000. The increase in interest income in 2001 is primarily due to higher average balances in cash, cash equivalents and securities available-for-sale resulting from the sale of 7.8 million shares of

common stock in November 2000 and cash provided by operations. Interest rate fluctuations can substantially effect the returns on our investments. The average interest rates earned on our investments for the three and nine months ended September 30, 2001 decreased from the average interest rates earned on our investments for the comparable periods in 2000 as a result of declining market interest rates.

Interest expense totaled $1.8 million and $5.5 million for the three and nine months ended September 30, 2001, respectively, compared to $1.8 million and $5.3 million for the comparable periods in 2000. Interest expense in 2001 and 2000 is primarily due to noncash interest charges relating to the convertible promissory notes offering in February 1999.

Our effective tax rate for the three and nine months ended September 30, 2001 was approximately 37% compared to 17% in 2000. Our effective tax rate for the three and nine months ended September 30, 2001 increased primarily due to the utilization in prior years of net operating loss carryforwards for financial reporting purposes. Our effective tax rate for 2000 results from the utilization of net operating loss carryforwards and the reduction of the valuation allowance against the related deferred tax assets. Our net operating loss carryforwards available to offset future taxable income at December 31, 2000 were approximately $211.0 million for federal income tax purposes and begin to expire in 2006. The utilization of our net operating loss carryforwards and tax credits may be subject to an annual limitation under the Internal Revenue Code due to a cumulative change of ownership of more than 50% in prior years. However, we anticipate this annual limitation to result only in a slight deferral in the utilization of our net operating loss carryforwards and tax credits. We expect that our effective tax rate in the future will continue to be closer to the maximum statutory tax rate.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operating and capital expenditures since inception principally through sales of equity securities, profits from our copromotion arrangement with Genentech related to the sales of Rituxan, license fees, contract revenues, lease financing transactions, debt financing transactions and interest income. We expect to finance our current and planned operating requirements principally through cash on hand, anticipated funds from our copromotion arrangement with Genentech and with funds from existing collaborative agreements and contracts. We believe that these funds will be sufficient to meet our operating requirements for the foreseeable future. Existing collaborative research agreements and contracts, however, could be canceled by the contracting parties. In addition, we may, from time to time seek additional funding through a combination of new collaborative agreements, strategic alliances and additional equity and debt financings or from other sources. Additional funds may not be obtainable through these sources on acceptable terms. If adequate funds are not available from the copromotion arrangement, operations or additional sources of financing, our business could be harmed. Our working capital and capital requirements will depend upon numerous factors, including:

•: the continued commercial success of Rituxan;
•: financing alternatives available for the construction of our large-scale manufacturing facility;
•: the progress of our preclinical and clinical testing;
•: fluctuating or increasing manufacturing requirements and research and development programs;
•: timing and expense of obtaining regulatory approvals;
•: levels of resources that we devote to the development of manufacturing, sales and marketing capabilities, including resources devoted to the potential commercial launch of ZEVALIN;
•: technological advances;
•: status of competitors; and
•: our ability to establish collaborative arrangements with other organizations.

Until required for operations, we invest our cash reserves in bank deposits, certificates of deposit, commercial paper, corporate notes, United States government instruments and other readily marketable debt instruments in accordance with our investment policy.

At September 30, 2001, we had $831.2 million in cash, cash equivalents and securities available-for-sale compared to $750.5 million at December 31, 2000. Sources of cash, cash equivalents and securities available-for-sale during the nine months ended September 30, 2001 included $103.3 million from operations and $24.1 million from the issuance of common stock under employee stock option and purchase plans. Uses of cash, cash equivalents and securities available-for-sale during the nine months ended September 30, 2001 included $49.9 million used to purchase land and capital equipment.

In September 2001, we purchased approximately 42.6 acres in San Diego for a proposed corporate headquarters and research and development campus. Additional costs we expect to incur in connection with this campus include design, development and construction costs, as well as the purchase and installation of equipment and furnishings for the campus. We estimate these costs at approximately $100 million over a two-year period. We expect to pay for these costs in part from our working capital and we presently intend to finance the remaining costs for this campus through an off balance sheet lease arrangement that will likely involve using cash on hand as collateral. We cannot assure you that lease financing for this campus will be obtained on acceptable terms, if at all. In the third quarter of 2001, we began preliminary site engineering preparations for the campus, which could potentially expand to over 750,000 square feet of facilities. The first phase of construction is expected to be completed in late 2003.

In September 2000, we purchased a 60-acre site in Oceanside, California for approximately $18.9 million in cash. We plan to build a large-scale manufacturing facility at the location, which we anticipate using to commercialize our products currently in clinical trials if they are approved by the FDA. Additional costs we expect to incur in connection with this facility include design, development, construction, validation and start-up costs, as well as the purchase and installation of equipment and furnishings for the facility. We estimate these costs at $300 to $400 million over a four-year period. We expect to pay for these costs in part from our working capital and we presently intend to finance the remaining costs for this facility through an off balance sheet lease arrangement that will likely involve using cash on hand as collateral. We cannot assure you that lease financing for this facility will be obtained on acceptable terms, if at all. In the first quarter of 2001, we began preliminary site engineering preparations for the first phase of development, which is anticipated to be approximately 300,000 square feet. The new facility in Oceanside is anticipated to be completed in early 2004. We expect the facility to be operating by the end of 2005. This expansion will allow us to better control the

manufacture of our products, reducing our reliance on contract manufacturers, as well as to reduce commercial risk.

In February 1999, we raised through the sale of convertible promissory notes approximately $112.7 million, net of underwriting commissions and expenses of $3.9 million. The convertible promissory notes are zero coupon and were priced with a yield to maturity of 5.5 percent annually. Upon maturity, the convertible promissory notes will have an aggregate principal face value of $345.0 million. Each $1,000 aggregate principal face value convertible promissory note is convertible at the holders' option at any time through maturity into 40.404 shares of our common stock at an initial conversion price of $8.36. We are required under the terms of the convertible promissory notes, as of 35 business days after a change in control occurring on or before February 16, 2004, to purchase any convertible promissory note at the option of its holder at a price equal to the issue price plus accrued original issue discount to the date of purchase. Additionally, the holders of the convertible promissory notes may require us to purchase the convertible promissory notes on February 16, 2004, 2009 or 2014 at a price equal to the issue price plus accrued original issue discount to the date of purchase with us having the option to repay the convertible promissory notes plus accrued original issue discount in cash, our common stock or a combination thereof. We have the right to redeem the convertible promissory notes on or after February 16, 2004.

In September 1997, we entered into a development and license agreement with Cytokine Pharmasciences, Inc. under which we may make payments to them totaling up to $10.5 million plus a share of future royalty and development milestone payments received by us from third parties, subject to attainment of product development milestone objectives, of which $3.5 million has been paid through September 30, 2001.

NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 141, "Business Combinations," or Statement No. 141, and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," or Statement No. 142, which supersedes Accounting Principles Board Opinion 17, "Intangible Assets." Statement No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method. Under Statement No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are tested at least annually for impairment. It is not anticipated that the financial impact of these statements will have a material effect on our condensed consolidated financial statements.

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," or Statement No. 143, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and for the associated asset retirement costs. The standard applies to tangible long-lived assets that have a legal obligation associated with their retirement that results from the acquisition, construction or development or normal use of the assets. We are required and plan to adopt the provisions of Statement No. 143 effective January 1, 2003. It is not anticipated that the financial impact of this statement will have a material effect on our condensed consolidated financial statements.

In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," or Statement No. 144, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets, including discontinued operations. While Statement No. 144 supersedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," it retains many of the fundamental provisions of that Statement. Statement No. 144 also supersedes the accounting and reporting provisions of Accounting

Principles Board Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," or Opinion No. 30, for the disposal of a segment of a business. Statement No. 144 is effective for fiscal years beginning after December 15, 2001. It is not anticipated that the financial impact of this statement will have a material effect on our condensed consolidated financial statements.

FORWARD-LOOKING INFORMATION AND RISK FACTORS
THAT MAY AFFECT FUTURE RESULTS

This Form 10-Q contains forward-looking statements based on our current expectations. You should be aware that these statements are projections or estimates as to future events, and actual results may differ materially.

In addition to the other information contained in this Form 10-Q, you should consider the following risk factors which could affect our actual future results and could harm our business, financial condition and results of operations. The risks and uncertainties described below are not the only risks facing us and additional risks and uncertainties may also harm our business.

Our Revenues Rely Significantly on Rituxan Sales

Our revenues currently depend largely upon continued sales of a single commercialized product, Rituxan. For the three and nine months ended September 30, 2001, 98% and 92%, respectively, of our revenues were derived from our Rituxan copromotion arrangement with Genentech. We cannot be certain that Rituxan will continue to be accepted in the United States or in any foreign markets or that Rituxan sales will continue to increase. A number of factors may affect the rate and level of market acceptance of Rituxan, including:

•: the perception by physicians and other members of the healthcare community of its safety and efficacy or that of competing products, if any;
•: the effectiveness of our and Genentech's sales and marketing efforts in the United States and the effectiveness of Roche's sales and marketing efforts outside the United States and Japan;
•: unfavorable publicity concerning Rituxan or similar drugs;
•: its price relative to other drugs or competing treatments;
•: the availability and level of third-party reimbursement; and
•: regulatory developments related to the manufacture or continued use of Rituxan.

We incurred annual operating losses from our inception in 1985 through fiscal 1997. Given our current reliance on Rituxan as the principal source of our revenue, any material adverse developments with respect to the commercialization of Rituxan may cause us to incur losses in the future.

Our Operating Results Are Subject to Significant Fluctuations

Our quarterly revenues, expenses and operating results have fluctuated in the past and are likely to fluctuate significantly in the future. Fluctuation may result from a variety of factors, including:

•: our achievement of product development objectives and milestones;
•: demand and pricing for Rituxan;
•: timing and nature of contract manufacturing and contract research and development payments and receipts;
•: hospital and pharmacy buying decisions;

•: clinical trial enrollment and expenses;
•: research and development and manufacturing expenses;
•: physician acceptance of our products;
•: government or private healthcare reimbursement policies;
•: our manufacturing performance and capacity and that of our partners;
•: the amount and timing of sales orders of Rituxan by Genentech for customers in the United States and by Roche for customers outside the United States and Japan;
•: rate and success of product approvals;
•: timing of FDA approval, if any, of competitive products and the rate of market penetration of competing products;
•: collaboration obligations and copromotion payments we make or receive;
•: interest rate fluctuations;
•: foreign currency exchange rates; and
•: overall economic conditions.

Our operating results during any one quarter do not necessarily suggest the anticipated results of future quarters. These results fluctuate periodically because our revenues are driven by the occurrence of events, for example, the achievement of product development milestones and the applicable profit-sharing allocation between us and Genentech, based upon our copromotion arrangement.

We Face Uncertain Results of Clinical Trials of Our Potential Products

Our future success depends in large part upon the results of clinical trials designed to assess the safety and efficacy of our potential products. We cannot be certain that patients enrolled in our clinical trials will respond to our products, that any product will be safe and effective or that data derived from the trials will be suitable for submission to the FDA, satisfactorily support a BLA, sBLA, or NDA or be sufficient for approval.

The completion rate of clinical trials depends significantly upon the rate of patient enrollment. Factors that affect patient enrollment include:

•: size of patient population for the targeted disease;
•: eligibility criteria;
•: proximity of eligible patients to clinical sites;
•: clinical trial protocols; and
•: the existence of competing protocols, including competitive financial incentives for patients and clinicians, and existing approved drugs, including Rituxan.

Our inability to enroll patients on a timely basis could result in increased expenses and product development delays, which could harm our business. Even if a trial is fully enrolled, significant uncertainties remain as to whether it will prove successful.

In addition, the length of time necessary to complete clinical trials and submit an application for marketing and manufacturing approvals varies significantly and may be difficult to predict. Failure to comply with extensive FDA regulations may result in delay, suspension or cancellation of a trial or the FDA's refusal to accept test results. The FDA may also suspend our clinical trials at any time if it

concludes that the participants are being exposed to unacceptable risks. Consequently, we cannot ensure that Phase I, Phase II, Phase III or Phase IV post-marketing testing will be completed timely or successfully, if at all, for any of our potential or existing products. Furthermore, success in preclinical and early clinical trials does not ensure that later phase or large scale trials will be successful.

We May be Unable to Develop and Commercialize New Products

Our future results of operations will depend to a large extent upon our ability to successfully commercialize new products in a timely and competitive manner. As a result, we must continue to develop, test and manufacture new products and must meet regulatory standards and obtain regulatory approvals for any new products. Our products currently in development may not receive the regulatory approvals necessary for marketing in a timely manner, if at all.

For example, we submitted a BLA for ZEVALIN on November 1, 2000. Additionally, a supplemental filing has been submitted by our third-party radioisotope supplier. In May 2001, we received a Complete Review Letter from the FDA regarding our ZEVALIN BLA, requesting additional information and analysis. On July 9, 2001, we submitted documentation and analysis to the FDA in response to the Complete Review Letter. We cannot be sure that the FDA will approve our BLA in a timely manner, if at all.

The FDA may request additional information and analysis of previously submitted information prior to final approval of ZEVALIN. In addition, the FDA must approve the labeling and package insert for ZEVALIN prior to commercialization. Moreover, the FDA has conducted pre-approval inspections of our radioisotope supplier and fill/finish provider. Our failure or the failure of our radioisotope supplier or fill/finish provider to meet FDA requirements, including those noted during FDA inspections, would delay or preclude us from selling ZEVALIN, which would harm our business.

The development and approval process is time-consuming and costly, and we cannot be certain that any of our products, if and when developed and approved, will be successfully commercialized or competitive in the marketplace. Delays or unanticipated costs in any part of the process, or our inability to obtain regulatory approval for or effectively commercialize our products, especially ZEVALIN, could harm our business.

We Have Limited Manufacturing Experience and Rely Heavily On Contract Manufacturers

We rely heavily upon third-party manufacturers to manufacture significant portions of our products and product candidates. Our current manufacturing capacity is limited. Our manufacturing experience to date has been limited to the production of preclinical and clinical quantities of product candidates and to approximately three years of commercial production of bulk Rituxan. We have no fill/finish experience or capacity, and we do not have experience manufacturing in the field of chelates or radioisotopes, which are required for our production of ZEVALIN. Therefore, we rely entirely upon third parties for fill/finish services as well as the manufacture of product components. Consequently, we cannot ensure that either our manufacturing facilities or our ability to sustain ongoing production of our products will be able to meet our expectations. If our current third-party manufacturers or service providers fail to meet our expectations, we cannot be certain that we will be able to enter into satisfactory agreements with other third-party manufacturers or service providers. Poor performance or coordination on our part or that of our third-party manufacturers or fill/finish service providers could harm our business.

ZEVALIN has multiple components that require successful coordination among several third-party contract manufacturers and suppliers. We may not be able to integrate and coordinate successfully our contract manufacturers and suppliers. In addition, our contract manufacturers and suppliers are required to maintain compliance with cGMP and are subject to inspections by the FDA to confirm this compliance. Their inability to demonstrate ongoing cGMP compliance and produce ZEVALIN

components could delay commercialization of ZEVALIN and impact our ability to meet our worldwide supply obligations. For example, if Catalytica is not able to timely resolve the cGMP issues raised in its warning letter and in subsequent inspections to the satisfaction of the FDA, approval and/or commercialization of ZEVALIN could be delayed.

In September 1999, we transferred all manufacturing of bulk Rituxan to Genentech. We rely upon Genentech for all Rituxan manufacturing to meet worldwide requirements. We cannot ensure that Genentech will manufacture and fill/finish Rituxan in sufficient quantities and on a timely and cost-effective basis or that Genentech will obtain and maintain all required manufacturing approvals. Genentech's failure to manufacture and fill/finish Rituxan or obtain and maintain required manufacturing approvals could harm our business.

We are converting our current manufacturing facility to a multi-product facility. From this facility, we have manufactured and will continue to manufacture our own commercial requirements of the antibody for ZEVALIN upon the receipt of approval, if any, from the FDA to manufacture and market the antibody. We cannot be certain that our manufacturing performance will meet our expectations. Also, we may not receive all necessary regulatory approvals for a multi-product facility, or, even if we do receive these approvals, they may not be obtained within our budgeted time and expense estimations. Our inability to receive FDA approval of our manufacturing facility for ZEVALIN would harm our ability to timely produce commercial supplies of the ZEVALIN antibody. To the extent we cannot produce our own biologics, we will need to rely on third-party manufacturers, of which there are only a limited number capable of manufacturing biologics products as contract suppliers. We cannot be certain that we could reach agreement on reasonable terms, if at all, with those manufacturers.

We Rely Heavily on a Limited Number of Suppliers

Some materials used in our products and potential products, including Rituxan and ZEVALIN, are currently available only from a single supplier or a limited number of suppliers. Some of these suppliers are subject to ongoing FDA approvals or other governmental regulations. Any interruption or delay in our supply of materials required to sell our products could harm our business if we were unable to obtain an alternative supplier for these materials in a cost-effective and timely manner. Additional factors that could cause interruptions or delays in our source of materials include limitations on the availability of raw materials or manufacturing performance experienced by our suppliers and a breakdown in our commercial relations with one or more suppliers. These factors may be completely out of our control.

In addition, we have entered into an agreement with MDS Nordion Inc., the commercial supplier of the radioisotope for our product ZEVALIN. Prior to the commercialization of ZEVALIN, this supplier will be required to obtain FDA approvals. We rely upon this supplier to meet our clinical and commercial requirements. If this supplier were unable to obtain and maintain FDA approvals, or if we were unable to receive the supply of this radioisotope for any other reason, including those described above, we would be unable to commercialize ZEVALIN unless we were to obtain a new supplier. We are aware of other entities that can provide the radioisotope that we need for the commercialization of ZEVALIN and we believe that these suppliers would be required to apply for additional governmental approvals to provide this radioisotope to us. The process of establishing a relationship with another supplier and the process of obtaining the required governmental approvals would be time-consuming and uncertain. There is no guarantee that we could reach an agreement with another supplier in a timely manner and, on commercially reasonable terms, or at all. As a result of these concerns, if we were to lose our supply or were unable to receive sufficient quantities of the radioisotope from our sole supplier, our ability to sell ZEVALIN could be harmed which, in turn, could significantly harm our business.

We Have Limited Sales and Marketing Experience

We have limited experience with commercial sales and marketing, based entirely upon our launch and subsequent sales of Rituxan. Outside the United States, our strategy is to pursue and to rely solely upon collaborations with established pharmaceutical companies for marketing, distribution and sale of our products. We currently have no plans to directly market outside the United States. Given that we currently rely upon our copromotional partner to market Rituxan in the United States and rely exclusively on a third party outside the United States, we cannot be certain that our products will be marketed and distributed in accordance with our expectations or that our market research or sales forecasts will be accurate. We also cannot be certain that we will ever be able to develop our own sales and marketing capabilities to an extent that we would not need to rely on third-party efforts, or that we will be able to maintain satisfactory arrangements with the third parties on whom we rely.

ZEVALIN, if approved, will be our first product to be marketed exclusively by us in the United States. We have no marketing support service experience and, therefore, we will be dependent on outside contractors to meet those needs. We rely upon a third-party logistics distributor to provide customer service, order entry, shipping, billing, customer reimbursement assistance and managed care sales support. We cannot be certain that the integration of these marketing support services can be successfully coordinated.

Our Industry is Intensely Competitive

The biotechnology industry is intensely competitive and we may not be able to produce or acquire rights to new products with commercial potential. We compete with biotechnology and pharmaceutical companies that have been established longer than we have, have a greater number of products on the market, have greater financial and other resources and have other technological or competitive advantages. We also compete in the development of technologies and processes and in acquiring personnel and technology from academic institutions, government agencies, and other private and public research organizations. We cannot be certain that one or more of our competitors will not receive patent protection that dominates, blocks or adversely affects our product development or business; will benefit from significantly greater sales and marketing capabilities; or will not develop products that are accepted more widely than ours. We are aware that a competitor, Corixa Corporation, formerly Coulter Pharmaceuticals, Inc., has filed a revised BLA for Bexxar, trademark, (tositumomab, Iodine I 131 tositumomab) a radiolabeled murine antibody product for the treatment of non-Hodgkin's lymphomas, which may compete with Rituxan and ZEVALIN, if approved. We are also aware of other potentially competitive biologic therapies for non-Hodgkin's lymphomas in development.

We May be Unable to Adequately Protect or Enforce Our Intellectual Property Rights or Secure Rights to Third-Party Patents and We are Involved in Patent Litigation.

