LEASE

1.

DEMISED PREMISES.

1.1

Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed by Tenant, demises and leases to Tenant and Tenant hires and leases from Landlord the premises described on Exhibit A attached and incorporated by reference (the “Demised Premises” or the “Premises”), in the building known locally as “One Technology Place” (the “Building”) located on the land described on attached Exhibit A-l (the “Land”), and situated at 200 E. First Street, Winston-Salem, North Carolina, 27101, together with all improvements, appurtenances, rights, privileges and easements in any way appertaining thereto.

1.2

As of the Commencement Date (as defined below) of the term of this Lease, the Demised Premises will consist of 40,432 rentable square feet in the Building, as more particularly described in Exhibit A attached hereto, and including within the meaning of “Premises” or “Demised Premises” the entire fourth floor of the Building, to be utilized as Tenant’s laboratory facilities, encompassing 20,216 rentable square feet, and 20,216 rentable square feet of general office space on the third floor of the Building.

1.3

In addition to the Demised Premises, Tenant will have exclusive use of 191 square feet of chemical storage space in the basement level of the Building, “as is”, as shown on the attached Exhibit A-2. Landlord shall have no obligations to Tenant with respect to such space, except for providing exclusive access to the space.

2.

INITIAL TERM, OPTION TO RENEW, RIGHT OF FIRST REFUSAL ON ADDITIONAL SPACE, TERMINATION RIGHTS.

2.1

The Initial Term of this Lease will be for five (5) years (the “Initial Term”) and will begin on August 1,2002 (the “Commencement Date”).

2.2

Renewal Rights. So long as Tenant is not in default under this Lease, Tenant has the right, but not the obligation, to extend the term of this Lease (“Renewal Option”) under the same terms and conditions for one (1) additional five (5) year term (the “Renewal Term”). Tenant must exercise its right for the Renewal Term by written notice to Landlord given on or before the date that is one hundred eighty (180) days prior to the expiration of the Initial Term. If Tenant does not exercise its right to extend in a timely manner, Tenant will have irretrievably lost its right to extend the term of this Lease. Rental payments applicable for the Renewal Term, if exercised, shall be as set forth in paragraphs 3.1 and 3.2. Any extension of this Lease beyond the Renewal Term (if exercised) shall be upon the terms and conditions mutually agreed upon by Landlord and Tenant, and unless such agreement is reached, this Lease shall expire.

2.3

Landlord hereby grants Tenant an option to lease additional space in the Building as and when it becomes available (the “Option to Lease”). This Option to Lease may be exercised at any time during the Initial Term or the Renewal Term, and may be exercised on one or more occasions. Exercise shall occur by written notice by Tenant to Landlord not later than thirty (30) days following written notice to Tenant by Landlord that additional space is available. Unless Landlord otherwise agrees, Tenant may exercise its Option to Lease only with respect to all of the additional space available. Tenant will pay Rent for such additional space leased during the Initial Term or the Renewal Term at the then current market rates for a building and space of similar class (condition) in the Winston-Salem or other comparable marketplace (including, but not limited to, leases executed in the subject Building within six months prior to Tenant’s exercise of this Option to Lease), making certain the then current market rate reflects the separate market rates for comparable laboratory space and comparable commercial office space, and reflects the “effective rent,” meaning a rent that takes into account size of space, length of term, other pertinent data and concessions, including (but not limited to) upfit allowances and costs, free rents, and similar items. If the amount of Rent for the expansion space cannot be agreed upon by the parties, then the amount of the Rent will be submitted to arbitration in accordance with the rules and procedures of the American Arbitration Association. Upon determination of the Rent as provided herein, the parties will execute an Amendment to this Lease incorporating the additional space as a part of the Demised Premises and the Rent as determined, and the Tenant may then occupy the space. Notwithstanding the foregoing, Tenant may not, unless Landlord otherwise agrees in writing a) exercise its Option to Lease in the fourth or fifth year of the Initial Term unless it simultaneously exercises its Renewal Option; or b) exercise its Option to Lease in the third or later years of the Renewal Term.

2.4

Except as otherwise provided in this subparagraph, Tenant shall have the unilateral right to terminate this Lease (“Termination Right”) at any time after the end of the third year of the Initial Term of this Lease, and upon payment of the termination fee (“Termination Fee”) set forth in paragraph 2.4.1. In order to exercise the Termination Right, Tenant shall provide Landlord with not less than one hundred eighty (180) days’ prior written notice. Provided, however, Tenant shall have waived its Termination Right in each of the following circumstances and for the periods stated: a) upon exercise of the Renewal Option, and continuing until three (3) years of the Renewal Term have elapsed; b) upon Tenant’s request pursuant to paragraph 6 to require Landlord to provide Tenant an allowance for redecorating of the Demised Premises, and continuing for the remainder of the Renewal Term; and c) upon Tenant’s exercise of an Option to Lease, and continuing for a period of three (3) years or until the end of the applicable term, whichever is shorter.

2.4.1

Tenant shall pay to Landlord a Termination Fee upon Tenant’s exercise of its Termination Right, in accordance with the schedule set forth in attached Exhibit C. The amounts set forth in such schedule reflect the unearned amounts at each date of the $2,013,234.00 in additional funding made available by Landlord to Tenant (the “Additional Funding”) in connection with the upfitting of the property and Tenant’s occupancy thereof. Such Termination Fee will be paid to Landlord on the effective date of such termination.