Our ability and the abilities of our partners to obtain and maintain patent and other protection for our products will affect our success. We are assigned, have rights to, or have exclusive licenses to a number of U.S. and foreign patents and patent applications. However, these patent applications may not be approved and, even if approved, our patent rights may not be upheld in a court of law if challenged. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. Our patent rights may not provide competitive advantages for our products and may be challenged, infringed upon or circumvented by our competitors.

Because of the large number of patent filings in the biopharmaceutical field, our competitors may have filed applications or been issued patents and may obtain additional patents and proprietary rights relating to products or processes competitive with or similar to ours. We cannot be certain that U.S. or foreign patents do not exist or will not issue that would harm our ability to commercialize our products and product candidates.

In September 1999, an interference to determine priority of inventorship was declared and is ongoing in the United States Patent and Trademark Office between Dartmouth University's patent application, which has been exclusively licensed to us, and Columbia University's patent, which we believe has been exclusively licensed to Biogen, Inc., relating to anti-CD40L antibodies. We, along with other companies, have filed oppositions to a Japanese patent assigned to Immunex Corporation relating to anti-CD40L antibodies. We are also aware that oppositions have been filed in the European Patent Office to granted European applications that have been licensed to us. Each of these applications contain claims relating to the use of anti-CD40L antibodies as a therapeutic. Also, we are aware of an opposition that was filed to a granted European patent application which names us as the applicant and which relates to PROVAX and therapeutic use thereof. If the outcome of the interference or any of the oppositions is adverse, in whole or in part, it could result in the scope of some or all of the granted claims being limited, some or all of the granted claims being lost, the granted patent application not proceeding to a patent or, our competitors having patent claims that may be asserted against us.

We are aware of several third-party patents and patent applications, to the extent they issue as patents, that if successfully asserted against us, may adversely affect our ability to make, use, offer to sell, sell and import our products. These third-party patents and patent applications may include:

•: three U.S. patents assigned to Glaxo SmithKline plc, or Glaxo, and foreign counterparts relating to therapeutic uses of CHO-glycosylated human chimeric, CDR-grafted or bi-specific antibodies;
•: two U.S. patents assigned to Glaxo and foreign counterparts directed to methods of growing CHO cells in media that is free from components obtained directly from an animal source;
•: six U.S. patents assigned to Corixa Corporation (formerly Coulter Pharmaceutical, Inc.) and the Regents of the University of Michigan; two that relate to compositions comprising radiolabeled antibodies directed to CD20 antigen; a third which relates to methods of treating lymphoma with anti-CD20 antibodies in combination with an anti-CD20 radiolabeled antibody, an apoptosis-inducing agent, external beam radiation, or a chemotherapeutic agent; a fourth directed to methods of treating lymphoma comprising imaging the distribution of a radiolabeled anti-CD20 antibody followed by the administration of radiolabeled antibodies directed to the CD20 antigen in non myelo-suppressive doses; and the fifth and sixth are directed to methods for establishing optimal radiation doses in the radiotheraputic treatment of disease.
•: a U.S. patent and foreign counterparts filed by Bristol-Myers Squibb Company that relate to ligands to a B7.1 antigen;
•: two U.S. patents assigned to Columbia University and a Japanese patent assigned to Immunex, which we believe have been exclusively licensed to Biogen, related to monoclonal antibodies to the 5C8 antigen found on T cells and methods of their use. We believe the 5C8 antigen and CD40L, the target for our IDEC-131 antibody, are both expressed on the surface of activated T cells; and
•: a number of issued U.S. and foreign patents that relate to various aspects of radioimmunotherapy of cancer and to methods of treating patients with anti-CD4 antibodies.

The owners, or licensees of the owners of these patents, or any foreign patents, and patent applications, to the extent they issue as patents, may assert that one or more of our products infringe one or more claims of these patents. If legal action is commenced against us or our partners to enforce any of these patents and patent applications, to the extent they issue as patents, and the plaintiff in such action prevails, we could be prevented from practicing the subject matter claimed in such patents.

For example, on September 10, 2001, we filed a complaint against GlaxoSmithKline and another complaint against Corixa Corporation, Coulter Pharmaceutical, Inc., and the Regents of the University

of Michigan, in federal court in the southern district of California. We are seeking declaratory judgment that Zevalin, our radiolabeled antibody for which we are currently seeking approval for use in the treatment of lymphoma, does not infringe patents held by the defendants and/or that such patents are invalid. On September 12, 2001, Corixa, Coulter and GlaxoSmithKline filed a lawsuit against us in federal court in the district of Delaware alleging that Zevalin infringes their patents. The lawsuit against us seeks to permanently enjoin us from commercializing Zevalin. The plaintiffs are also seeking compensatory and statutory damages. We intend to vigorously prosecute and defend these lawsuits. However, it is not possible to predict or determine the outcome of this litigation and accordingly there can be no assurance that we will prevail. An unfavorable outcome could have a material adverse impact on our business.

On May 28, 1999, Glaxo filed a patent infringement lawsuit against Genentech. On September 14, 2000, Glaxo filed a second patent infringement lawsuit against Genentech. These suits assert that the manufacture, use, and sale of Rituxan infringes U.S. patents owned by Glaxo. The trial for the first of these suits concluded on May 4, 2001 with the jury unanimously finding that Rituxan does not infringe patents held by Glaxo. The jury also unanimously found that all of the patent claims that Glaxo asserted against Genentech were invalid. Glaxo has appealed this ruling. The judge has rescheduled the trial for the second suit to begin June 2002. To date we have not been named in either of these suits.

If Glaxo were to prevail in the second suit or on appeal of the first suit, it could be awarded a variety of remedies, including damages for past sales, requiring Genentech to obtain a license from Glaxo or obtaining an injunction against the sale of Rituxan. Because we rely on sales of Rituxan for substantially all of our revenue, an injunction would significantly harm our business. Further, if Genentech were required to obtain a license from Glaxo, our operating results in a particular quarter could be harmed as a result of any payment required for past royalties. Additionally, our long-term profitability could be harmed by reduced profit sharing under our collaboration agreement with our partner Genentech as a result of future royalties and other payments to Glaxo.

Glaxo has also sued Roche in Germany asserting that Rituxan infringes Glaxo's patents. On October 26, 2000, a German court handling the infringement phase of the suit issued a decision holding that the manufacture, use and sale of Rituxan infringes patents held by Glaxo. Roche has appealed the decision and the appeal is pending before the Court of Appeal. If Glaxo elects to enforce the decision, it must post a $6.4 million bond. A second German court considering the validity of the Glaxo patents has to date not issued a decision. Additionally, Roche has filed oppositions in the European Patent Office to several of the Glaxo patents. Although we were not named in the suit, if Glaxo obtains an injunction precluding further sale of Rituxan in Europe, our business could be harmed.

In addition to patents, we rely on trade secrets and proprietary know-how that we seek to protect, in part, through confidentiality agreements with our partners, employees and consultants. These parties may breach our agreements and courts may not enforce the agreements, leaving us without adequate remedies. Further, our trade secrets may become known or be independently developed or patented by our competitors.

If it were ultimately determined that our claimed intellectual property rights are unenforceable, or that our use of our products infringes on the rights of others, we may be required or may desire to obtain licenses to patents and other intellectual property held by third parties to develop, manufacture and market our products. We may not be able to obtain these licenses on commercially reasonable terms, if at all, and any licensed patents or intellectual property that we may obtain may not be valid or enforceable. In addition, the scope of intellectual property protection is subject to scrutiny and challenge by courts and other governmental bodies. Litigation and other proceedings concerning patents and proprietary technologies can be protracted, expensive and distracting to management and companies may sue competitors as a way of delaying the introduction of competitors' products. Any litigation, including any interference proceeding to determine priority of inventions, oppositions to patents in foreign countries or litigation against our partners, may be costly and time-consuming and could harm our business.

Failure to Obtain Product Approvals or Comply with Government Regulations Could Harm Our Business

As pharmaceutical manufacturers, we as well as our partners, contract manufacturers and suppliers are subject to extensive, complex, costly and evolving governmental rules, regulations and restrictions administered by the FDA, by other federal and state agencies, and by governmental authorities in other countries. In the United States, our products cannot be marketed until they are approved by the FDA. Rituxan is our only product that has received FDA approval, and we cannot be certain that ZEVALIN or any of our product candidates will be approved either in the United States or in other countries in a timely fashion, if at all.

Obtaining FDA approval involves the submission, among other information, of the results of preclinical and clinical studies on the product, and requires substantial time, effort and financial resources. Before approval of an NDA or BLA, the FDA will also perform prelicensing inspections of our facility and our contract manufacturers, suppliers and fill/finish providers facilities to determine compliance with cGMP. Our failure or the failure of our partners, contract manufacturers or suppliers, in particular our radioisotope supplier or fill/finish provider, to meet FDA requirements would delay or preclude our ability to sell ZEVALIN which would harm our business.

Even assuming FDA approval, we, as well as our partners, contract manufacturers and suppliers, are subject to numerous FDA requirements covering, among other things, testing, manufacturing, quality control, labeling and continuing promotion of drugs, and to government inspection at all times. Failure to meet or comply with any rules, regulations or restrictions of the FDA or other agencies could result in:

•: fines;
•: unanticipated expenditures;
•: product delays;
•: non-approval or product recall or seizure;
•: interruption of production; and
•: criminal prosecution.

Although we have instituted internal compliance programs and continue to address compliance issues raised from time to time by the FDA, we may not be able to meet regulatory agency standards and any lack of compliance may harm our business.

We May be Unable to Maintain Third-Party Research and Development Relationships

Funding of research and development efforts depends largely upon various arrangements with strategic partners and others who provide us with funding and who perform research and development with respect to our products. These strategic partners may generally terminate their arrangements with us at any time. These parties may develop products that compete with ours, and we cannot be certain that they will perform their contractual obligations or that any revenues will be derived from such arrangements. If one or more of our strategic partners fail to achieve product development objectives, this failure could harm our ability to fund related programs and develop products.

Our Business Exposes Us to Product Liability Claims

Our design, testing, development, manufacture and marketing of products involve an inherent risk of exposure to product liability claims and related adverse publicity. Insurance coverage is expensive and difficult to obtain, and we may be unable to obtain coverage in the future on acceptable terms, if at all. Although we currently maintain product liability insurance for our products in the amounts we believe to be commercially reasonable, we cannot be certain that the coverage limits of our insurance policies or those of our strategic partners will be adequate. If we are unable to obtain sufficient insurance at an acceptable cost or if a successful product liability claim is made against us, whether fully covered by insurance or not, our business could be harmed.

Future Transactions May Harm Our Business or the Market Price of Our Securities

We regularly review potential transactions related to technologies, products or product rights and businesses complementary to our business. These transactions could include:

•: mergers;
•: acquisitions;
•: strategic alliances;
•: off-balance sheet financings;
•: licensing agreements; and
•: copromotion agreements.

We may choose to enter into one or more of these transactions at any time, which may cause substantial fluctuations to the market price of securities that we have issued. Moreover, depending upon the nature of any transaction, we may experience a charge to earnings, which could also harm the market price of securities that we have issued.

We May Not be Able to Successfully Develop and Commence Operations of Our New Manufacturing Facility

We have recently purchased a 60-acre parcel of land on which we intend to develop a manufacturing facility. We have limited experience in developing manufacturing facilities and may not be able to successfully develop or commence operations at this facility. We may encounter difficulties in designing, constructing and initiating our manufacturing facility, including:

•: governmental regulation of our manufacturing facility, specifically, FDA approvals required for the commercial manufacture of our products currently in clinical trials;
•: public opinion regarding the impact of the facility on nearby communities;
•: construction delays, including obtaining necessary governmental approvals and permits;

•: cost overruns;
•: delays in design, shipment and installation of equipment for our facility;
•: other unforeseeable factors inherent in the construction process; and
•: obtaining financing we may need to complete the facility.

Even if we are able to successfully develop this manufacturing facility, we may not be able to do so in a cost-effective manner or in a time frame that is consistent with our expected future manufacturing needs.

Volatility of Our Stock Price

The market prices for our common stock and for securities of other companies engaged primarily in biotechnology and pharmaceutical development, manufacture and distribution are highly volatile. For example, the market price of our common stock fluctuated between $32.63 per share and $75.00 per share during the eight months ended October 31, 2001. The market price of our common stock will likely continue to fluctuate due to a variety of factors, including:

•: material public announcements;
•: the announcement and timing of new product introductions by us or others;
•: technical innovations or product development by us or our competitors;
•: regulatory approvals or regulatory issues;
•: developments relating to patents, proprietary rights and orphan drug status;
•: actual or potential clinical results with respect to our products under development or those of our competitors;
•: political developments or proposed legislation in the pharmaceutical or healthcare industry;
•: economic and other external factors, disaster or crisis;
•: hedge and/or arbitrage activities by holders of our convertible promissory notes;
•: period-to-period fluctuations in our financial results or results which do not meet or exceed analyst expectations; and
•: market trends relating to or affecting stock prices throughout our industry, whether or not related to results or news regarding us or our competitors.

We are Subject to Uncertainties Regarding Healthcare Reimbursement and Reform

Our ability to commercialize products depends in part on the extent to which patients are reimbursed by governmental agencies, private health insurers and other organizations, such as health maintenance organizations, for the cost of such products and related treatments. Our business could be harmed if healthcare payers and providers implement cost-containment measures and governmental agencies implement healthcare reform.

Our Business Involves Environmental Risks

Our business and the business of several of our strategic partners, including Genentech, involve the controlled use of hazardous materials, chemicals, biologics and radioactive compounds. Biologics manufacture is extremely susceptible to product loss due to microbial or viral contamination, material equipment failure, or vendor or operator error. Although we believe that our safety procedures for handling and disposing of such materials complies with state and federal standards, there will always be

the risk of accidental contamination or injury. In addition, microbial or viral contamination may cause the closure of the respective manufacturing facility for an extended period of time. By law, radioactive materials may only be disposed of at state-approved facilities. We currently store our radioactive materials on-site because the approval of a disposal site in California for all California-based companies has been delayed indefinitely. If and when a disposal site is approved, we may incur substantial costs related to the disposal of these materials. If we were to become liable for an accident, or if we were to suffer an extended facility shutdown, we could incur significant costs, damages and penalties that could harm our business.

We Face Increased Energy Costs and May Face Power Outages as a Result of the Energy Crisis Currently Being Experienced in California

In late 2000, and continuing into 2001, the State of California has been subject to a deterioration in the ability of major utilities to provide energy for State's needs. Throughout California, the crisis has resulted in "rolling blackouts" where certain areas are not provided with any electricity for periods of up to two hours. To date the most immediate impact has been the significant increase in power rates for most users, including us. In addition, the loss of electrical power of "blackouts" for any significant periods could harm our ability to manufacture the clinical and commercial requirements of our products, including the ZEVALIN antibody, and could result in significantly higher manufacturing costs.

We Rely upon Key Personnel

Our success will depend, to a great extent, upon the experience, abilities and continued services of our executive officers and key scientific personnel. If we lose the services of any of these officers or key scientific personnel, our business could be harmed. Our success also will depend upon our ability to attract and retain other highly qualified scientific, managerial, sales and manufacturing personnel and our ability to develop and maintain relationships with qualified clinical researchers. Competition for these personnel and relationships is intense and we compete with numerous pharmaceutical and biotechnology companies as well as with universities and non-profit research organizations. We may not be able to continue to attract and retain qualified personnel or develop and maintain relationships with clinical researchers.

We May Be Unable to Raise Additional Capital or to Repurchase Our Convertible Promissory Notes

We expend and will likely continue to expend substantial funds to complete the research, development, manufacturing and marketing of our potential future products. Consequently, we may seek to raise capital through collaborative arrangements, strategic alliances or equity and debt financings or from other sources. We may need to raise additional funds or borrow funds to complete the construction of our planned Oceanside facility. We may be unable to raise additional capital on commercially acceptable terms, if at all, and if we raise capital through equity financing, existing stockholders may have their ownership interests diluted. Our failure to be able to generate adequate funds from operations or from additional sources would harm our business.

If we undergo events constituting a change of control prior to February 16, 2004, we will be obligated to repurchase all our outstanding convertible promissory notes at the option of the holder. We may not have sufficient funds at that time or may not be able to raise sufficient funds to make these repurchases.

Our Convertible Promissory Notes Leverage Us Considerably

As a result of issuing our convertible promissory notes in February 1999, we raised approximately $112.7 million, net of underwriting commissions and expenses of $3.9 million, by incurring indebtedness

of $345.0 million at maturity in 2019. As a result of this indebtedness, our principal and interest obligations increased substantially. The degree to which we are leveraged could harm our ability to obtain future financing and could make us more vulnerable to industry downturns and competitive pressures. Our ability to meet our debt obligations will be dependent upon our future performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control. The holders of the convertible promissory notes may require us to purchase the convertible promissory notes on February 16, 2004, 2009, and 2014 at a price equal to the issue price plus accrued original issue discount to the date of purchase. We have the option to repay our convertible promissory notes plus accrued original issue discount in cash, our common stock or a combination thereof. We have the right to redeem the convertible promissory notes on or after February 16, 2004.

In addition, in the event of our insolvency, bankruptcy, liquidation, reorganization, or dissolution or upon our default in payment with respect to any indebtedness or an event of default with respect to such indebtedness resulting in the acceleration thereof, our assets will be available to pay the amounts due on our convertible promissory notes only after all our senior indebtedness has been paid in full. Moreover, holders of common stock would only receive the assets remaining after payment of all indebtedness and preferred stock, if any.

We Have Adopted Several Anti-takeover Measures and Our Convertible Promissory Notes May Have A Further Anti-takeover Effect

We have taken a number of actions that could discourage a takeover attempt that might be beneficial to stockholders who wish to receive a premium for their shares from a potential bidder. For example, we reincorporated into Delaware, which subjects us to Section 203 of the Delaware General Corporation Law, providing that we may not enter into a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the manner prescribed in the code section. In addition, we have adopted a stockholder rights plan that was amended and restated as of July 26, 2001 that would cause substantial dilution to a person who attempts to acquire us on terms not approved by our board of directors. In addition, our board of directors has the authority to issue, without vote or action of stockholders, up to 8,000,000 shares of preferred stock and to fix the price, rights, preferences and privileges of those shares. Any series of preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of common stock. Although we currently have 48,014 shares of non-voting convertible preferred stock outstanding, which were convertible into 2,880,840 shares of common stock as of September 30, 2001, the board of directors has no present intention of issuing any additional shares of preferred stock. However, the board of directors may issue additional series of preferred stock in the future. In addition, our copromotion arrangement with Genentech provides Genentech with the option to buy the rights to Rituxan in the event that we undergo a change of control, which may limit our attractiveness to potential acquirers.

We are required by the terms of our convertible promissory notes, as of 35 business days after a change in control occurring on or before February 16, 2004, to purchase any convertible promissory note at the option of its holder and at a price equal to the issue price plus accrued original issue discount to the date of repurchase. This feature of our convertible promissory notes may have an anti-takeover effect.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to a variety of risks, including changes in interest rates affecting the return on our investments and the cost of our debt.

At September 30, 2001, we maintained a portion of our cash and cash equivalents in financial instruments with original maturities of three months or less. We also maintained an investment portfolio containing financial instruments in which the majority have original maturities of greater than three months but less than twenty-four months. These financial instruments, principally comprised of corporate obligations and to a lesser extent foreign and U.S. government obligations, are subject to interest rate risk and will decline in value if interest rates increase. A hypothetical ten percent change in interest rates during the nine months ended September 30, 2001, would have resulted in approximately a $3.0 million change in pretax income. We have not used derivative financial instruments in our investment portfolio.

Our long-term debt totaled $134.2 million at September 30, 2001 and was comprised solely of the convertible promissory notes. Our long-term debt obligation bears interest at a weighed average interest rate of 5.5%. Due to the fixed rate nature of the convertible promissory notes, an immediate ten percent change in interest rates would not have a material effect on our financial condition or results of operations.

Underlying market risk exists related to an increase in our stock price or an increase in interest rates which may make conversion of the convertible promissory notes to common stock beneficial to the convertible promissory notes holder. Conversion of the convertible promissory notes would have a dilutive effect on our earnings per share and book value per common share.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

(a): On September 10, 2001, we filed a complaint against GlaxoSmithKline and another complaint against Corixa Corporation, Coulter Pharmaceutical, Inc., and the Regents of the University of Michigan, in federal court in the Southern District of California. We are seeking declaratory judgment that Zevalin, our radiolabeled antibody for which we are currently seeking approval for use in the treatment of lymphoma does not infringe patents held by the defendants and/or that such patents are invalid. On September 12, 2001, Corixa, Coulter and GlaxoSmithKline filed a lawsuit against us in federal court in the district of Delaware alleging that Zevalin infringes their patents. The lawsuit against us seeks to permanently enjoin us from commercializing Zevalin. The plaintiffs are also seeking compensatory and special damages. We intend to vigorously prosecute and defend these lawsuits. However, it is not possible to predict or determine the outcome of this litigation and accordingly there can be no assurance that we will prevail. An unfavorable outcome could have a material adverse impact on our business.

In addition, we are involved in certain other legal proceedings generally incidental to our normal business activities. While the outcome of any such proceedings cannot be accurately predicted, we do not believe the ultimate resolution of any such existing matters would have a material adverse effect on our business or financial condition.

(b): No material legal proceedings were terminated in the third quarter of 2001.

Item 2. Changes in Securities.

None

Item 3. Defaults upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K.

(a): Exhibits referenced

Exhibit Number		Description
10.10*		Purchase and Sale Agreement and Escrow Instructions between San Dieguito Partnership, L.P. and IDEC Pharmaceuticals Corporation, dated July 17, 2001, and the First, Second and Third Amendments to the Purchase and Sale Agreement and Escrow Instructions dated August 17, 2001, August 24, 2001 and August 29, 2001, respectively.
10.11*		Supply Agreement between Catalytica Pharmaceuticals, Inc. and IDEC Pharmaceuticals Corporation dated August 8, 2001.
10.12*		Collaborative Development Agreement between IDEC Pharmaceuticals Corporation and Mitsubishi Pharma Corporation, formerly Mitsubishi-Tokyo Pharmaceuticals, Inc., dated September 21, 2001.
10.13		Amended and Restated IDEC Pharmaceuticals Corporation Deferred Compensation Plan dated September 5, 2001.

* Confidential treatment requested as to certain portions of this agreement.

(b): Reports on Form 8-K. None

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		IDEC PHARMACEUTICALS CORPORATION


Date:	November 14, 2001	By:	/s/ William H. Rastetter
			William H. Rastetter Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Date:	November 14, 2001	By:	/s/ Phillip M. Schneider
			Phillip M. Schneider Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

QuickLinks

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION Item 1. Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING INFORMATION AND RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Item 2. Changes in Securities.

Item 3. Defaults upon Senior Securities.

Item 4. Submission of Matters to a Vote of Security Holders.

Item 5. Other Information.

Item 6. Exhibits and Reports on Form 8-K.

Signatures

CONFIDENTIAL TREATMENT REQUESTED EXHIBIT 10.10

CONFIDENTIAL TREATMENT REQUESTED: PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED ARE MARKED "CONFIDENTIAL TREATMENT REQUESTED" AND APPROPRIATE
SECTIONS, WHERE TEXT HAS BEEN OMITTED, ARE NOTED WITH "[CONFIDENTIAL TREATMENT
REQUESTED]." AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.

PURCHASE AND SALE AGREEMENT

AND ESCROW INSTRUCTIONS

BY AND BETWEEN

SAN DIEGUITO PARTNERSHIP, L.P.,

A CALIFORNIA LIMITED PARTNERSHIP,

AND THE INDIVIDUALS AND ENTITIES LISTED ON SCHEDULE "1"

("SELLER")

AND

IDEC PHARMACEUTICALS CORPORATION

("BUYER")

DATED AS OF JULY 17, 2001

CONFIDENTIAL TREATMENT

ARTICLE 1 RECITALS.........................................................................................1
1.1 Ownership and Description........................................................................1
1.2 The Settlement Agreement.........................................................................1
1.3 Intention........................................................................................2
1.4 Assignment.......................................................................................2
1.5 Rights and Interests.............................................................................2
1.6 Mitigation Land..................................................................................2

ARTICLE 2 AGREEMENT OF SALE................................................................................2
2.1 Purchase Price...................................................................................2
2.2 Reimbursement....................................................................................3

ARTICLE 3 OPENING OF ESCROW................................................................................3

ARTICLE 4 INVESTMENT OF DEPOSIT............................................................................3

ARTICLE 5 TITLE............................................................................................4
5.1 Preliminary Title Report.........................................................................4
5.2 Grant Deed.......................................................................................4
5.3 Title Review.....................................................................................4
5.4 Extended Closing Date............................................................................5

ARTICLE 6 CONDITIONS PRECEDENT AND COVENANTS...............................................................6
6.1 Buyer's Conditions...............................................................................6
6.2 Non-Satisfaction of Buyer's Conditions - Refund of Deposit and Waiver............................7
6.3 Seller's Conditions..............................................................................8
6.4 Non-Satisfaction of Seller's Conditions..........................................................8

ARTICLE 7 OBLIGATIONS AND DISCLOSURES......................................................................9
7.1 Escrow Non-Liability.............................................................................9
7.2 Definitions......................................................................................9
7.3 Due Diligence Investigation.....................................................................10
7.4 Property Documents..............................................................................10
7.5 Right of Entry..................................................................................11
7.6 Right of Inquiry................................................................................11
7.7 Hold Harmless and Buyer Indemnity...............................................................12
7.8 Hold Harmless and Seller Indemnity..............................................................13
7.9 Assignments.....................................................................................13
7.10 Wetland Restoration.............................................................................13
7.11 License Agreement - Garden Communities..........................................................14
7.12 Other Agreements................................................................................14

ARTICLE 8 SELLER'S DELIVERIES TO ESCROW...................................................................15
8.1 Seller's Grant Deed.............................................................................15

(i)

CONFIDENTIAL TREATMENT

8.2 Non-Foreign Certificate.........................................................................15
8.3 Assignments.....................................................................................15
8.4 Assignment of Easement..........................................................................15
8.5 Termination of Memorandum of Tenancy-In-Common Agreement........................................15

ARTICLE 9 BUYER'S DELIVERIES TO ESCROW....................................................................16
9.1 Cash............................................................................................16
9.2 Joining in Assignments..........................................................................16

ARTICLE 10 CLOSE OF ESCROW................................................................................16
10.1 Closing Date....................................................................................16

ARTICLE 11 THE CLOSING....................................................................................16
11.1 Closing Procedure..............................................................................16

ARTICLE 12 PRORATION, FEES AND COSTS......................................................................17
12.1 Taxes..........................................................................................17
12.2 Seller's Payment of Charges and Fees...........................................................17
12.3 Buyer's Payment of Charges and Fees............................................................17

ARTICLE 13 ESCROW AGENT'S DELIVERY OF FUNDS AND DOCUMENTS.................................................17
13.1 Recordation of Documents.......................................................................17
13.2 Delivery of Documents..........................................................................18
13.3 Delivery of Funds..............................................................................18

ARTICLE 14 SELLER'S WARRANTIES............................................................................18
14.1 Seller's Power, Authority and Authorization....................................................18
14.2 Notice of Violation............................................................................19
14.3 No Pending Actions.............................................................................19
14.4 Leases.........................................................................................19
14.5 No Liens.......................................................................................19
14.6 Agreements Affecting the Property..............................................................19
14.7 No Default.....................................................................................19
14.8 True Information...............................................................................20
14.9 Contracts......................................................................................20
14.10 Agreement Enforceable..........................................................................20
14.11 Future Action..................................................................................20
14.12 Undisclosed Assessments........................................................................20
14.13 Hazardous Materials............................................................................20
14.14 No Bankruptcy..................................................................................20
14.15 Cost Liens.....................................................................................21
14.16 Settlement Agreement...........................................................................21
14.17 Wetlands Restoration...........................................................................21
14.18 Change in Representation or Warranty...........................................................21

ARTICLE 15 BUYER'S WARRANTIES.............................................................................22
15.1 Authority......................................................................................22

(ii)

CONFIDENTIAL TREATMENT

15.2 Satisfaction and Warranty......................................................................22

ARTICLE 16 SURVIVAL.......................................................................................22

ARTICLE 17 ASSIGNMENT AND INDEMNIFICATION BY BUYER.......................................................22
17.1 Assignment.....................................................................................22
17.2 Effect of Assignment...........................................................................23

ARTICLE 18 LIQUIDATED DAMAGES; REMEDIES...................................................................23
18.1 Escrow Non-Liability...........................................................................23
18.2 Liquidated Damages.............................................................................23
18.3 Buyer's Remedies...............................................................................24

ARTICLE 19 REAL ESTATE COMMISSION.........................................................................24

ARTICLE 20 NOTICES........................................................................................25

ARTICLE 21 TAX-FREE EXCHANGE..............................................................................26
21.1 Buyer Cooperation in Tax Deferred Exchange.....................................................26

ARTICLE 22 EXTENT OF ESCROW AGENT'S RESPONSIBILITIES......................................................26
22.1 Escrow Agent Liability.........................................................................26
22.2 Informing Parties..............................................................................26
22.3 Responsibility for Documents...................................................................26
22.4 Conflicting Demands and Claims.................................................................26
22.5 Reporting of Transaction.......................................................................26

ARTICLE 23 GENERAL PROVISIONS.............................................................................27
23.1 Breach.........................................................................................27
23.2 Captions.......................................................................................27
23.3 Cash Defined...................................................................................27
23.4 Confidentiality................................................................................27
23.5 Construction...................................................................................27
23.6 Counterparts...................................................................................27
23.7 Entire Agreement...............................................................................27
23.8 Escrow Defined.................................................................................27
23.9 Exhibits.......................................................................................27
23.10 Gender.........................................................................................28
23.11 Good Faith.....................................................................................28
23.12 Attorneys' Fees................................................................................28
23.13 Modification...................................................................................28
23.14 Possession.....................................................................................28
23.15 Severability...................................................................................28
23.16 Successors.....................................................................................28
23.17 Survival.......................................................................................28
23.18 Time of Essence................................................................................28

(iii)

CONFIDENTIAL TREATMENT

23.19 Rule of Construction...........................................................................28
23.20 Waiver.........................................................................................28

Exhibit "A" - Real Property Description

Exhibit "B" - Plat Map

Exhibit "C" - Mitigation Land Legal Description

Exhibit "D" - Mitigation Land Plat Map

Exhibit "E" - Title Report

Exhibit "F" - Grant Deed

Exhibit "G" - Assignment Agreement

Exhibit "H" - Assignment and Assumption of Contracts

Exhibit "I" - Assignment of Rights Under Settlement Agreement

Exhibit "J" - Property Documents

Exhibit "K" - Affidavit [Non-Foreign Affidavit Pursuant to FIRPTA]

Exhibit "L" - Withholding Exemption Certificate and Nonresident Waiver Request for
Real Estate Sales (Form 597-W)

Exhibit "M" - Assignment of Easements

Exhibit "N" - Remaining Settlement Agreement Actions

Exhibit "O" - Estoppel Certificate

(iv)

CONFIDENTIAL TREATMENT

PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS

THIS AGREEMENT ("Agreement") dated as of the 17th day of July, 2001, by and
between SAN DIEGUITO PARTNERSHIP, L.P. ("PARTNERSHIP"), A CALIFORNIA LIMITED
PARTNERSHIP, AS TO AN UNDIVIDED 28.1083629% INTEREST, TOGETHER WITH THE
INDIVIDUALS AND ENTITIES LISTED ON SCHEDULE "1" ATTACHED HERETO, herein
collectively referred to as "Seller" and IDEC PHARMACEUTICALS CORPORATION, A
DELAWARE CORPORATION, herein referred to as "Buyer" is entered into with
reference to the recitals set forth in Article 1 [Recitals] below and
constitutes (a) a contract of purchase-and-sale between the parties; and (b)
escrow instructions to CHICAGO TITLE COMPANY, 925 "B" Street, San Diego, CA
92101 ("Escrow Agent"), the consent of which appears at the end hereof.

ARTICLE 1

RECITALS

1.1 OWNERSHIP AND DESCRIPTION. Seller owns and holds fee title to the
real property ("Nobel Land") described in Exhibit "A" and depicted in Exhibit
"B." As used herein, the "Property" means the Nobel Land together with: (a) all
easements and other rights appurtenant thereto, including Seller's interest (if
any) in appurtenant water and mineral rights; and (b) Seller's entire right,
title and interest in and to all governmental permits, entitlements and
approvals applicable to development, construction, operation and use of the
Nobel Land, all soils tests and reports, maps, surveys, engineering reports,
environmental reports, drawings or specifications, the name "Nobel Research
Park", and all contracts, contract rights or other intellectual or intangible
property of any type whatsoever relating in any way to the Nobel Land, or the
development, use or operation thereof, and all other contracts or agreements
including without limitation the Settlement Agreement (defined herein below)
with respect to the Nobel Land that are approved in writing by Buyer.
Concurrently with the Closing, Seller shall cause San Dieguito Valley, Inc. to
convey its right, title and interest in and to the Easement as described in
Section 7.10.

1.2 THE SETTLEMENT AGREEMENT. On November 16, 1998, San Dieguito
Partnership, L.P. and San Dieguito Valley, Inc., collectively as plaintiffs
(collectively referred to as "SDP"), and the City Council of the City of San
Diego and the City of San Diego (the "City"), collectively as defendants,
entered into a settlement agreement which was thereafter amended by that certain
First Amendment to Settlement Agreement dated December 21, 1999, and further
evidenced by that certain Letter Agreement between SDP and the City, dated
December 21, 1999 resolving certain issues relating to the settlement agreement
(the settlement agreement, First Amendment, and Letter Agreement are
collectively referred to as the "Settlement Agreement").

-1-

CONFIDENTIAL TREATMENT REQUESTED

1.3 INTENTION. Buyer desires to purchase and Seller desires to sell the
Property pursuant to the terms and conditions set forth in this Agreement.

1.4 ASSIGNMENT. Seller desires to assign to Buyer all of its right,
title and interest to the Property and any rights relating thereto in and under
the Settlement Agreement, and any rights or benefits incident thereto, including
but not limited to any rights of Seller in, under or to those certain
development permits, governmental approvals, consents, orders, agreements or the
like issued with respect to the Property, pursuant to the Assignment Agreement
and the Assignment of Rights Under Settlement Agreement attached hereto as
Exhibit "G" and Exhibit "I", respectively, and incorporated herein by reference.

1.5 RIGHTS AND INTERESTS. The Property to be purchased and sold pursuant
to this Agreement shall also include all of Seller's right, title and interest
in and to all rights, interests and privileges appertaining to the Property
including all land use entitlements, development rights, and permits subject to
the conditions and limitations set forth in this Agreement.

1.6 MITIGATION LAND. The Partnership owns and holds fee simple title to
that certain real property comprising approximately 17 gross acres located in
the City and County of San Diego ("County") legally described on Exhibit "C" and
depicted on Exhibit "D" attached hereto (the "Mitigation Land"). As used herein,
the "Mitigation Property" means the Mitigation Land together with: (a) all
easements and other rights appurtenant thereto, including the Partnership's
interest (if any) in appurtenant water and mineral rights; and (b) the
Partnership's entire right, title and interest in and to all governmental
permits, entitlements and approvals applicable to the Mitigation Land, and all
other contracts or agreements with respect to the Mitigation Land that are
approved in writing by Buyer. On or before expiration of the Due Diligence
Period, as a condition to Buyer's obligations, Buyer and Seller shall execute
and deliver a Purchase and Sale Agreement and Joint Escrow Instructions under a
separate escrow with Escrow Agent for the purchase and sale of the Mitigation
Property (the "Mitigation Property Agreement"). The Purchase Price for the
Mitigation Property shall be [CONFIDENTIAL TREATMENT REQUESTED].

ARTICLE 2

AGREEMENT OF SALE

2.1 PURCHASE PRICE. Seller hereby agrees to sell, and Buyer hereby
agrees to purchase, through Escrow, the Property for a total purchase price of
[CONFIDENTIAL TREATMENT REQUESTED] ("Total Purchase Price"), subject to the
terms and conditions set forth herein. The Total Purchase Price shall be payable
in cash on or before the Close of Escrow as follows:

2.1.1 Deposit to Escrow within one (1)
business day after the Opening
of Escrow (the "Deposit"): [CONFIDENTIAL
TREATMENT
REQUESTED]

-2-

CONFIDENTIAL TREATMENT REQUESTED

2.1.2 The balance of the Total Purchase Price
to Escrow on the business day preceding
the Closing Date: [CONFIDENTIAL
TREATMENT
REQUESTED]

TOTAL: [CONFIDENTIAL
TREATMENT
REQUESTED]

2.2 REIMBURSEMENT. At the Close of Escrow Buyer shall reimburse Seller
[CONFIDENTIAL TREATMENT REQUESTED].

ARTICLE 3

OPENING OF ESCROW

Concurrent with the execution of this Agreement, Buyer and Seller agree
that Seller shall cause an escrow ("Escrow") for the purpose of the sale of the
Property to be opened at Chicago Title Company, 925 "B" Street, San Diego, CA
92101. This Agreement shall constitute Escrow instructions. Buyer and Seller
shall also promptly sign such other general instructions which Escrow Agent may
require provided such general instructions are not inconsistent with this
Agreement. The Escrow shall be deemed open ("Opening of Escrow") upon Buyer's
and Seller's execution and delivery of a copy of this Agreement, and Escrow
Agent's execution of the Consent of Escrow Agent attached to this Agreement.

ARTICLE 4

INVESTMENT OF DEPOSIT

Escrow Agent shall invest Buyer's Deposit in any federally-insured interest
bearing account, certificate of deposit or bond insured by the United States
government provided that all such investments shall be subject to Buyer's
reasonable approval, collectable upon demand and, if applicable, have a maturity
date before the Closing Date set forth in Article 10.1 [Closing Date]. Buyer and
Seller shall cooperate in the execution of any additional instructions required
by Escrow Agent for the investment of the Deposit provided such contemplated
investments comply with this Article. All accrued interest earned on such
invested Deposit shall belong to Buyer, shall be an offset or credit to the sums
to be paid by Buyer set forth in Article 2.1 [Purchase Price], and shall be
returned to Buyer whenever this Agreement provides for a return of the Deposit
to Buyer, provided that if Escrow is terminated because of a default of Buyer,
then in such event all such accrued interest together with the Deposit shall be
liquidated damages to Seller pursuant to Article 18.2.

-3-

CONFIDENTIAL TREATMENT

ARTICLE 5

TITLE

5.1 PRELIMINARY TITLE REPORT. Attached hereto as Exhibit "E" is Chicago
Title Company's ("Title Insurer") Preliminary Title Report No. 13048042 - U16
("Updated Report") for the Property showing the condition of title to the
Property as of 7:30 a.m., June 25, 2001.

5.2 GRANT DEED. Seller shall convey title to the Property to Buyer by
Grant Deed through Escrow in the form attached hereto as Exhibit "F" ("Grant
Deed"). Subject to Buyer's review and approval pursuant to Article 5.3, title to
the Nobel Land shall be subject only to the following permitted matters
("Permitted Matters"):

5.2.1 Printed exceptions and exclusions from coverage set forth
in the Title Policy described in Article 11.1.3 [Title Policy];

5.2.2 Item Nos. 1, 4, 5, 6, 7, 9 and 10 as shown on Schedule "B" of
the Updated Report;

5.2.3 Matters shown on that ALTA Survey, dated June 7, 2001,
prepared by Rick Engineering (the "Survey"); and

5.2.4 Any voluntary lien or encumbrance imposed by Buyer.

5.3 TITLE REVIEW.

5.3.1 DELIVERY TO BUYER. Seller has delivered to Buyer the Updated
Report, together with copies of all underlying documents referred to therein,
and the Survey. Escrow Agent shall cause the Title Insurer: (a) to review the
Survey and to conduct a physical inspection for purposes of issuing the Title
Policy described in Article 11.1.3; and (b) to identify any additional title
exceptions resulting from the Title Insurer's review of such Survey and physical
inspection in a supplement to the Updated Report. Buyer shall have a right to
review and approve any such supplement in accordance with the procedure
described below.

5.3.2 TIME TO OBJECT. Buyer shall have until the date which is
fifteen (15) days after the Opening of Escrow [and seven (7) days after Buyer's
receipt of any supplement thereto containing exceptions not set forth in the
original Updated Report, and the Closing Date shall be extended as necessary to
accommodate such review period and the response periods set forth in subsections
5.3.4 and 5.3.5], to notify Escrow Agent (with a copy to Seller), in writing, of
its objection to any exceptions and legal descriptions in the Updated Report and
any other matters indicated as Permitted Matters in Section 5.2 or to any new
matters shown in such supplemental report.

5.3.3 NO OBJECTION. If Buyer's written approval is not received by
Escrow Agent within the applicable time period set forth in 5.3.2 above, Buyer
shall be deemed to have disapproved the Updated Report, or supplement thereto,
all exceptions indicated therein and the Survey, and to have elected to
terminate this Agreement and the Escrow, in which event neither

-4-

CONFIDENTIAL TREATMENT

party shall have any further rights or obligations hereunder except for any
obligations which survive such termination under the provisions of this
Agreement, and Buyer's Deposit and all interest earned thereon shall be returned
to Buyer.

5.3.4 TIME TO ELIMINATE EXCEPTIONS. If Buyer timely objects to one
or more exceptions indicated in the Updated Report, the Permitted Matters or a
supplemental report, Seller may, at its option, cure such objection by
delivering written notice to Escrow Agent (with a copy to Buyer) within ten (10)
days after Seller's receipt of Buyer's objection to any matters shown in the
Updated Report or to any Permitted Matters (or within five (5) days after
receipt of Buyer's objection to any matters shown in a supplemental report),
indicating that Seller agrees to cure such exception(s) by the Closing Date. As
used herein, "cure" means either: (1) removing the matter as an exception set
forth in Schedule B of the Title Policy; or (2) modifying the Title Policy to
include an endorsement ensuring against risks related to such exception or an
indemnity of the Title Insurer, on terms and conditions approved by Buyer in
writing. If Seller delivers such written election to cure disapproved
exceptions, Seller shall complete such cure on or before the Closing Date. If
Seller fails to deliver such written notice, Seller shall be deemed to have
elected not to cure the disapproved exceptions.

5.3.5 RIGHT TO CANCEL OR PERFORM. If Seller does not elect to cure
each exception to which Buyer has objected, Buyer shall elect one of the
following, by delivering written notice to Escrow Agent (with a copy to Seller)
within five (5) days after receipt of notice of Seller's election or expiration
of the cure period described in 5.3.4 above (whichever occurs first): (1) to
waive its objections, take title subject to such exceptions, and proceed with
Close of Escrow; or (2) to terminate this Agreement and the Escrow, in which
event neither party shall have any further rights or obligations hereunder
except for any obligations which survive such termination under the provisions
of this Agreement, and Buyer's Deposit and all interest earned thereon shall be
returned to Buyer. If Buyer fails to deliver written notice of its election
within said 5-day period, Buyer will be deemed to have elected to terminate
pursuant to subsection (2) above.

5.4 EXTENDED CLOSING DATE. If Escrow Agent is unable to procure the
Title Policy specified in 11.1.3 [Title Policy] because of a defect in title or
a non-Permitted Matter recorded against the Property after the date of the
Updated Report by a third party not affiliated with any person or entity
comprising Seller and disapproved by Buyer (collectively a "Defect"), Seller in
its sole discretion may extend the Closing Date for a period not exceeding 90
days by notifying Escrow Agent and Buyer in writing before the scheduled Closing
Date of Seller's desire to extend the Closing Date for said period ("Extended
Closing Date"). If Seller extends the Closing Date, Seller shall use its
reasonable best efforts to cure the Defect within said 90 day period but nothing
herein shall require Seller to expend in excess of $50,000 to cure the Defect.
As used herein, the term Defect shall not include (1) a monetary lien or
encumbrance (other than non-delinquent real property taxes) which shall be
removed by Seller concurrently with or before the Closing Date, (2) the exercise
of a Purchase Right (as defined in Article 6.1.8), or (3) an exception recorded
by or at the request of Seller. If Seller cures such Defect within said 90 day
period, the Closing Date shall be on or before twenty (20) days after Seller and
the Title Insurer provide confirmation reasonably acceptable to Buyer that the
Defect has been cured. If Seller is unable to cure the Defect within the period
set forth above, Buyer shall have the option, on or before 5:00 p.m. of the
second business day following the Extended Closing Date, to

-5-

CONFIDENTIAL TREATMENT

unilaterally waive its objection to the Defect by delivery of written notice
thereof to Escrow Agent and Seller and take title to the Property subject to
said Defect without, however, any decrease, diminution or offset of or against
the Total Purchase Price. In the event Buyer does waive such objection, then the
Closing shall be on or before 5:00 p.m. of the 20th day following the Extended
Closing Date ("Buyer's Extended Closing Date"). In the event of no waiver by
Buyer of such objection, then Escrow shall be terminated as provided in Article
6.2 [Non-Satisfaction of Buyer's Conditions - Refund of Deposit and Waiver].
Provided Seller complies with its obligations under this Article 5.4, said
failure to cure a Defect shall not be a breach of this Agreement by Seller.
Recordation of any instrument pertaining to an exercise of a Purchase Right on
or after Opening of Escrow shall constitute a default by Seller under this
Agreement and shall entitle Buyer to those remedies set forth in Article 18
below.

ARTICLE 6

CONDITIONS PRECEDENT AND COVENANTS

6.1 BUYER'S CONDITIONS. Buyer's obligations to purchase the Property and
consummate the Close of Escrow shall be contingent upon satisfaction or waiver
by Buyer of each of the following conditions:

6.1.1 TITLE POLICY. Commitment by the Title Insurer during the Due
Diligence Period described in Article 7.3 [Due Diligence Investigation] to issue
as of the Closing Date set forth in Article 10 [Close of Escrow] the Title
Policy described in Article 11.1.3 [Title Policy].

6.1.2 ASSIGNMENT OF INTERESTS. Execution and delivery by Seller to
Escrow Agent before the Closing Date of the Assignments described in Article
7.09 [Assignments]. Such Assignments shall be in the form attached hereto as
Exhibits "G", "H" and "I" signed by Buyer and Seller.

6.1.3 DUE DILIGENCE SATISFACTION. Delivery by Buyer to Escrow Agent
during the Due Diligence Period described in Article 7.3 [Due Diligence
Investigation] of Buyer's written satisfaction as to all matters to be
investigated by Buyer.

6.1.4 MITIGATION PROPERTY. The Partnership and Buyer shall have
executed and delivered the Mitigation Property Agreement and opened a separate
escrow with Escrow Agent for the purchase and sale of the Mitigation Property
upon mutually acceptable terms and conditions prior to expiration of the Due
Diligence Period. Buyer's obligation to purchase the Property shall not be
contingent upon Buyer's purchase of the Mitigation Property from the
Partnership.

6.1.5 APPROVAL BY BOARD OF DIRECTORS OF BUYER. Delivery by Buyer to
Escrow Agent and Seller on or before July 18, 2001 of a resolution certified by
Buyer setting forth the unconditional approval by Buyer's Board of Directors of
this Agreement and the transactions set forth herein.

6.1.6 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. Seller
shall have duly performed each and every covenant to be performed by Seller
pursuant to this Agreement as

-6-

CONFIDENTIAL TREATMENT

of the Close of Escrow, and Seller's representations, warranties and covenants
set forth in Articles 7 and 14 hereof shall be true and correct in all material
respects as of the Close of Escrow.

6.1.7 NO MATERIAL CHANGES. As of the Close of Escrow, there shall
have been no material adverse changes in the physical condition of the Property
as it existed at the Opening of Escrow.

6.1.8 RIGHTS OF FIRST REFUSAL/BUY/SELL RIGHTS. Prior to Opening of
Escrow, Seller shall have delivered to Buyer and the Title Insurer written
evidence satisfactory to Buyer and the Title Insurer that any and all rights of
first refusal and buy/sell rights pursuant to the partnership agreements for the
Partnership and any other similar agreements among the partners, persons and
other entities directly or indirectly comprising the Partnership and Seller and
held by the persons or entities comprising Seller or their constituent partners,
members, trustors, trustees and beneficiaries (herein "Purchase Rights") have
been waived, terminated or satisfactorily resolved so as to enable Seller to
sell the Property to Buyer pursuant to the terms of this Agreement without any
exceptions to coverage under the Title Policy with respect to any such Purchase
Rights.

6.1.9 SELLER BOARD APPROVAL. Prior to the Opening of Escrow Seller
has delivered to Escrow Agent and Buyer the resolutions adopted by the Board of
Directors of San Dieguito Valley, Inc. ("General Partner"), the sole General
Partner of the Partnership, setting forth the unconditional approval by such
General Partner and the Partnership of this Agreement and the transactions set
forth herein.

6.2 NON-SATISFACTION OF BUYER'S CONDITIONS - REFUND OF DEPOSIT AND
WAIVER. Subject to Article 5.4 [Extended Closing Date], in the event any
condition set forth in Article 6.1 [Buyer's Conditions] is neither satisfied nor
waived by Buyer within the time specified therefor, as the same may be extended,
Buyer, provided it is not then in default, may terminate this Agreement and the
Escrow by written demand therefor delivered to Seller and Escrow Agent. The
making of such demand shall be optional, not mandatory; no delay in the making
of such demand shall affect the rights of Buyer hereunder. In the event such
demand is made:

6.2.1 If Buyer is not in breach of its obligation under this
Agreement, then Escrow Agent shall return to each party the funds, including
Buyer's Deposit and all accrued interest thereon to Buyer, and documents
theretofore deposited by such party unless Escrow Agent decides (in its
uncontrolled discretion) the protection of its interest requires otherwise; in
which case Escrow Agent may interplead the deposited funds and documents in a
Court of competent jurisdiction.

6.2.2 Each party shall pay one-half (1/2) of Escrow Agent's fees
and incurred expenses, if any.

6.2.3 If this Agreement and the Escrow are terminated as provided
in this Article (except as a result of Seller's breach or default), Buyer shall
promptly, upon such termination, deliver to Seller copies of all items delivered
to Buyer set forth in Article 7.4 [Property Documents]. The sole remedy of Buyer
arising as a result of a failure (other than a

-7-

CONFIDENTIAL TREATMENT

failure arising out of the default of a party under this Agreement) of any of
the conditions precedent to Buyer's obligations shall be the termination of
Escrow and this Agreement and the return to Buyer of Buyer's Deposit and all
interest accrued thereon.

6.3 SELLER'S CONDITIONS. Seller's obligations to sell the Property and
consummate the Close of Escrow shall be contingent upon satisfaction or waiver
by Seller of each of the following conditions:

6.3.1 TITLE POLICY. The Title Insurer shall have issued or
committed to issue to Buyer the Title Policy described in Section 11.1.3 as of
the Closing.

6.3.2 REPRESENTATION, Warranties and Covenants of Buyer. Buyer
shall have duly performed each and every covenant to be performed by Buyer
pursuant to this Agreement as of the Close of Escrow, and Buyer's
representations, warranties and covenants set forth in Article 15 hereof shall
be true and correct in all material respects as of the Close of Escrow.

6.3.3 RIGHTS OF FIRST REFUSAL/BUY/SELL RIGHTS. Prior to Opening of
Escrow, Seller shall have delivered to Buyer and the Title Insurer written
evidence satisfactory to Buyer and the Title Insurer that the Purchase Rights
have been waived, terminated or satisfactorily resolved so as to enable Seller
to sell the Property to Buyer pursuant to the terms of this Agreement without
any exceptions to coverage under the Title Policy with respect to any such
Purchase Rights.

6.3.4 SELLER BOARD APPROVAL. Prior to the Opening of Escrow Seller
has delivered to Escrow Agent and Buyer the resolutions adopted by the Board of
Directors of San Dieguito Valley, Inc. ("General Partner"), the sole General
Partner of the Partnership, setting forth the unconditional approval by such
General Partner and the Partnership of this Agreement and the transactions set
forth herein.

6.4 NON-SATISFACTION OF SELLER'S CONDITIONS. Subject to Article 5.4
[Extended Closing Date], in the event any of the conditions set forth in Article
6.3 [Seller's Conditions] is neither satisfied nor waived by Seller within the
time specified therefore, as the same may be extended, Seller, provided it is
not then in default, may elect to terminate this Agreement and the Escrow by
written demand therefore delivered to Buyer and Escrow Agent. The making of such
demand shall be optional, not mandatory; no delay in the making of such demand
shall affect the rights of Seller hereunder. In the event such demand is made:

6.4.1 If Buyer is not breach of its obligations under this
Agreement, then Escrow Agent shall return to Buyer its Deposit and all accrued
interest thereon to Buyer, and return to the parties such other funds and
documents theretofore deposited by such party unless Escrow Agent decides (in
its uncontrolled discretion) the protection of its interest requires otherwise;
in which case Escrow Agent may interplead the deposited funds and documents in a
Court of competent jurisdiction.

6.4.2 Each party shall pay one-half of Escrow Agent's fees and
incurred expenses, if any.

-8-

CONFIDENTIAL TREATMENT

6.4.3 If this Agreement and Escrow is terminated as provided in
this Article 6.4 (except as a result of Seller's breach or default) Buyer shall
promptly, upon such termination, deliver to Seller copies of all items delivered
to Buyer set forth in Article 7.4 [Property Documents]. The sole remedy of
Seller arising as a result of a failure (other than a failure arising out of the
default by Buyer under this Agreement) of any of the conditions precedent to
Seller's obligations shall be the termination of Escrow and this Agreement.

ARTICLE 7

OBLIGATIONS AND DISCLOSURES

7.1 ESCROW NON-LIABILITY. Escrow Agent shall have no concern with or
liability or responsibility for this Article.

7.2 DEFINITIONS. For purposes of this Article 7 and Article 14 (Seller's
Warranties), the following terms shall have the meanings set forth below.

7.2.1 LAWS. "Laws" means all governmental laws, statutes,
ordinances, resolutions, rules, regulations, restrictions and requirements
applicable to the Property, as amended or supplemented from time to time prior
to the Closing Date.

7.2.2 ENVIRONMENTAL LAWS. "Environmental Laws" means all Laws
applicable to the physical condition of the Property or the presence of any
substance thereon, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Sections 9601 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), the
Clean Water Act (33 U.S.C. Sections 466 et seq.), the Safe Drinking Water Act
(14 U.S.C. Sections 300f et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. Sections 5101 et seq.), the Toxic Substances Control Act (15 U.S.C.
Sections 2601 et seq.), the California Hazardous Waste Control Act (California
Health and Safety Code Sections 25100 et seq.), the California Hazardous
Substances Account Act (California Health and Safety Code Sections 25300 et
seq.), the Safe Drinking Water and Toxic Enforcement Act ("Proposition 65")
(California Health and Safety Code Sections 25249.5 et seq.), and the
Porter-Cologne Water Quality Control Act (California Health and Safety Code
Sections 13000 et seq.), and any similar federal, state or local Laws, all
regulations and publications implementing or promulgated pursuant to the
foregoing, as any of the foregoing may be amended or supplemented from time to
time.

7.2.3 HAZARDOUS MATERIALS. "Hazardous Materials" means substances
which are flammable; explosive; corrosive; radioactive; toxic; and any
substances defined or regulated as hazardous substances, hazardous materials,
toxic substances or hazardous wastes in any of the Environmental Laws.

7.2.4 SELLER'S KNOWLEDGE. The phrases "to the best of Seller's
knowledge," "Seller's knowledge" or similar phrases used in this Agreement mean
actually or constructively known or disclosed to any officer or director of the
General Partner, and excludes all other members of Seller, including, but not
limited to, all tenants in common; trusts and the trustees

-9-

CONFIDENTIAL TREATMENT

and beneficiaries thereof; and limited liability companies and officers,
directors and managers thereof as set forth in Schedule 1 attached hereto.

7.3 DUE DILIGENCE INVESTIGATION. For a period commencing upon the
Opening of Escrow and ending thirty (30) days thereafter ("Due Diligence
Period"), Buyer shall have the right to conduct investigations and retain
consultants as it deems necessary to investigate the Property to determine its
suitability for development for Buyer's intended purposes. Buyer shall have the
right during the Due Diligence Period to examine and approve all things
concerning the Property which Buyer deems material to its purchase, use and
development of the Property, including, but not limited to, topography, geology,
condition of the soil, the presence, storage, discharge, or use of toxic or
hazardous materials on the Property, condition of title to the Property,
availability and capacity of utilities and sanitary facilities including,
without limitation, water, sewer, electricity, gas, telephone, cable television,
suitability for intended use, feasibility of development, zoning, fire and
police protection, the possibility of moratoria, governmental land use
regulations and government fees, fee increases, threatened and endangered
species mitigation, and the feasibility and availability of building permits and
other entitlements from any governmental agency for the development of the
Property including but not limited to any and all applications, fees, procedures
and approvals necessary to complete land use entitlement and the final
subdivision map for the Property. Buyer understands and agrees that Seller does
not, in any respect, guaranty, warrant or represent that any development of the
Property will be permitted. As part of Buyer's due diligence investigation,
Buyer may seek to obtain the City's execution of an Estoppel Certificate
concerning the Settlement Agreement in the form of Exhibit O attached hereto.
Seller shall reasonably cooperate with Buyer in seeking to obtain the City's
execution of such an Estoppel Certificate. The City's execution of such an
Estoppel Certificate shall not be a condition to Close of Escrow. Subject to
satisfaction or waiver of the conditions to the Close of Escrow set forth
herein, Buyer shall accept the Property in an "as is" condition, and
acknowledges that, except as expressly set forth in this Agreement, Seller has
not made and does not make any warranty or representation whatsoever as to the
physical condition or suitability for intended use of the Property, whether
express or implied. Buyer acknowledges and agrees that Buyer is purchasing the
Property solely in reliance on Buyer's own investigation (and the
representations and warranties of Seller set forth in this Agreement) and that
Buyer shall be responsible at its cost and expense to complete the land use
entitlement process and final subdivision map for the Property and, except as
expressly provided otherwise in this Agreement (including the exhibits hereto),
to comply at its expense with all obligations imposed by any agreement, permit
or land use entitlement relating to the Property.

7.4 PROPERTY DOCUMENTS. Prior to the Opening of Escrow, Seller has
delivered or caused to be delivered to Buyer copies of those documents relating
or applicable to the Property more particularly described in Exhibit "J"
("Property Documents"). Within fourteen (14) days from the Opening of Escrow,
Seller shall deliver or cause to be delivered to Buyer copies of all of the
following documents within its possession or control relating or applicable to
the Mitigation Property (collectively, "Mitigation Land Documents"): a
preliminary title report and underlying exception documents; all surveys,
geotechnical, soils or grading investigations or reports, environmental,
biological, or hazardous materials investigations, reports, assessments or
studies, zoning and development permits, licenses, or other approvals,
correspondence with federal, state and local government agencies regarding use
of the Mitigation Land as mitigation

-10-

CONFIDENTIAL TREATMENT REQUESTED

property for the development of the Nobel Land; copies of any property tax
bills; and any other documents which materially affect the value or use of the
Mitigation Property as mitigation land. Seller specifically represents that to
the best of Seller's knowledge the Property Documents and the Mitigation Land
Documents include all soils/geotechnical reports, engineering reports, plans and
specifications, and hazardous materials or environmental reports relating to the
Property or the Mitigation Land, as applicable, which are in Seller's possession
or under its reasonable control, and all commitments to, agreements with, or
approvals by all federal, state and local governmental agencies, public
utilities or other parties affecting the Property or the Mitigation Land, as
applicable. Seller has no knowledge or reason to believe that the documents are
incomplete or incorrect but Seller makes no warranty or representation of any
kind that said documents are accurate or complete. Seller warrants that as to
each of said documents there are no unpaid liens or costs for consultant fees
for which Buyer would be liable. To the extent that any of said documents are
proprietary to the consultant who prepared such documents or require the payment
of additional fees for reuse, [CONFIDENTIAL TREATMENT REQUESTED] shall pay all
such proprietary and additional fees which arise or accrue from and after Close
of Escrow.

7.5 RIGHT OF ENTRY. During the term of the Escrow, Buyer and its
representatives, employees, agents and independent contractors shall have the
right, [CONFIDENTIAL TREATMENT REQUESTED], to enter on to the Property for the
purpose of obtaining any and all information regarding the Property as Buyer
deems appropriate, including, but not by way of limitation, environmental,
engineering and survey studies and soils tests. Buyer shall, [CONFIDENTIAL
TREATMENT REQUESTED], obtain all governmental approvals and permits necessary to
conduct its investigation. Buyer agrees to and does hereby hold Seller harmless
from and against any loss, liability or damage resulting from the activities of
Buyer, its representatives, agents and independent contractors, or anyone acting
pursuant to authorization from Buyer, in relation to the Property and from and
against any mechanics' liens or claims of lien resulting therefrom; provided,
however, that Buyer shall not be liable or responsible for (a) damage to the
Property which is reasonably necessary to the investigation of its physical
characteristics, including soils tests and surveying, or (b) any pre-existing
conditions or any losses, damages or liabilities resulting or arising therefrom.
Buyer shall, however, [CONFIDENTIAL TREATMENT REQUESTED], return the Property as
nearly as is practicable to its physical condition immediately prior to its
activities thereon and shall repair any physical damage resulting from its
activities thereon.

7.6 RIGHT OF INQUIRY. During the term of this Escrow, Buyer and its
representatives, employees, agents and independent contractors shall have the
right, [CONFIDENTIAL TREATMENT REQUESTED], to (a) meet with all City, County,
district, State, Federal, and other governmental entities and agencies, subject
to Buyer providing Seller with reasonable prior notice of the time and place of
such meetings, and with all persons or other entities with whom Seller or others
have contractual arrangements in connection with or relating to the Property;
(b) discuss with any such entities, agencies or persons the terms of this
Agreement, the terms of any contractual arrangements between Seller and any such
entity, agency or person and Buyer's proposed development of the Property; and
(c) make any applications to any appropriate governmental agency provided the
same will not, in the event Escrow does not close, commit Seller or the Property
to any matter so applied for.

-11-

CONFIDENTIAL TREATMENT

7.7 HOLD HARMLESS AND BUYER INDEMNITY.

7.7.1 Buyer hereby holds all Sellers described in Schedule 1
including but not limited to as respects the persons and entities listed in
Schedule 1 the partners whether general or limited of any partnership or the
members of any limited liability company, the officers, directors, shareholders
of any corporation, the trustor, trustee and beneficiary of any trust, and the
respective agents, employees, attorneys, and attorneys in fact of each of them
(collectively "Seller Indemnified Parties" ), free and harmless and hereby
indemnifies the Seller Indemnified Parties from any and all claims, including
any claim of any owner or would be purchaser, demands, causes of action and
damages, including reasonable attorneys fees, arising from and after Close of
Escrow and arising from or relating to all work performed on the Property by or
for Buyer, onsite and offsite, or in the vicinity of the Property, including
without limitation, claims premised on construction or design defects, after
Close of Escrow, and all other acts and events occurring or arising from and
after Close of Escrow.

7.7.2 In addition to the foregoing, Buyer hereby holds the Seller
Indemnified Parties free and harmless and hereby indemnifies the Seller
Indemnified Parties from any and all claims, demands, causes of action and
damages, including reasonable attorneys fees, arising under any land use
entitlement, permit or any agreement relating to the Property, occurring or
arising from and after the Close of Escrow.

The foregoing indemnities of Buyer to the Seller Indemnified Parties shall
be subject to each of the following:

(i) Prior payment of a claim or loss shall not be required of the
Seller Indemnified Parties.

(ii) If any of the Seller Indemnified Parties receives a
complaint, claim or other notice of any loss, claim, damage or liability which
may give rise to an indemnified loss, such Seller Indemnified Party shall
promptly notify the indemnitor of such complaint, claim or other notice;
provided, however, the omission to so notify the indemnitor shall not relieve
the indemnitor from any liability under this Agreement except to the extent
liability could have been avoided had such notice been promptly given. In no
event, however, shall the indemnitor be obligated to indemnify any of the Seller
Indemnified Parties for any settlement of any claim or action effected without
the indemnitor's prior written approval.

(iii) In the event any claim is made or action brought against any
of the Seller Indemnified Parties for which a Seller Indemnified Party may be
indemnified by the indemnitor under this Agreement the indemnitor shall retain
counsel of its choice reasonably acceptable to the Seller Indemnified Party to
defend such claim or action and shall permit the Indemnified Party to monitor
the defense of such claim or action. The indemnitor shall have the right to
defend, compromise, settle, counter-sue, and appeal all such claims and actions.

(iv) Nothing expressed or referred to in this Article is intended
or shall be construed to give any person other than the Seller Indemnified
Parties any legal or equitable right, remedy or claim to indemnification under
or in respect to this Agreement.

-12-

CONFIDENTIAL TREATMENT REQUESTED

7.8 HOLD HARMLESS AND SELLER INDEMNITY. Seller hereby holds Buyer, and
Buyer's officers, directors, members, shareholders, partners, employees,
successors and assigns (collectively "Buyer Indemnified Parties"), and each of
them, free and harmless and hereby indemnifies the Buyer Indemnified Parties,
and each of them, from any and all claims, demands, liabilities, causes of
action and damages, including reasonable attorneys' fees ("Claims"), arising
prior to the Close of Escrow and arising from or relating to the Property,
including, without limitation, all acts and events occurring prior to the Close
of Escrow, and any breach by Seller of the representations, warranties and
covenants of Seller set forth in this Agreement; provided, however, that, except
for Claims arising from a breach by Seller of its representations, warranties
and covenants set forth in this Agreement (for which there is no maximum
liability), Seller's liability under this Article 7.8 shall not exceed the sum
of [CONFIDENTIAL TREATMENT REQUESTED].

The obligations of Seller to the Buyer Indemnified Parties under this
Article 7.8 shall include and be subject to each of the following:

(i) Prior payment of a claim or loss shall not be required of the
Buyer Indemnified Parties.

(ii) If any of the Buyer Indemnified Parties receives a complaint,
claim or other notice of any loss, claim, damage or liability which may give
rise to an indemnified loss hereunder, such Buyer Indemnified Party shall
promptly notify Seller of such complaint, claim or other notice; provided,
however, the omission to so notify Seller shall not relieve Seller from any
liability under this Agreement except to the extent liability could have been
avoided had such notice been promptly given. In no event, however, shall Seller
be obligated to indemnify any of the Buyer Indemnified Parties for any
settlement of any claim or action effected without Seller's prior written
approval.

(iii) In the event any claim is made or action brought against any
of the Buyer Indemnified Parties for which a Buyer Indemnified Party is
indemnified by Seller under this Agreement, Seller shall retain counsel of its
choice reasonably acceptable to the Buyer Indemnified Party to defend such claim
or action and shall permit the Buyer Indemnified Party to monitor the defense of
such claim or action. Seller shall have the right to defend, compromise, settle,
counter-sue, and appeal all such claims and actions.

(iv) Nothing expressed or referred to in this Article is intended
or shall be construed to give any person other than the Buyer Indemnified
Parties any legal or equitable right, remedy or claim to indemnification under
or in respect to this Agreement.

7.9 ASSIGNMENTS. Buyer acknowledges and agrees that upon the Close of
Escrow it shall become the assignee of those certain matters described in and
subject to the terms and conditions of the Assignment Agreement, Assignment and
Assumption of Contracts, and Assignment of Rights Under Settlement Agreement
(the "Assignments") attached hereto as Exhibit "G", Exhibit "H" and Exhibit "I",
respectively.

7.10 WETLAND RESTORATION. Seller warrants and represents to Buyer that,
upon the Close of Escrow, San Dieguito Valley, Inc. shall execute and record in
favor of Buyer an

-13-

CONFIDENTIAL TREATMENT

assignment, in the form of Exhibit "M" attached hereto ("Assignment of
Easements"), of all of San Dieguito Valley, Inc.'s right, title and interest
under that certain easement (the "Easement") for the purpose of Access and
Wetlands Restoration described in that Amended and Restated Grant of Easements
recorded in the Office of the San Diego County Recorder on December 15, 2001,
(document no. 2000-0683653) ("Grant of Easements") as part of the consideration
set forth in Article 2.1 [Purchase Price]. Said Easement is located upon a
portion of an approximate 27 acre subdivision located in the San Dieguito Valley
("Villas Property") as described in the Grant of Easements, is located in the
Coastal Zone and is subject to the jurisdiction of the California Coastal
Commission, and benefits the Property as set forth in the CONCEPTUAL WETLAND
HABITAT RESTORATION PLAN FOR NOBEL RESEARCH PARK prepared by RECON (no. 3068B)
dated May 12, 1999 ("Restoration Plan"), and as set forth in City of San Diego
Mitigated Negative Declaration LDR No. 99-0034, pursuant to the approval by the
City of San Diego of the aforementioned Mitigated Negative Declaration and
Planned Industrial Development/Resource Protection Ordinance Permit No. 99-0034.
Said Grant of Easements, a copy of which has been provided to Buyer with the
Property Documents, sets forth the terms and conditions under which the grantee
of such Easement may enter upon the easement and perform the work and activity
required under the foregoing Mitigated Negative Declaration and the Planned
Industrial Development/Resource Protection Ordinance Permit ("Wetland Habitat
Restoration Activities"). A copy of Coastal Development Permit Amendment
6-98-154-A1 authorizing the Wetland Habitat Restoration Activities has been
provided to Buyer, which Permit shall be assigned by Seller to Buyer as set
forth in Article 7.09 [Assignments]. Seller represents to Buyer and Buyer
acknowledges that Seller has entered into that certain contract amendment with
RECON dated January 3, 2001 for the grading, restoration, monitoring, repair,
reinstallation and/or reestablishment of Wetland Habitat Restoration Activities
upon the Easement as set forth in the above referenced Mitigated Negative
Declaration and the Planned Industrial Development/Resource Protection Ordinance
Permit. The Title Policy shall include coverage of Buyer's easement rights
pursuant to the Assignment of Easements, on terms and conditions acceptable to
Buyer.

7.11 LICENSE AGREEMENT - GARDEN COMMUNITIES. Pursuant to the terms and
conditions of that certain license agreement, dated January 26, 2001, as amended
(the "License Agreement"), a limited license has been granted by Seller to La
Jolla Crossroads, an affiliate of Garden Communities, for the purpose of
temporary haul road access generally along and within the Judicial Drive right
of way by the licensee to the development site located adjacent to the northwest
boundary of the Property. A copy of the License Agreement has been delivered to
Buyer as part of the Property Documents. Pursuant to its terms, the license
granted under the License Agreement has expired; and Seller agrees to obtain
Buyer's prior written approval of any modification or extension of the License
Agreement, other than an extension up to the Closing Date.

7.12 OTHER AGREEMENTS. Buyer acknowledges that Seller, as a part of the
process of gaining approvals and entitlements for the development of the
Property, provided certain assurances and promises to the City of San Diego
University Planning Group, which subsequently endorsed approval of the
development of the Property, as follows:

-14-

CONFIDENTIAL TREATMENT REQUESTED

(a) The developer of the Nobel Research Park shall, if so
requested by the University Planning Group, provide signal light access to the
City proposed Nobel Athletic Field by way of addition of a fourth "leg" to the
signal light to be constructed at the intersection of Street "A" (entry to the
proposed development on the Property) and Judicial Drive.

(b) The developer of the Nobel Research Park shall enhance
landscaping to the reasonable satisfaction of the University Planning Group at
the slope location on the east side of Judicial Drive, north of Street "A".

Buyer agrees and covenants to implement the above assurances and promises
if and when requested by the University Planning Group in the development and
construction of improvements on the Property.

ARTICLE 8

SELLER'S DELIVERIES TO ESCROW

Seller shall deliver to Escrow Agent prior to the Closing Date, the
following:

8.1 SELLER'S GRANT DEED. The Grant Deed in the form of Exhibit "F"
attached hereto, conveying the Property to Buyer, executed and acknowledged by
Seller and/or such other persons as the Title Insurer may require in order to
issue the Title Policy.

8.2 NON-FOREIGN CERTIFICATE. Certificates pursuant to IRC Section 1445
and California Form 597-W, in form and content set forth in Exhibit "K" and
Exhibit "L", signed by each Seller (except [CONFIDENTIAL TREATMENT REQUESTED]),
certifying that the certifying Seller is or is not a non-resident alien or
foreign corporation, foreign partnership, foreign trust or foreign estate, as
the case may be. With respect to [CONFIDENTIAL TREATMENT REQUESTED], Seller
shall cause to be delivered to Escrow Agent evidence, reasonably satisfactory to
Escrow Agent and Buyer, of written agreements having been entered into between
[CONFIDENTIAL TREATMENT REQUESTED], the Internal Revenue Service and the
Franchise Tax Board regarding payment, or the provision for payment, of taxes by
[CONFIDENTIAL TREATMENT REQUESTED] with respect to this transaction; otherwise,
Escrow Agent shall withhold from distributions to Seller, for the benefit of
[CONFIDENTIAL TREATMENT REQUESTED], such amounts as are required by law to
provide for payment of taxes to such taxing authorities in respect of
[CONFIDENTIAL TREATMENT REQUESTED] ownership interests in the Property.

8.3 ASSIGNMENTS. The Assignments described in Article 7.09 [Assignments]
fully executed by Seller.

8.4 ASSIGNMENT OF EASEMENT. The Assignment of Easements for the Wetland
Habitat Restoration area described in Article 7.10 [Wetland Restoration] in the
form of Exhibit "M" duly executed and acknowledged by San Dieguito Valley, Inc.
("Assignment of Easements").

8.5 TERMINATION OF MEMORANDUM OF TENANCY-IN-COMMON AGREEMENT. A document
in a form approved by the Title Insurer duly executed and acknowledged by Seller
to

-15-

CONFIDENTIAL TREATMENT

eliminate the Memorandum of Tenancy-In-Common Agreement recorded upon the
Property on March 27, 2000, as document no. 2000-0151333, as an exception to the
Title Policy.

ARTICLE 9

BUYER'S DELIVERIES TO ESCROW

Buyer shall deliver to Escrow Agent prior to the Closing Date, the
following:

9.1 CASH. Cash pursuant to Article 2.1 [Purchase Price] and Article 2.2
[Reimbursement], and such sums as are necessary to pay Buyer's Escrow and other
charges pursuant to Article 12 [Proration, Fees and Costs].

9.2 JOINING IN ASSIGNMENTS. Buyer shall promptly join in the execution
and if required acknowledgment of all documents within the scope of Article 8.3
[Assignments] so as not to delay the Close of Escrow.

ARTICLE 10

CLOSE OF ESCROW

10.1 CLOSING DATE. Escrow shall close on a date (the "Closing Date")
designated by Buyer which is on or before forty-five days following the Opening
of Escrow as provided in Article 3 [Opening of Escrow], unless the Closing Date
is extended pursuant to the provisions of Articles 5.3.2 or 5.4 [Extended
Closing Date]. "Close of Escrow" or "Closing" means the date Escrow Agent
records the Grant Deed in favor of Buyer and delivers the Total Purchase Price
to Seller.

ARTICLE 11

THE CLOSING

11.1 CLOSING PROCEDURE. Escrow Agent shall close the Escrow by recording
the following documents in the following order: (a) Grant Deed; (b) such other
documents as may be necessary to procure the Title Policy; and (c) the
Assignment of Easements, and delivering funds and documents as set forth in
Article 13 entitled "Escrow Agent's Delivery of Funds and Documents" if, AND
ONLY IF, each of the following conditions have been satisfied:

11.1.1 DELIVERY OF FUNDS AND INSTRUMENTS. All funds and instruments
described in Article 8 [Seller's Deliveries to Escrow] and Article 9 [Buyer's
Deliveries to Escrow] have been delivered to Escrow Agent.

11.1.2 SATISFACTION OF CONDITIONS. The conditions set forth in
Article 6.1 [Buyer's Conditions] and Article 6.3 [Seller's Conditions] have
been, or upon such Closing shall be, satisfied or waived.

11.1.3 TITLE POLICY. Escrow Agent has procured from Title Insurer an
ALTA Owner's policy of title insurance (Form B-1970) with liability in the
amount of the Total

-16-

CONFIDENTIAL TREATMENT REQUESTED

Purchase Price, insuring that fee title to the Property vests in Buyer subject
only to those matters approved, or deemed approved, by Buyer pursuant to Article
5.3 and containing such endorsements as Buyer may have requested and the Title
Insurer shall have committed during the Due Diligence Period to issue as of the
Closing (the "Title Policy").

ARTICLE 12

PRORATION, FEES AND COSTS

12.1 TAXES. Escrow Agent will prorate (i.e., apportion) between the
parties, in cash, to the Close of Escrow, non-delinquent County, City and
special district (if any) taxes, based on the latest information available to
Escrow Agent. Prorations shall be made on the basis of a thirty (30) day month
and a three hundred sixty (360) day year. If any supplemental real estate taxes
are, pursuant to California Revenue and Taxation Code Section 75 and following,
levied for any period preceding the Close of Escrow, the parties will,
immediately after (i) the Close of Escrow or (ii) the issuance of the
supplemental real estate tax bill (whichever occurs last) prorate between
themselves in cash, without interest, to the date of the Close of Escrow, the
supplemental real estate tax as shown by said bill with Seller responsible for
the portion of such taxes attributable to the period prior to and including the
Closing Date, and Buyer responsible for the portion of such taxes attributable
to the period after the Closing Date.

Escrow Agent shall not be liable or responsible for the proration or
collection of supplemental taxes, if any, assessed pursuant to Chapter 498,
Statute of 1983 of the State of California.

12.2 SELLER'S PAYMENT OF CHARGES AND FEES. Seller will pay [CONFIDENTIAL
TREATMENT REQUESTED]. -

12.3 BUYER'S PAYMENT OF CHARGES AND FEES. Buyer will pay [CONFIDENTIAL
TREATMENT REQUESTED].

ARTICLE 13

ESCROW AGENT'S DELIVERY OF FUNDS AND DOCUMENTS

13.1 RECORDATION OF DOCUMENTS. Escrow Agent will cause the County
Recorder of San Diego County to mail the Grant Deed and Assignment of Easements
(and each other

-17-

CONFIDENTIAL TREATMENT

document which is herein expressed to be, or by general usage is, recorded)
after recordation, to the grantee or beneficiary acquiring rights under said
document.

13.2 DELIVERY OF DOCUMENTS. Escrow Agent will, at Close of Escrow,
deliver by United States Mail (or will hold for personal pickup, if requested)
each non-recorded document received hereunder by Escrow Agent to the party
acquiring rights under said document.

13.3 DELIVERY OF FUNDS. Escrow Agent will, at the Close of Escrow,
deliver by United States Mail (or will hold for personal pickup, if requested)
(a) to Seller, or order, any funds and documents Seller will be entitled to; and
(b) to Buyer, or order, any excess funds theretofore delivered to Escrow Agent
will be entitled to Buyer.

ARTICLE 14

SELLER'S WARRANTIES

In addition to any other express representations, warranties and agreements
of Seller contained in this Agreement, the matters set forth in this Article
constitute representations and warranties by Seller which are now and shall at
the Close of Escrow be true and correct and which shall survive the Close of
Escrow and recordation of Seller's Grant Deed.

14.1 SELLER'S POWER, AUTHORITY AND AUTHORIZATION.

14.1.1 Each of the entities comprising Seller has the legal power,
right and authority to enter into this Agreement and the instruments referenced
therein, and to consummate the transactions contemplated herein. All requisite
action (whether by partnership, corporation, trust or by limited liability
company, as applicable) has been taken by each entity comprising Seller to duly
and validly authorize the entity's execution, delivery and performance of this
Agreement and the transactions contemplated herein. The individuals executing
this Agreement and the instruments referenced therein on behalf of an entity
comprising Seller have been duly authorized to execute this Agreement. Each of
the Partnership and the General Partner (San Dieguito Valley, Inc.) is duly
formed, validly existing and in good standing under the laws of the State of
California.

14.1.2 The execution, delivery and performance of this Agreement and
the instruments referenced therein will not violate the terms and conditions of
the organizational documents of any entity comprising Seller or the terms and
conditions of any agreement or obligation to which the entity is a party or by
which it is bound. Neither the execution, delivery and performance of this
Agreement, and the instruments referenced herein, by Seller, nor the assignment
of Buyer's right, title and interest in and to this Agreement as permitted by
the terms and conditions hereof, will violate or activate any of the Purchase
Rights, and all such Purchase Rights have been irrevocably waived, expired or
terminated with respect to this Agreement and the transactions contemplated
hereby pursuant to written consents, waivers and/or approvals heretofore
executed by all holders thereof and delivered to Escrow Agent and Buyer prior to
the Opening of Escrow. Seller has not received written notice of any proposed
transfer by a partner of its interest in the Partnership pursuant to Section
15.1 of the limited partnership agreement of

-18-

CONFIDENTIAL TREATMENT

the Partnership, as amended; and Seller has not received any Election Notice
which is still pending pursuant to Section 16.3 of said partnership agreement.

14.1.3 The persons and entities set forth on Schedule "1" attached
hereto constitute all persons and entities having an ownership interest in the
Property, and such persons and entities, collectively, hold fee title to all of
the Property.

14.1.4 Seller represents that neither Seller nor any person or
entity comprising Seller, is a party to nor bound by any other agreement to sell
or offer to sell the Property or any portion thereof to any other party, and
that any other prior agreements which Seller (or any of them) may have been
subject to or otherwise bound by have been terminated and the other parties
thereunder have no further rights or interests under any such agreements with
respect to the Property.

14.2 NOTICE OF VIOLATION. To the best of Seller's knowledge, Seller has
not received any notices from governmental authorities pertaining to violations
of Laws with respect to the Property or the Easement with which Seller has not
fully complied with or corrected, and there are no known violations of Laws with
respect to the Property.

14.3 NO PENDING ACTIONS. There are no actions, proceedings,
investigations or condemnation or eminent domain proceedings pending or
threatened, in writing, against Seller or the Property, before or by any court,
arbitrator, administrative agency or other governmental authority. To the best
of Seller's knowledge, there are no actions, proceedings, investigations or
condemnation or eminent domain proceedings that are expected to be brought
against or with respect to Seller or the Property or the Easement which would
materially and adversely affect the ability of Seller to convey the Property to
Buyer. To the best of Seller's knowledge, there are no actions or proceedings
pertaining to the Property or the Easement which have been threatened or are
being contemplated by the City, County, or state or federal agencies or bodies
having jurisdiction over the Property.

14.4 LEASES. There are no oral or written leases, subleases, occupancies
or tenancies in effect pertaining to the Property, and no parties other than
Seller are in possession of the Property, except as provided in Article 7.11
[License Agreement - Garden Communities].

14.5 NO LIENS. To the best of Seller's knowledge, there are no liens,
encumbrances, covenants, conditions, reservations, restrictions, easements or
other matters affecting the Property except as disclosed in the Updated Report
and this Agreement.

14.6 AGREEMENTS AFFECTING THE PROPERTY. To the best of Seller's
knowledge, and except as disclosed to Buyer in writing or pursuant to this
Agreement, there are no commitments to or agreements with any federal, state or
local governmental agencies, public utilities or other parties affecting or
binding upon Seller or the Property or the Easement to pay or contribute
property or money to construct, install, maintain or provide any improvements on
the Property or off-site in connection with the development of the Property.

14.7 NO DEFAULT. To the best of Seller's knowledge, Seller is not in
default, and will not be in default as of the Closing Date, with respect to any
of its obligations or liabilities pertaining to the Property or the Easement,
nor are there any facts, circumstances, conditions or

-19-

CONFIDENTIAL TREATMENT

events which, but for notice or lapse or time or both, would constitute or
result in any such default.

14.8 TRUE INFORMATION. To the best of Seller's knowledge, all documents,
instruments and information delivered to by Buyer, pursuant to the terms hereof,
are complete and true copies of such documents or original counterparts thereof
and Seller is aware of no inaccuracy in or misrepresentation of the matters
contained therein. To the best of Seller's knowledge, none of the
representations or warranties of Seller in this Agreement, nor any document,
statement, certificate, schedule or other information furnished or to be
furnished by Seller to Buyer pursuant to this Agreement or in connection with
the transaction contemplated herein contains, or will as of the Close of Escrow
contain, any untrue statement of a material fact or omits, or omit any material
fact necessary to make the statement of facts contained therein not misleading.

14.9 CONTRACTS. There are no material contracts affecting the Property
except as set forth in Exhibit "G", Exhibit "H" and Exhibit "I".

14.10 AGREEMENT ENFORCEABLE. No consent, approval or other authorization
of, or registration, declaration or filing with, any court or governmental
agency or commission is required for the due execution and delivery of this
Agreement or for the validity or enforceability thereof against Seller.

14.11 FUTURE ACTION. During the term of this Escrow, without the prior
written consent of Buyer, which consent may not be unreasonably withheld, Seller
(or any of them) shall not execute or consent to the execution of any document,
agreement or other instrument which may affect, modify, limit or terminate any
permits, approvals or entitlements affecting the Property, result in an
alteration of the condition of title to the Property or the Easement as approved
by Buyer, extend the Closing Date or impair the ability of Seller to deliver
title to and possession of the Property to Buyer in accordance with the terms of
this Agreement.

14.12 UNDISCLOSED ASSESSMENTS. Other than as set forth in the Updated
Report, as supplemented from time to time, and the Property Documents, to the
best of Seller's knowledge there are no pending or proposed assessments nor any
understanding or agreement with any taxing authority respecting the imposition
or deferment of any taxes or assessments respecting the Property.

14.13 HAZARDOUS MATERIALS. To the best of Seller's knowledge (1) the
Property and the Easement are not in violation of any Environmental Laws; (2)
neither Seller nor any third party has used, manufactured, generated, treated,
stored, disposed of, or released any Hazardous Materials on, under or about the
Property or the Easement or transported any Hazardous Materials over the
Property or the Easement; and (3) there has been no presence, use, generation,
storage, transportation, release or discharge of Hazardous Materials on,
beneath, above or in the vicinity of the Property or the Easement prior to the
Closing Date.

14.14 NO BANKRUPTCY. The persons and entities comprising Seller have
neither filed nor been the subject of any filing of a petition under the Federal
Bankruptcy Law or any federal

-20-

CONFIDENTIAL TREATMENT

or state insolvency laws or laws for composition of indebtedness or for the
reorganization of debtors.

14.15 COST LIENS. All costs associated with any improvements to, or for
the benefit of, the Property have been fully paid and, to the best of Seller's
knowledge, there is no basis for any mechanics' or materialmen's lien or any
lien for professional services affecting the Property or the Easement as a
result of work or services performed or materials provided to Seller or for the
benefit of the Property prior to the Close of Escrow.

14.16 SETTLEMENT AGREEMENT. To the best of Seller's knowledge with respect
to the Settlement Agreement:

14.16.1 Except as more particularly set forth on Exhibit "N" (to
be attached hereto by Seller within ten (10) days from Opening of Escrow
[Settlement Agreement Actions]) all respective obligations and conditions to
such obligations, of the parties to the Settlement Agreement pertaining to the
Property have been fully satisfied and performed in accordance with the terms
thereof;

14.16.2 The City has no rights under the Settlement Agreement to
acquire or reacquire any portion of the Property, nor any interest therein; and

14.16.3 Neither Seller nor the City has any right to rescind any
provisions contained in, or actions heretofore taken under the Settlement
Agreement pertaining to the Property and the use, entitlement and development
thereof.

14.16.4 Neither Seller nor the City is in breach or default of
its respective obligations under the Settlement Agreement, and no event has
occurred which with notice or lapse of time would constitute an event of default
by Seller or the City under the Settlement Agreement.

14.17 WETLANDS RESTORATION. Except as set forth in the Restoration Plan,
the Coastal Development Permit Amendment 6-98-154-A1 or as otherwise disclosed
in Article 7.10 [Wetland Restoration], to the best of Seller's knowledge, there
is no restriction upon or other impediment to implementation of the Restoration
Plan and use of the Easement for purposes of wetlands restoration as set forth
in the Restoration Plan.

14.18 CHANGE IN REPRESENTATION OR WARRANTY. The representations of Seller
set forth above in this Article 14 are made as of the date of execution of this
Agreement and are intended to be true and correct as of the Close of Escrow. If,
subsequent to the date of this Agreement and prior to the Close of Escrow,
Seller determines that, as a result of facts or subsequent events discovered or
arising after execution of this Agreement, any of such representations (except
for those set forth in Section 14.1) [the "Section 14.1 Representations"] are no
longer true and correct as of such subsequent date, Seller shall not be in
breach of this Agreement, provided that Seller shall promptly notify Buyer in
writing ("Change Notice") of such facts or subsequent events and the effect on
the applicable representation and provided further that such subsequent event
was not caused or consented to by Seller. Seller shall have the option, but not
the obligation, to take steps to cure or correct the situation so that the
affected representation and any

-21-

CONFIDENTIAL TREATMENT

Section 14.1 Representation will be true and correct as of the Close of Escrow,
and, if Seller exercises such option, Seller shall identify the corrective
action in the Change Notice. If Seller elects to undertake corrective action
such that the affected representation will be true and correct as of the Close
of Escrow, the parties shall proceed with performance under this Agreement and
the Closing, Seller shall complete such corrective action, and the Closing Date
shall be extended for the time reasonably required by Seller to complete such
cure, not to exceed thirty (30) days. If Seller does not elect to undertake such
corrective action, then, within fifteen (15) days after Buyer's receipt of the
Change Notice, but in no event later than the Closing Date, Buyer shall elect,
by delivering written notice to Escrow Agent (with a copy to Seller) either to:
(1) proceed with performance of this Agreement and the Closing; or (2) terminate
this Agreement and the Escrow for non-satisfaction of a condition. In the event
of termination pursuant to this Section, Buyer's Deposit (plus interest earned
thereon) shall be returned to Buyer and except for termination resulting from
(A) the failure of a representation to be true as a result of a subsequent event
caused or consented to by Seller, or (B) the failure of Section 14.1
Representation to be true as of the Closing, neither party shall have any
further obligation hereunder except for any obligations which survive
termination under the provisions of this Agreement.

ARTICLE 15

BUYER'S WARRANTIES

15.1 AUTHORITY. Buyer warrants that, subject to satisfaction of the
conditions set forth in Article 6.1.5 (Approval by Board of Directors of Buyer),
Buyer has the authority to enter into this Agreement and to complete the
purchase of the Property as set forth in this Agreement.

15.2 SATISFACTION AND WARRANTY. Buyer warrants to Seller that Buyer is
purchasing the Property in its "as is" condition and based upon Buyer's
examination, inspection, and satisfaction as to the physical condition of the
Property and all land use and development rights, entitlements and permits.

ARTICLE 16

SURVIVAL

All of the covenants, representations and warranties of Buyer and Seller
set forth in this Agreement, including, without limitation, any and all waivers,
hold harmless and indemnity covenants of Buyer and Seller shall survive the
Close of Escrow and shall remain in full force and effect.

ARTICLE 17

ASSIGNMENT AND INDEMNIFICATION BY BUYER

17.1 ASSIGNMENT. Buyer shall have the right to assign its rights
hereunder ("Permitted Assignment") to (i) any entity that is controlled by,
controls, or is under common control with Buyer, provided that such assignee has
the financial capacity to consummate the transactions contemplated hereunder, or
(ii) a to-be-identified third party financial institution for purposes of

-22-

CONFIDENTIAL TREATMENT

structuring the purchase of the Property as a synthetic lease ( "Synthetic Lease
Entity"). Seller agrees to cooperate with Buyer if Buyer elects to structure the
purchase of the Property as a synthetic lease transaction, provided that Seller
shall incur no additional third party costs (except as reimbursed by Buyer) or
liabilities thereby. Buyer shall indemnify and hold Seller harmless from and
against any and all claims asserted by any such Synthetic Lease Entity with
respect to any assignment or otherwise arising from the transactions between
Buyer, the Synthetic Lease Entity or any other financial institution involved in
the proposed synthetic lease transaction, except to the extent any such claim
results from Seller's failure to perform its obligations, or a breach of
Seller's representations and warranties as set forth in this Agreement and
further excepting any other claims which Buyer would have against Seller had
Buyer purchased the Property directly from Seller. Except for a Permitted
Assignment, Buyer shall not have the right to otherwise assign its rights
hereunder without first having obtained Seller's written approval which Seller
may approve or deny in its sole and absolute discretion, except that Seller's
approval shall not be unreasonably withheld if the original Buyer remains liable
for consummating the Close of Escrow pursuant to this Agreement ("Requested
Assignment"). Any Permitted Assignment or request for a Requested Assignment
shall be submitted to Seller in writing, accompanied by (a) financial statement
of the proposed assignee, prepared by a certified public accountant in
accordance with generally accepted accounting principles so as to reflect the
assignee's financial condition as of a date not earlier than three (3) months
prior to the date of such written request; (b) a statement of the proposed
assignee's qualification to become the assignee of Buyer's rights; and (c) a
written agreement executed by the assignee obligating the assignee to perform
the assignor's obligations hereunder in a form reasonably satisfactory to
Seller. Approval of any Requested Assignment shall not constitute a waiver of
Seller's right to approve or disapprove any subsequent proposed Requested
Assignment.

17.2 EFFECT OF ASSIGNMENT. In the event of any Permitted Assignment or
approved Requested Assignment, the assignee shall be and become obligated under
the terms of this Agreement as (i) the grantee of the Seller's Grant Deed and
any other grant of rights contemplated hereunder, whether by assignment or deed,
(ii) the insured under the Title Policy, (iii) the person(s) having the right or
obligation to (a) deliver statements, (b) deliver documents, (c) give approvals,
(d) waive conditions, or (e) make demands, all as may be permitted or required
by this Agreement.

ARTICLE 18

LIQUIDATED DAMAGES; REMEDIES

18.1 ESCROW NON-LIABILITY. Escrow Agent shall have no concern with or
liability or responsibility for this Article.

18.2 LIQUIDATED DAMAGES. THE PARTIES ACKNOWLEDGE AND AGREE THAT SELLER
WILL SUFFER SUBSTANTIAL DAMAGES IF THE CLOSING DOES NOT OCCUR AS A RESULT OF A
DEFAULT BY BUYER. GIVEN FLUCTUATIONS IN LAND VALUES, THE UNPREDICTABLE STATE OF
THE ECONOMY AND OF GOVERNMENTAL REGULATIONS, THE FLUCTUATING MONEY MARKET FOR
REAL ESTATE LOANS, AND OTHER FACTORS WHICH DIRECTLY AFFECT THE VALUE AND
MARKETABILITY OF THE PROPERTY, THE PARTIES REALIZE THAT IT WILL

-23-

CONFIDENTIAL TREATMENT REQUESTED

BE EXTREMELY DIFFICULT AND IMPRACTICAL, IF NOT IMPOSSIBLE, TO ASCERTAIN WITH ANY
DEGREE OF CERTAINTY THE ACTUAL AMOUNT OF SELLER'S DAMAGES IN THE EVENT OF SUCH
FAILURE TO PERFORM BY BUYER. THEREFORE, THE PARTIES HEREBY AGREE THAT BUYER'S
DEPOSIT [CONFIDENTIAL TREATMENT REQUESTED] AND ALL INTEREST ACCRUED THEREON
WHILE HELD BY ESCROW AGENT REPRESENTS A REASONABLE ESTIMATE OF SUCH DAMAGES,
CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF EXECUTION OF THIS
AGREEMENT, AND THAT SELLER SHALL HAVE THE RIGHT TO RECEIVE AND RETAIN THE FULL
AMOUNT OF THE DEPOSIT AND ACCRUED INTEREST AS LIQUIDATED DAMAGES PURSUANT TO
CALIFORNIA CIVIL CODE SECTION 1671, AS SELLER'S SOLE AND EXCLUSIVE REMEDY AS A
RESULT OF BUYER'S DEFAULT. SELLER WAIVES ALL RIGHTS AND REMEDIES SELLER
OTHERWISE MAY HAVE BASED UPON SUCH DEFAULT, INCLUDING, WITHOUT LIMITATION, ANY
RIGHT PURSUANT TO CALIFORNIA CIVIL CODE SECTION 3389 TO SPECIFICALLY ENFORCE
THIS AGREEMENT. IF THE CLOSE OF ESCROW FAILS TO OCCUR FOR ANY REASON OTHER THAN
BUYER'S DEFAULT UNDER THIS AGREEMENT, BUYER AND SELLER SHALL PROMPTLY GIVE
WRITTEN INSTRUCTIONS TO ESCROW AGENT TO IMMEDIATELY RETURN TO BUYER THE DEPOSIT,
TOGETHER WITH ALL INTEREST ACCRUED THEREON. BY SIGNING THEIR INITIALS BELOW,
EACH PARTY CONFIRMS ITS CONSENT TO AND AGREEMENT WITH THE PROVISIONS OF THIS
PARAGRAPH:

----------------------------- ------------------------------
Seller's Initials Buyer's Initials

The parties agree that a single initial by Archie Wright III, in his
capacity as attorney in fact for any of the entities comprising Seller, shall
for purposes of this Article 18 be effective as to all such entities.

18.3 BUYER'S REMEDIES. In the event of a default by Seller, and in
addition to the return of the Deposit and interest accrued thereon and the right
to terminate this Agreement, Buyer shall have the right to recover damages or to
pursue any other remedy available at law or in equity.

ARTICLE 19

REAL ESTATE COMMISSION

Each party warrants to the other that the warranting party has incurred no
obligation for a real estate broker's or salesman's commission by reason of this
Agreement or the transaction contemplated hereby for which the other party would
be liable.

-24-

CONFIDENTIAL TREATMENT

ARTICLE 20

NOTICES

Unless otherwise specifically provided herein, all notices, demands or
other communications given hereunder shall be in writing and shall be deemed
delivered as of actual personal delivery or except as to Escrow Agent who may
use regular mail, as of the second business day after mailing by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

If to Seller, to: San Dieguito Partnership, LP
San Dieguito Valley, Inc., General Partner
Roy B. Collins, President 656 Fifth Avenue, Suite B
San Diego, CA 92101
Telephone: (619) 232-6599
Fax: (619) 232-6592

with copy to: Baker & McKenzie
Clark H. Libenson, Esq.
101 West Broadway, 12th Floor
San Diego, CA 92101
Telephone: (619) 235-7778
Fax: (619) 236-0429

If to Buyer, to: IDEC Pharmaceuticals Corporation
Attn: Phillip Schneider, and Corporate Secretary
3030 Callan Road
San Diego, CA 92121
Telephone: (858) 431-8500
Fax: (858) 431-8887

with copy to: Allen Matkins Leck Gamble & Mallory LLP
Attn: Ellen B. Spellman, Esq.
501 West Broadway, Ninth Floor
San Diego, CA 92101
Telephone: (619) 233-1155
Fax: (619) 233-1158

If to Escrow Agent, to: Chicago Title Company
Attn: Shelva Molm
925 "B" Street
San Diego, CA 92101
Telephone: (619) 544-6250
Fax: (619) 544-6229

or such other address or to such other person as any party shall designate to
the others for such purpose in the manner hereinabove set forth.

-25-

CONFIDENTIAL TREATMENT

ARTICLE 21

TAX-FREE EXCHANGE

21.1 BUYER COOPERATION IN TAX DEFERRED EXCHANGE. Buyer shall cooperate
with any Seller desiring to exchange its undivided ownership interest in the
Property so as to effectuate a tax-free exchange under the provisions of Section
1031 of the Internal Revenue Code. Buyer shall cooperate with Seller by the
execution of such documents as are reasonably necessary to effectuate the
exchange provided the same (i) does not delay the Close of Escrow (ii) is
without any liability, cost or expense to Buyer; and (iii) Buyer is not required
thereby to hold title to any property other than the Property.

ARTICLE 22

EXTENT OF ESCROW AGENT'S RESPONSIBILITIES

22.1 ESCROW AGENT LIABILITY. Escrow Agent shall not be liable for any of
its acts or omissions unless the same shall constitute negligence or willful
misconduct.

22.2 INFORMING PARTIES. Escrow Agent shall have no obligation to inform
any party of any other transaction or of facts within Escrow Agent's knowledge,
even though the same concerns the Property, provided such matters do not prevent
Escrow Agent's compliance with this Agreement.

22.3 RESPONSIBILITY FOR DOCUMENTS. Escrow Agent shall not be responsible
for (a) the sufficiency or correctness as to form or the validity of any
document deposited with Escrow Agent; (b) the manner of execution of any such
deposited document, unless such execution occurs in Escrow Agent's premises and
under its supervision; or (c) the identity, authority, or rights of any persons
executing any document deposited with Escrow Agent.

22.4 CONFLICTING DEMANDS AND CLAIMS. Should Escrow Agent receive or
become aware of conflicting demands or claims with respect to the Escrow, the
rights of any party hereto, or funds, documents or property deposited with
Escrow Agent, Escrow Agent shall have the right to discontinue any further acts
until such conflict is resolved to its satisfaction, and it shall have the
further right to commence or defend any action for the determination of such
conflict. The parties shall, immediately after demand therefor by Escrow Agent,
reimburse Escrow Agent (in such respective proportions as the Court shall
determine) any reasonable attorney's fees and court costs incurred by Escrow
Agent pursuant to this Paragraph.

22.5 REPORTING OF TRANSACTION. As the party responsible for closing the
transaction contemplated by this Agreement, Escrow Agent will take all steps
necessary to report this transaction to the Internal Revenue Service as required
by section 6045 of the Internal Revenue Code of 1986. Buyer and Seller will
provide Escrow Agent with all documents reasonably required by Escrow Agent to
satisfy this reporting requirement.

-26-

CONFIDENTIAL TREATMENT

ARTICLE 23

GENERAL PROVISIONS

23.1 BREACH. The failure of any condition precedent set forth in
Article 6, [Conditions Precedent and Covenants] to be satisfied shall not
constitute a breach of this Agreement by either Buyer or Seller provided that
the failure of a condition to be satisfied is not the result of a default in the
performance of any obligation of the defaulting party.

23.2 CAPTIONS. Captions in this Agreement are inserted for convenience of
reference only and do not define, or limit the scope or the intent of this
Agreement or any of the terms hereof.

23.3 CASH DEFINED. Whenever used in this Agreement the term "cash" means
currency, cashier's checks, or Federal Funds wire transferred into Escrow
Agent's bank account.

23.4 CONFIDENTIALITY. Until the Close of Escrow, Seller and Buyer agree
to maintain, and cause their respective brokers and representatives to maintain,
the confidentiality of their negotiations with one another, and the transactions
contemplated by this Agreement. In addition, until the Close of Escrow, Buyer
agrees to maintain the confidentiality of all material and/or information
respecting the Property received from Seller to the extent such information has
been designated by Seller as confidential and is not otherwise within the public
domain. Buyer and Seller shall be permitted to disclose the terms of this
Agreement and such Property information to its employees, consultants, lenders,
partners, attorneys and/or agents responsible for working on this transaction.
Buyer and Seller shall also be permitted to disclose the terms of this Agreement
to the extent required by law applicable to such party such as, without
limitation, in the case of Buyer, reporting requirements of federal and state
securities laws and regulations. Seller and Buyer shall also coordinate and
consult with one another prior to making any public statements, or any
statements that may become public regarding this transaction. At the request of
Buyer or Seller, the documentary transfer tax shall be reported in a separate
document which shall not be recorded with the Grant Deed.

23.5 CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.

23.6 COUNTERPARTS. This Agreement may be executed in duplicate originals
or in any number of counterparts, and the signature pages of each counterpart
may be removed and attached to one agreement which shall be deemed an original,
and shall constitute one instrument.

23.7 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the transaction contemplated hereby and all
prior or contemporaneous agreements, understandings, representations and
statements, oral or written, are merged herein.

23.8 ESCROW DEFINED. Whenever used in this Agreement the term "Escrow"
shall mean the Escrow created by this Agreement.

23.9 EXHIBITS. All exhibits referred to herein and attached hereto are a
part hereof.

-27-

CONFIDENTIAL TREATMENT

23.10 GENDER. The use herein of (a) the neuter gender includes the
masculine and the feminine; and (b) the singular number includes the plural,
whenever the context so requires.

23.11 GOOD FAITH. Seller and Buyer agree to execute all such instruments
and documents and to take all actions as may be required in order to consummate
the purchase and sale contemplated herein, and to use their best efforts to
accomplish the close of this Escrow in accordance with the provisions hereof.

23.12 ATTORNEYS' FEES. In the event either party commences litigation
relating to or arising out of this Agreement, including any action or proceeding
for the judicial interpretation, enforcement or rescission hereof, the
prevailing party shall be entitled to a judgment against the other for an amount
including reasonable attorneys' fees and court and other costs incurred,
including attorney fees and court and other costs incurred in and from any
appeal resulting therefrom.

23.13 MODIFICATION. No modification, waiver, amendment, discharge or
change of this Agreement shall be valid unless the same is in writing and signed
by the owner(s) against which the enforcement of such modification, waiver,
amendment, discharge or change is or may be sought.

23.14 POSSESSION. Possession of the subject Property will be delivered to
Buyer as of the close of Escrow.

23.15 SEVERABILITY. In the event any term, covenant, condition, provision
or agreement herein contained is held to be invalid or void by any court of
competent jurisdiction, the invalidity of any such term, covenant, condition,
provision or agreement shall in no way affect any other term, covenant,
condition, provision or agreement herein contained.

23.16 SUCCESSORS. All terms of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective legal representatives, successors, assigns, trusts and beneficiaries
thereof.

23.17 SURVIVAL. All obligations referred to herein to be performed at a
time or times after the close of the Escrow, and all warranties and
representations contained herein, shall survive the close of the Escrow and the
delivery of Seller's Grant Deed.

23.18 TIME OF ESSENCE. Time is of the essence of this Agreement.

23.19 RULE OF CONSTRUCTION. The terms of this Agreement have been
negotiated in any statute or rule of construction that ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.

23.20 WAIVER. The failure of a party to insist upon another party's strict
adherence to any term of this Agreement on any occasion will not be construed as
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.

-28-

CONFIDENTIAL TREATMENT

THIS AGREEMENT has been executed in San Diego, California, as of the date
set forth at the beginning hereof.

"SELLER"

SAN DIEGUITO PARTNERSHIP, L.P., a California limited liability company

By: SAN DIEGUITO VALLEY, INC., a California corporation,
its sole General Partner

By: /s/ Roy B. Collins
------------------------
Roy B. Collins, President

JOHN R. BENSON AND BARBARA B. MEYER,
Co-Trustees of the Henrietta Benson Trust UDT 1/30/67

/s/ Archie T. Wright III
------------------------
John R. Benson, by Archie T. Wright III,
as his Attorney-in-Fact

/s/ Archie T. Wright III
------------------------
Barbara B. Meyer, by Archie T. Wright III,
as her Attorney-in-Fact

JOHN V. HANNON AND MARGARET E. HANNON,
Co-Trustees of the John V. Hannon Living Trust UDT 1/26/95

/s/ Archie T. Wright III
------------------------
John V. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

/s/ Archie T. Wright III
------------------------
Margaret E. Hannon, by Archie T. Wright III,
as her Attorney-in-Fact

-29-

CONFIDENTIAL TREATMENT

JOSEPH S. HANNON AND MATTIE SUE HANNON,
Co-Trustees of the Joseph S. Hannon Living Trust UDT 8/8/95

/s/ Archie T. Wright III
------------------------
Joseph S. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

/s/ Archie T. Wright III
------------------------
Mattie Sue Hannon, by Archie T. Wright III,
as her Attorney-in-Fact

MARY S. BAKER,
Trustee of the Mary S. Baker Living Trust UDT 5/14/92

/s/ Archie T. Wright III
------------------------
Mary S. Baker, by Archie T. Wright III,
as her Attorney-in-Fact

GUSTAF O. ARRHENIUS AND JENNY L. ARRHENIUS, Co-Trustees of the
Arrhenius Family Trust UDT 10/11/79

/s/ Archie T. Wright III
------------------------
Gustaf O. Arrhenius, by Archie T. Wright III,
as his Attorney-in-Fact

/s/ Archie T. Wright III
------------------------
Jenny L. Arrhenius, by Archie T. Wright III,
as her Attorney-in-Fact

PIA BARONE, a married woman

/s/ Archie T. Wright III
------------------------
Pia Barone, by Archie T. Wright III,
as her Attorney-in-Fact

-30-

CONFIDENTIAL TREATMENT

LOUIS J. PETERSON AND AGNES F. PETERSON,
Co-Trustees of the Louis J. Peterson and Agnes F. Peterson
Revocable Trust UDT 4/5/96

/s/ Archie T. Wright III
------------------------
Louis J. Peterson, by Archie T. Wright III,
as his Attorney-in-Fact

/s/ Archie T. Wright III
------------------------
Agnes F. Peterson, by Archie T. Wright III,
as her Attorney-in-Fact

WILLIAM R. REVELLE,
Trustee of the William R. Revelle Trust UDT 4/28/89

/s/ Archie T. Wright III
------------------------
William R. Revelle, by Archie T. Wright III,
as his Attorney-in-Fact

REVELLE FAMILY REAL ESTATE LIMITED LIABILITY COMPANY, a
Delaware limited liability company

By: /s/ Archie T. Wright III
------------------------
William R. Revelle, by Archie T. Wright III, as his
Attorney-in-Fact
Its: Managing Member

"BUYER"

IDEC PHARMACEUTICALS CORPORATION, a Delaware corporation

By: /s/ Phillip Schneider
------------------------
Its: SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER

-31-

CONFIDENTIAL TREATMENT

SCHEDULE "1"

NOBEL RESEARCH PARK OWNERSHIP
APN: 345-010-45; 345-011-25

February 1, 2001

SUPERVISING CO-TENANT:

SAN DIEGUITO PARTNERSHIP 28.1083629%

CO-TENANTS:

Revelle Family Real Estate LLC, a Delaware limited
liability company

John R. Benson and Barbara B. Meyer, Co-Trustees of 22.7398393%
the Henrietta Benson Trust UDT 1/30/67

John V. Hannon and Margaret E. Hannon, Co-Trustees 11.6067898%
of the John V. Hannon Living Trust UDT 1/26/95

Joseph S. Hannon and Mattie Sue Hannon, Co-Trustees
of the Joseph S. Hannon Living Trust UDT 8/8/95

Mary S. Baker, Trustee of the Mary S. Baker Living
Trust UDT 5/14/92

Gustaf O. Arrhenius and Jenny L. Arrhenius, Co-Trustees of the
Arrhenius Family Trust UDT 10/11/79

Pia Barone, a married woman

Louis J. Peterson and Agnes F. Peterson, Co-Trustees of
the Louis J. Peterson and Agnes F. Peterson Revocable
Trust UDT 4/5/96
-------------------

William R. Revelle, Trustee of the William R.
Revelle Trust UDT 4/28/89
-------------------
71.8916371%
-------------------
100.0000000%

-32-

CONFIDENTIAL TREATMENT

CONSENT OF ESCROW AGENT

The undersigned Escrow Agent hereby agrees to (a) accept the foregoing
Agreement and Instructions; (b) be escrow agent under said Agreement and
Instructions for the fees therein specified; and (c) be bound by said Agreement
and Instructions in the performance of its duties as Escrow Agent; provided,
however, the undersigned shall have no obligations, liability or responsibility
under this Consent or otherwise, unless and until (a) said Agreement and
Instructions, fully signed by the parties, have been delivered to the
undersigned; and (b) any amendment to said Agreement and Instructions unless and
until the same shall be accepted by the undersigned in writing.

Dated : July __, 2001 CHICAGO TITLE COMPANY

By:
-------------------------

-33-

CONFIDENTIAL TREATMENT

EXHIBIT "A"

NOBEL RESEARCH PARK

REAL PROPERTY DESCRIPTION

EXHIBIT "A"
-1-

CONFIDENTIAL TREATMENT

EXHIBIT "B"

NOBEL RESEARCH PARK

PLAT MAP

Refer to ALTA Survey, dated June 7, 2001, prepared by Rick Engineering

EXHIBIT "B"
-1-

CONFIDENTIAL TREATMENT

EXHIBIT C

MITIGATION LAND LEGAL DESCRIPTION

EXHIBIT "C"
-2-

CONFIDENTIAL TREATMENT

EXHIBIT D

MITIGATION LAND PLAT MAP

EXHIBIT "D"
-1-

CONFIDENTIAL TREATMENT

EXHIBIT "E"

TITLE REPORT

(CHICAGO TITLE COMPANY, DATED JUNE 25, 2001)

EXHIBIT "E"
-1-

CONFIDENTIAL TREATMENT

EXHIBIT "F"

GRANT DEED

RECORDING REQUESTED BY )
AND WHEN RECORDED MAIL TO: )
)
IDEC Pharmaceuticals Corporation )
Attention: Mr. Phillip Schneider )
3030 Callan Road )
San Diego, CA 92121 )
)
MAIL TAX STATEMENTS TO: )
)
SAME AS ABOVE )
)
- --------------------------------------------------------------------------------
(Space Above For Recorder's Use)

TAX ASSESSOR' PARCEL NO.
-------------------

Amount of Documentary Transfer Tax shown on attached paper -- not for public
record.

GRANT DEED

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
SAN DIEGUITO PARTNERSHIP, L.P., a California limited partnership, and the
undersigned persons and entities (collectively "Grantor"), hereby grant to IDEC
PHARMACEUTICALS CORPORATION, a Delaware corporation ("Grantee"), the real
property located in the City of San Diego, County of San Diego, State of
California, described as follows and hereinafter referred to as the "Property":

[INSERT LEGAL DESCRIPTION]

SUBJECT TO:

(1) All general and special real property taxes and assessments,
not delinquent; and

(2) All other conditions, covenants, liens, restrictions and

other encumbrances and matters of record in the Official Records of San Diego
County, California.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

EXHIBIT "F"
-1-

CONFIDENTIAL TREATMENT

[Signature Page to Grant Deed]

IN WITNESS WHEREOF, Grantor has executed this Grant Deed on

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

GRANTOR: SAN DIEGUITO PARTNERSHIP, L.P.,
a California limited liability company

By: San Dieguito Valley, Inc.,
a California corporation, General Partner

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

JOHN R. BENSON AND BARBARA B.
MEYER, Co-Trustees of the Henrietta Benson
Trust UDT 1/30/67

---------------------------------------------
John R. Benson, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Barbara B. Meyer, by Archie T. Wright III,
as her Attorney-in-Fact

JOHN V. HANNON AND MARGARET E.
HANNON, Co-Trustees of the John V. Hannon
Living Trust UDT 1/26/95

---------------------------------------------
John V. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Margaret E. Hannon, by Archie T. Wright III,
as her Attorney-in-Fact

EXHIBIT "F"
-2-

CONFIDENTIAL TREATMENT

JOSEPH S. HANNON AND MATTIE SUE
HANNON, Co-Trustees of the Joseph S. Hannon
Living Trust UDT 8/8/95

---------------------------------------------
Joseph S. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Mattie Sue Hannon, by Archie T. Wright III,
as her Attorney-in-Fact

MARY S. BAKER, Trustee of the Mary S. Baker
Living Trust UDT 5/14/92

---------------------------------------------
Mary S. Baker, by Archie T. Wright III,
as her Attorney-in-Fact

EXHIBIT "F"
-3-

CONFIDENTIAL TREATMENT

GUSTAF O. ARRHENIUS AND JENNY L.
ARRHENIUS, Co-Trustees of the Arrhenius
Family Trust UDT 10/11/79

---------------------------------------------
Gustaf O. Arrhenius, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Jenny L. Arrhenius, by Archie T. Wright III,
as her Attorney-in-Fact

PIA BARONE, a married woman

---------------------------------------------
Pia Barone, by Archie T. Wright III,
as her Attorney-in-Fact

LOUIS J. PETERSON AND AGNES F.
PETERSON, Co-Trustees of the Louis J. Peterson
and Agnes F. Peterson Revocable Trust UDT
4/5/96

---------------------------------------------
Louis J. Peterson, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Agnes F. Peterson, by Archie T. Wright III,
as her Attorney-in-Fact

WILLIAM R. REVELLE, Trustee of the
William R. Revelle Trust UDT 4/28/89

---------------------------------------------
William R. Revelle, by Archie T. Wright III,
as his Attorney-in-Fact

EXHIBIT "F"
-4-

CONFIDENTIAL TREATMENT

REVELLE FAMILY REAL ESTATE
LIMITED LIABILITY COMPANY, a Delaware
limited liability company

By:
-------------------------------------------
William R. Revelle, by Archie T. Wright III,
as his Attorney-in-Fact
Its: Managing Member

EXHIBIT "F"
-5-

CONFIDENTIAL TREATMENT

STATE OF
--------------------------
) ss
COUNTY OF )
--------------------------

On ________________________, before me, ________________________, a Notary
Public in and for said state, personally appeared _______________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

--------------------------------------
Notary Public in and for said State

[SEAL]

STATE OF
--------------------------
) ss
COUNTY OF )
--------------------------

WITNESS my hand and official seal.

--------------------------------------
Notary Public in and for said State

[SEAL]

EXHIBIT "F"
-6-

CONFIDENTIAL TREATMENT

EXHIBIT G

ASSIGNMENT AGREEMENT

This ASSIGNMENT AND ASSUMPTION AGREEMENT ("Assignment"), effective on
________________________, ____ ("Effective Date"), is executed by SAN DIEGUITO
PARTNERSHIP, L.P., a California limited partnership, and those other persons and
entities set forth below ("Assignor"), and IDEC PHARMACEUTICALS CORPORATION, a
Delaware corporation ("Assignee"), with reference to the following facts:

RECITALS

A. Pursuant to a Purchase and Sale Agreement and Escrow Instructions
("Purchase Agreement") dated _________________, 2001, Assignee has contracted to
purchase certain real property ("Property") owned by Assignor, located in the
City of San Diego, County of San Diego, State of California, more particularly
described in Exhibit "A" attached to the Purchase Agreement.

B. As a condition to such purchase, Assignor has agreed to transfer and
assign Assignor's interest in certain plans, drawings, specifications, tests,
reports, maps, governmental permits, approvals and other entitlements relating
to the Property.

NOW, THEREFORE, in consideration of the mutual covenants set forth in the
Purchase Agreement, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1. ASSIGNMENT. Assignor hereby assigns and transfers to Assignee, as of
the Effective Date, the following property (collectively, the "Assigned
Property"):

(a) All of Assignor's right, title and interest in and to the
maps, permits, entitlements, rights and approvals issued by the City of San
Diego ("City") and any other governmental authorities in connection with the
construction, development, operation and use of the Property, all soils tests
and reports, surveys, engineering reports, environmental reports, drawings and
specifications relating in any way to the Property including, without limitation
all of Assignor's right, title and interest in and to those matters more
particularly described in Schedule "1" attached hereto;

(b) All of Assignor's right, title and interest in and to the
name "Nobel Research Park" and other intellectual or intangible property
relating to the Property.

2. PRORATION OF OBLIGATIONS. Assignor has paid and shall indemnify,
defend and hold Assignee harmless from and against any and all fees, costs and
expenses which arose and/or accrued prior to the Effective Date with respect to
the Assigned Property. As part of the Assigned Property, Assignor hereby assigns
to Assignee any and all deposits with the City, other governmental agencies or
other parties in respect of the Assigned Property. From and after the Effective
Date, Assignee shall pay and indemnify, defend and hold Assignor harmless from
and against any and all fees, costs, expenses and additional deposits which
accrue, arise or are required from and after the Effective Date with respect to
the Assigned Property.

EXHIBIT "G"
-1-

CONFIDENTIAL TREATMENT

3. PROPRIETARY INTERESTS. To the extent any of the Assigned Property is
proprietary to the consultant or person preparing same or require payment of
additional fees for re-use by Assignee, Assignee shall be responsible for
obtaining any and all consents required from such consultants or persons and
shall pay any fees required for use or re-use of such Assigned property by
Assignee.

4. EFFECTIVE DATE OF ASSIGNMENT. The Assignment shall take effect on
the Effective Date set forth above, which is the date of recordation of the
Grant Deed conveying the Property from Assignor to Assignee.

5. GENERAL PROVISIONS.

(a) ATTORNEYS' FEES. In the event of any legal action or
proceeding between the parties in connection with this Assignment, the
prevailing party shall be entitled to recover from the losing party all of its
costs and expenses, including court costs and reasonable attorneys' fees.

(b) GOVERNING LAW. This Assignment shall be governed, construed
and enforced in accordance with the laws of the State of California.

(c) NOTICE. Notice to either party shall be in writing, addressed
to the party to be notified at the address specified herein, and either (a)
personally delivered, (b) sent by an overnight courier service such as Airborne,
Federal Express, or Purolator, (c) sent by first-class mail, registered or
certified mail, postage prepaid, return receipt requested, or (d) sent by
telecopier with written confirmation of receipt requested. Any such notice shall
be deemed received: (a) on the date of receipt if personally delivered; (b) on
the date of receipt as evidenced by the receipt provided by an overnight courier
service, if sent by such courier; or (c) three (3) business days after deposit
in the U.S. Mail, if sent by mail.

ASSIGNOR'S ADDRESS FOR NOTICE:

If to Assignor, to: San Dieguito Partnership, LP
San Dieguito Valley, Inc., General Partner
Roy B. Collins, President
656 Fifth Avenue, Suite B
San Diego, CA 92101
Telephone: (619) 232-6599
Fax: (619) 232-6592

With copy to: Baker & McKenzie
Clark H. Libenson, Esq.
101 West Broadway, 12th Floor
San Diego, CA 92101
Telephone: (619) 235-7778
Fax: (619) 236-0429

EXHIBIT "G"
-2-

CONFIDENTIAL TREATMENT

If to Assignee, to: IDEC Pharmaceuticals Corporation
3030 Callan Road
San Diego, CA 92121
Attn: Mr. Phillip Schneider and Corporate
Secretary
Telephone: (858) 431-8500
Fax: (858) 431-8887

With copy to: Allen Matkins Leck Gamble & Mallory LLP
501 West Broadway, Ninth Floor
San Diego, CA 92101
Attn: Ellen B. Spellman, Esq.
Telephone: (619) 233-1155
Fax: (619) 233 1158

If to Escrow Agent, to: Chicago Title Company
925 "B" Street
San Diego, CA 92101
Attn: Ms. Shelva Molm
Telephone: (619) 544-6250
Fax: (619) 544-6229

Either party may change its address for notice by delivering written notice
to the other party as provided herein.

(d) SUCCESSORS. This Assignment shall be binding on and inure to
the benefit of the parties and their respective heirs, legal representatives,
successors, and assigns.

EXHIBIT "G"
-3-

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment to be effective as of the Effective Date set forth above.

"ASSIGNOR" SAN DIEGUITO PARTNERSHIP, L.P.,
a California limited liability company

By: San Dieguito Valley, Inc.,
a California corporation, General Partner

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

JOHN R. BENSON AND BARBARA B.
MEYER, Co-Trustees of the Henrietta Benson
Trust UDT 1/30/67

---------------------------------------------
John R. Benson, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Barbara B. Meyer, by Archie T. Wright III,
as her Attorney-in-Fact

JOHN V. HANNON AND MARGARET E.
HANNON, Co-Trustees of the John V. Hannon
Living Trust UDT 1/26/95

------------------------------------------
John V. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

------------------------------------------
Margaret E. Hannon, by Archie T. Wright III,
as her Attorney-in-Fact

EXHIBIT "G"
-4-

CONFIDENTIAL TREATMENT

JOSEPH S. HANNON AND MATTIE SUE
HANNON, Co-Trustees of the Joseph S. Hannon
Living Trust UDT 8/8/95

---------------------------------------------
Joseph S. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

Mattie Sue Hannon, by Archie T. Wright III,
as her Attorney-in-Fact

MARY S. BAKER, Trustee of the Mary S. Baker
Living Trust UDT 5/14/92

---------------------------------------------
Mary S. Baker, by Archie T. Wright III,
as her Attorney-in-Fact

GUSTAF O. ARRHENIUS AND JENNY L.
ARRHENIUS, Co-Trustees of the Arrhenius
Family Trust UDT 10/11/79

---------------------------------------------
Gustaf O. Arrhenius, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Jenny L. Arrhenius, by Archie T. Wright III,
as her Attorney-in-Fact

PIA BARONE, a married woman

---------------------------------------------
Pia Barone, by Archie T. Wright III,
as her Attorney-in-Fact

EXHIBIT "G"
-5-

CONFIDENTIAL TREATMENT

LOUIS J. PETERSON AND AGNES F.
PETERSON, Co-Trustees of the Louis J. Peterson
and Agnes F. Peterson Revocable Trust UDT
4/5/96

---------------------------------------------
Louis J. Peterson, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Agnes F. Peterson, by Archie T. Wright III,
as her Attorney-in-Fact

WILLIAM R. REVELLE, Trustee of the
William R. Revelle Trust UDT 4/28/89

---------------------------------------------
William R. Revelle, by Archie T. Wright III,
as his Attorney-in-Fact

REVELLE FAMILY REAL ESTATE
LIMITED LIABILITY COMPANY, a Delaware
limited liability company

By:
-------------------------------------------
William R. Revelle, by Archie T. Wright III,
as his Attorney-in-Fact
Its: Managing Member

"ASSIGNEE" DEC PHARMACEUTICALS CORPORATION,
a Delaware corporation

By:
-------------------------------------------
Name:
-------------------------------------------
Its:
-------------------------------------------

EXHIBIT "G"
-6-

CONFIDENTIAL TREATMENT

SCHEDULE 1

ASSIGNMENT AND ASSUMPTION AGREEMENT

ASSIGNED PROPERTY

1. Vesting Tentative Map No. 99-0034

- Resolution R-292054 adopted by San Diego City Council on
August 3, 1999

2. Planned Industrial Development/Resource Protection Ordinance Permit
No. 99-0034

- Resolution R-292055 adopted by San Diego City Council on
August 3, 1999

3. Ordinance O-18677 approving zone change from R-1-5 to Scientific
Research (SR) adopted by San Diego City Council on September 14,
1999

4. Certification of Mitigated Negative Declaration DEP 99-0034

- Resolution R-292053 adopted by San Diego City Council on
August 3, 1999

5. Planned Industrial Permit recorded March 17, 2000

6. Design Guidelines dated June 28, 1999

7. California Coastal Commission Amendment 6-98-154-A1 dated
November 1, 1999 (Implementation of 0.90 acre wetland creation and
enhancement)

8. Non-Exclusive Mitigation Easement recorded November 4, 1999, as
amended and restated and recorded on December 15, 2000

9. Geotechnical Report Prepared by Robert Prater Associates February
28, 1999

10. Phase I Report Prepared by Robert Prater Associates January 29, 1999

11. Mitigated Negative Declaration & Technical Appendices (DEP 99-0034)
Prepared by RECON Final Report June 30, 1999

- Wetland Delineation Report

- Biological Resources Survey

- Cultural Resource Survey

SCHEDULE 1
-1-

CONFIDENTIAL TREATMENT

- Conceptual Wetland Habitat Restoration Plan

- Quino Checkerspot Butterfly Flight Survey Report

- Noise Technical Report

12. Traffic Impact Analysis Prepared by Kimley Horn Associates May 19,
1999

13. Water Study Prepared by Powell & Associates September 10, 1999

14. Department of Fish and Game Streambed Alteration Permit (Section
1603) Notification No. 5-217-99

15. Settlement Agreement by and between the City of San Diego and the
San Dieguito Partnership dated November 16, 1998

- First Amendment to Settlement Agreement dated December 21,
1999

- Letter Agreement by and between the City of San Diego and the
San Dieguito Partnership dated December 21, 1999

16. Approved Vesting Tentative Map No. 99-0034 (Drawings), prepared by
Rick Engineering

17. Preliminary Plans and Drawings for Mass Grading of the Nobel
Research Park and Improvement of Judicial Drive pursuant to private
contract No. J-13360B dated December 14, 2000; prepared by Rick
Engineering

18. ALTA Survey dated June 7, 2001, prepared by Rick Engineering

19. License Agreement by and between San Dieguito Partnership as
Licensor and La Jolla Crossroads 1 LLC (Garden Communities) as
Licensee dated January 26, 2001, as amended April 6, 2001.

20. All rights and privileges related to or arising from any and all
studies, reports, surveys, plans, drawings, permits, approvals and
agreements of any kind or nature undertaken, made, issued or granted
on behalf of the Nobel Research Park.

SCHEDULE 1
-2-

CONFIDENTIAL TREATMENT

EXHIBIT H

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

This ASSIGNMENT AND ASSUMPTION OF CONTRACTS ("Assignment"), effective on
______________, 2001 ("Effective Date"), is executed by SAN DIEGUITO
PARTNERSHIP, L.P., a California limited partnership, and those other persons and
entities set forth below ("Assignor"), and IDEC PHARMACEUTICALS CORPORATION, a
Delaware corporation ("Assignee"), with reference to the following facts:

R E C I T A L S :

A. Pursuant to that certain Purchase and Sale Agreement and Escrow
Instructions ("Purchase Agreement") dated _____________, 2001, Assignor has
contracted to sell and Assignee has contracted to purchase certain real property
more particularly described in Exhibit "A" attached to the Purchase Agreement
("Property").

B. Pursuant to the Purchase Agreement, Assignor has agreed to transfer
and assign, and Assignee has agreed to assume, certain contractual obligations
of Assignor relating to the Property.

A G R E E M E N T :

NOW, THEREFORE, in consideration of the mutual covenants set forth in the
Purchase Agreement and the mutual covenants set forth herein, and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

1. ASSIGNMENT OF CONTRACTS. Assignor hereby assigns and transfers to
Assignee all its right, title and interest in and to the contracts listed on
Schedule "1" attached hereto and made a part hereof ("Contracts").

2. ASSUMPTION OF CONTRACTS. Assignee hereby accepts said assignment,
expressly assumes Assignor's interest in the Contracts and agrees to be bound by
all the terms, conditions and covenants thereof, and agrees to perform all the
obligations imposed on Assignor thereunder arising on or after the Effective
Date.

3. EFFECTIVE DATE. The assignment and assumption shall take effect on
the Effective Date first set forth above, which is the date of recordation of
the grant deed transferring the Real Property from Assignor to Assignee.

4. PAYMENT. Assignor represents and warrants that, as of the Effective
Date, all sums due and payable by Assignor under the Contracts for work and
services performed or materials delivered prior to the Effective Date have been
paid in full.

EXHIBIT "H"
-1-

CONFIDENTIAL TREATMENT

on or after the Effective Date. Assignor shall indemnify, protect, hold harmless
and defend (by counsel reasonably approved by Assignee) Assignee from and
against any and all losses, liabilities, claims, demands, damages, costs or
other expenses, including reasonable attorneys' fees, arising from or relating
to any breach or default or obligation under the Contracts occurring prior to
the Effective Date.

6. GENERAL PROVISIONS.

(a) ATTORNEYS' FEES. In the event of any legal action or
proceeding between the parties arising out of this Assignment, the losing party
shall pay the prevailing party's legal costs and expenses, including, but not
limited to, reasonable attorneys' fees as determined by the court.

(b) ASSIGNMENT/SUCCESSORS. This Assignment shall inure to the
benefit of and be binding upon the parties and their respective legal
representatives, heirs, successors and assigns, including any nominee or
assignee of Assignee under the Purchase Agreement.

(c) AUTHORITY. Each party represents and warrants that it has
full power and authority to execute and fully perform its obligations under this
Assignment pursuant to its governing instruments, without the need for any
further action, and that the person(s) executing this Assignment on behalf of
such party are duly designated agents and are authorized to do so.

(d) COUNTERPARTS. This Assignment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement after each party has executed such a
counterpart.

(e) GOVERNING LAW. This Assignment shall be governed, construed
and enforced in accordance with the laws of the State of California.

(f) NOTICE. Notice to either party shall be in writing, addressed
to the party to be notified at the address specified herein, and either (1)
personally delivered, or (2) sent by a recognized national overnight courier
service such as Airborne, Federal Express or Purolator which provides a receipt
upon delivery, or (3) sent by registered or certified first-class U.S. mail,
postage prepaid, return receipt requested. Any such notice shall be deemed
received on the date of receipt if personally delivered, or on the date of
delivery evidenced by the receipt provided by the courier service or the
registered or certified mail receipt, as the case may be.

EXHIBIT "H"
-2-

CONFIDENTIAL TREATMENT

With copy to: Baker & McKenzie
Clark H. Libenson, Esq.
101 West Broadway, 12th Floor
San Diego, CA 92101
Telephone: (619) 235-7778
Fax: (619) 236-0429

If to Assignee, to: IDEC Pharmaceuticals Corporation
3030 Callan Road
San Diego, CA 92121
Attn: Mr. Phillip Schneider and Corporate
Secretary
Telephone: (858) 431-8500
Fax: (858) 431-8887

With copy to: Allen Matkins Leck Gamble & Mallory LLP
501 West Broadway, Ninth Floor
San Diego, CA 92101
Attn: Ellen B. Spellman, Esq.
Telephone: (619) 233-1155
Fax: (619) 233 1158

If to Escrow Agent, to: Chicago Title Company
925 "B" Street
San Diego, CA 92101
Attn: Ms. Shelva Molm
Telephone: (619) 544-6250
Fax: (619) 544-6229

Either party may change its address for notice by delivering written notice
to the other party as provided herein.

[Signatures Appear on Next Page]

EXHIBIT "H"
-3-

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption of Contracts to be effective on the Effective Date first set forth
above.

"ASSIGNOR"

SAN DIEGUITO PARTNERSHIP, L.P.,
a California limited liability company

By: SAN DIEGUITO VALLEY, INC.,
a California corporation, General Partner

By:
-----------------------------------------
Roy B. Collins, President

JOHN R. BENSON AND BARBARA B. MEYER,
Co-Trustees of the Henrietta Benson Trust
UDT 1/30/67

-----------------------------------------
John R. Benson, by Archie T. Wright III,
as his Attorney-in-Fact

-----------------------------------------
Barbara B. Meyer, by Archie T. Wright III,
as her Attorney-in-Fact

JOHN V. HANNON AND MARGARET E. HANNON,
Co-Trustees of the John V. Hannon Living Trust
UDT 1/26/95

-----------------------------------------
John V. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

-----------------------------------------
Margaret E. Hannon, by Archie T. Wright
III, as her Attorney-in-Fact

EXHIBIT "H"
-4-

CONFIDENTIAL TREATMENT

JOSEPH S. HANNON AND MATTIE SUE HANNON,
Co-Trustees of the Joseph S. Hannon Living
Trust UDT 8/8/95

-----------------------------------------
Joseph S. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

-----------------------------------------
Mattie Sue Hannon, by Archie T. Wright
III, as her Attorney-in-Fact

MARY S. BAKER, Trustee of the Mary S. Baker
Living Trust UDT 5/14/92

-----------------------------------------
Mary S. Baker, by Archie T. Wright III,
as her Attorney-in-Fact

GUSTAF O. ARRHENIUS AND JENNY L. ARRHENIUS,
Co-Trustees of the Arrhenius Family Trust UDT
10/11/79

-----------------------------------------
Gustaf O. Arrhenius, by Archie T. Wright
III, as his Attorney-in-Fact

-----------------------------------------
Jenny L. Arrhenius, by Archie T. Wright
III, as her Attorney-in-Fact

PIA BARONE, a married woman

-----------------------------------------
Pia Barone, by Archie T. Wright III,
as her Attorney-in-Fact

EXHIBIT "H"
-5-

CONFIDENTIAL TREATMENT

LOUIS J. PETERSON AND AGNES F. PETERSON,
Co-Trustees of the Louis J. Peterson and
Agnes F. Peterson Revocable Trust UDT 4/5/96

-----------------------------------------
Louis J. Peterson, by Archie T. Wright
III, as his Attorney-in-Fact

-----------------------------------------
Agnes F. Peterson, by Archie T. Wright
III, as her Attorney-in-Fact

WILLIAM R. REVELLE,
Trustee of the William R. Revelle Trust
UDT 4/28/89

-----------------------------------------
William R. Revelle, by Archie T. Wright
III, as his Attorney-in-Fact

REVELLE FAMILY REAL ESTATE LIMITED LIABILITY
COMPANY, a Delaware limited liability company

By:
-----------------------------------------
William R. Revelle, by Archie T. Wright
III, as his Attorney-in-Fact Its:
Managing Member

"ASSIGNEE"

IDEC PHARMACEUTICALS CORPORATION,
a Delaware corporation

By:
-----------------------------------------

EXHIBIT "H"
-6-

CONFIDENTIAL TREATMENT REQUESTED

EXHIBIT 1

LIST OF ASSIGNED CONTRACTS

- - Contract by and between San Dieguito Partnership and RECON, under contract
amendment dated January 3, 2001, in the amount of [CONFIDENTIAL TREATMENT
REQUESTED], for the purpose of implementation and [CONFIDENTIAL TREATMENT
REQUESTED] monitoring and maintenance of wetland restoration activities as
required by MMRP.

- - Contract by and between San Dieguito Partnership and Rick Engineering dated
December 14, 2000 in the amount of [CONFIDENTIAL TREATMENT REQUESTED]
(amendment pending), for the purpose of preparing mass grading and
improvement drawings for submittal to the City of San Diego.

- - License Agreement, dated January 26, 2001, as amended, between San Dieguito
Partnership, as licensor, and La Jolla Crossroads, as licensee.

EXHIBIT "1"
-1-

CONFIDENTIAL TREATMENT

EXHIBIT I

ASSIGNMENT OF RIGHTS UNDER SETTLEMENT AGREEMENT

This Assignment of Rights Under Settlement Agreement ("Assignment"),
effective ______________, 2001 ("Effective Date"), is executed by SAN DIEGUITO
PARTNERSHIP, L.P. (the "Partnership"), San Dieguito Valley, Inc. ("SDV") and
those other persons and entities set forth below ("Assignor"), and IDEC
PHARMACEUTICALS CORPORATION, a Delaware corporation ("Assignee"), with reference
to the following facts:

A. The Partnership, SDV and the City Council of San Diego and the City
of San Diego (collectively the "City") entered into that certain Settlement
Agreement dated November 16, 1998, thereafter amended by that certain First
Amendment to Settlement Agreement dated December 21, 1999, and further evidenced
by that certain Letter Agreement resolving certain issues related to the
Settlement Agreement, as amended, dated December 21, 1999. The Settlement
Agreement, First Amendment to Settlement Agreement, and the Letter Agreement are
collectively referred to herein as the "Settlement Agreement".

B. Pursuant to that certain Purchase and Sale Agreement and Escrow
Instructions ("Purchase Agreement"), dated July ___, 2001, by and between
Assignor and Assignee, Assignee has agreed to purchase certain real property
more particularly described in the Purchase Agreement and referred to therein
and in the Settlement Agreement as "Nobel Research Park" (the "Nobel Property").

C. Pursuant to the Purchase Agreement, Assignor desires to assign and
Assignee desires to accept the assignment of all of Assignor's right, title,
interest and benefits under the Settlement Agreement relating to the Nobel
Property.

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as set forth
below.

1. ASSIGNMENT; RESERVATION. As of the Effective Date, Assignor hereby
assigns to Assignee all of Assignor's right, title, interest and benefits (but
not Assignor's obligations) under the Settlement Agreement relating to the Nobel
Property, including but not limited to (a) any covenants, representations and
warranties agreed to or made by the City, and (b) any rights or benefits arising
or flowing from the Settlement Agreement, including but not limited to any
rights of Assignor in, under or to those certain development permits,
governmental approvals, consents, orders, agreements or the like issued with
respect to the Nobel Property. Assignor hereby reserves from the foregoing
assignment, on a non-exclusive basis, any rights to indemnity or otherwise which
it may have under the Settlement Agreement against the City to defend against
any third-party claims brought against Assignor for which the City may have
responsibility under the Settlement Agreement.

2. NO ASSUMPTION. Assignee does not assume any of Assignor's
obligations or duties set forth in or arising out of the Settlement Agreement,
including but not limited to, any obligations in connection with SDP's Property
(as defined in the Settlement Agreement).

EXHIBIT "I"
-1-

CONFIDENTIAL TREATMENT

3. EFFECTIVE DATE OF ASSIGNMENT. The Assignment shall take effect on
the Effective Date set forth above, which is the date of recordation of the
Grant Deed conveying the Nobel Property from Assignor to Assignee.

4. GENERAL PROVISIONS.

(b) GOVERNING LAW. This Assignment shall be governed, construed
and enforced in accordance with the laws of the State of California.

ASSIGNOR'S ADDRESS FOR NOTICE:

With copy to: Baker & McKenzie
Clark H. Libenson, Esq.
101 West Broadway, 12th Floor
San Diego, CA 92101
Telephone: (619) 235-7778
Fax: (619) 236-0429

If to Assignee, to: IDEC Pharmaceuticals Corporation
3030 Callan Road
San Diego, CA 92121
Attn: Mr. Phillip Schneider and Corporate
Secretary
Telephone: (858) 431-8500
Fax: (858) 431-8887

EXHIBIT "I"
-2-

CONFIDENTIAL TREATMENT

With copy to: Allen Matkins Leck Gamble & Mallory LLP
501 West Broadway, Ninth Floor
San Diego, CA 92101
Attn: Ellen B. Spellman, Esq.
Telephone: (619) 233-1155
Fax: (619) 233 1158

If to Escrow Agent, to: Chicago Title Company
925 "B" Street
San Diego, CA 92101
Attn: Ms. Shelva Molm
Telephone: (619) 544-6250
Fax: (619) 544-6229

Either party may change its address for notice by delivering written notice
to the other party as provided herein.

(d) SUCCESSORS. This Assignment shall be binding on and inure to
the benefit of the parties and their respective heirs, legal representatives,
successors, and assigns.

EXHIBIT "I"
-3-

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment to
be effective as of the Effective Date set forth above.

"ASSIGNOR" SAN DIEGUITO PARTNERSHIP, L.P.,
a California limited liability company

By: San Dieguito Valley, Inc.,
a California corporation, General Partner

By:
-----------------------------------------
Roy B. Collins, President

SAN DIEGUITO VALLEY, L.P.,
a California corporation, General Partner

By: San Dieguito Valley, Inc.,
a California corporation, General Partner

By:
------------------------------------------
Roy B. Collins, President

JOHN R. BENSON AND BARBARA B. MEYER
Co-Trustees of the Henrietta Benson Trust UDT
1/30/67

---------------------------------------------
John R. Benson, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Barbara B. Meyer, by Archie T. Wright III,
as her Attorney-in-Fact

JOHN V. HANNON AND MARGARET E.
HANNON, Co-Trustees of the John V. Hannon
Living Trust UDT 1/26/95

---------------------------------------------
John V. Hannon, by Archie T. Wright III,
as his Attorney-in-Fact

---------------------------------------------
Margaret E. Hannon, by Archie T. Wright III,
as her Attorney-in-Fact

EXHIBIT "I"
-4-