2.4.2

In the event that Tenant defaults under the Lease and/or abandons the Lease so that the Lease is terminated prior to the expiration of the Initial Term, Tenant will pay to Landlord, in addition to any other amounts which may be due Landlord, that portion of the Additional Funding which is unearned as of the date of such termination (the “Unearned Additional Funding”). The Unearned Additional Funding due is calculated by dividing the Additional Funding ($2,013,324.00) by the sixty (60) total months in the Initial Term, and multiplying such result ($33,553.90) by the number of months or portions thereof remaining in the Initial Term. Such sum represents Tenant’s reimbursement to Landlord of the Unearned Additional Funding.

3.

RENTAL.

3.1

Beginning on the Commencement Date, Tenant will pay annual rental pursuant to the following schedule (“rsf” indicates “rentable square foot”):

3.2

Additional rental.

3.2.1

Taxes. During the Initial Term and the Renewal Term, Tenant will pay to Landlord, as Additional Rent, Tenant’s pro rata share of any annual increase in ad valorem taxes over ad valorem taxes for calendar year 2002 (the “Tax Base Year”). Tenant’s share of such increase in ad valorem taxes over ad valorem taxes for the Tax Base Year will be computed by multiplying such increase in ad valorem taxes over the Tax Base Year ad valorem taxes by a fraction, the numerator of which is the rentable square footage of the Demised Premises and the denominator of which is the total rentable square footage which is subject to taxation in the Building (currently 81,286). If the rentable square footage for the Demised Premises using the aforesaid computation is not adequate to account for all of the rentable square footage in the Building, when combined with the rentable square footage reflected in leases for space in the Building executed prior to the date of execution of this Lease, an adjustment will be made to Tenant’s share of the increase in such taxes such that Landlord will not absorb any portion of the total increase which might otherwise be allocated to it as a result of any discrepancy in the shares as reflected in the individual leases. Landlord will submit an invoice to Tenant showing Tenant’s pro rata share of such increase in ad valorem taxes, adjusted as aforesaid, within 30 days after receipt of the final tax bill for the Demised Premises. Accompanying the invoice will be a copy of the current and previous tax bills received by Landlord and a statement showing the calculation of Tenant’s pro rata share (adjusted as aforesaid) of the increase in such taxes. Tenant will pay Landlord its share of the increase in such taxes before December 15 of the tax year. Tenant will also list and pay all ad valorem taxes on its personal property and any other property which Tenant brings into the Demised Premises. In determining the amount of taxes for any calendar year, the amount of special assessments to be included shall be limited to the amount of the installment of the special assessment required to be paid during that year as if Landlord had elected to have the special assessment paid over the maximum period of time permitted by law.

3.2.2

Building Operating Costs.

3.2.2.1 

During the Initial Term and Renewal Term, Tenant will pay to Landlord, as Additional Rent, the amounts provided in subparagraph 3.2.2 based on Tenant’s pro rata share (adjusted in accordance with 3.2.2.2 below) of the amount by which the Building Operating Costs for each 12-month period (or part thereof, pro-rated) beginning April 1, 2003, exceed the Building Operating Costs for the Operating Base Year. The “Operating Base Year” is the 12-month period ending March 31, 2003. (Tenant will pay no share of Building Operating Costs for the Operating Base Year.) Those Building Operating Costs which vary with occupancy (i.e., janitorial services, HVAC costs) will be adjusted to reflect the Building Operating Costs for such expenses Landlord would have incurred if the Building is not fully occupied. Building Operating Costs which do not vary with occupancy, such as insurance and lobby maintenance, will continue to be allocated on a pro rata basis (adjusted in accordance with 3.2.2.2 below) over the space in the Building whether or not occupied.

3.2.2.2 

Tenant’s share of the increases in Building Operating Costs over Building Operating Costs for the Operating Base Year will be computed by multiplying such increases in Building Operating Costs by a fraction, the numerator of which is the rentable square footage in the Demised Premises and the denominator of which is the rentable square feet in the Building (currently 81,286). If the rentable square footage for the Demised Premises using the aforesaid computation is not adequate to account for all of the rentable square footage in the Building, when combined with the rentable square footage reflected in leases for space in the Building executed prior to the date of execution of this Lease, an adjustment will be made to Tenant’s share of the increase in such Building Operating Costs such that Landlord will not absorb any portion of the total increase which might otherwise be allocated to it as a result of any discrepancy in the shares as reflected in the individual leases. “Building Operating Costs” means and includes all costs, expenses, taxes (other than ad valorem taxes) and disbursements which Landlord pays in connection with the management, operation, maintenance, and repair of the Building and of all building systems, components and appurtenances, including the Common Area. Such costs include, but are not limited to, the costs of all utilities (not separately metered to a particular tenant), fuel, building supplies, door locks and keys, light bulbs, plumbing and electrical repairs, garbage removal, drainage, lighting, facilities, parking lot and drive repair and maintenance, security services, pest control, alterations required by government authorities (unless

such constitute capital expenditures), janitorial services, window cleaning, maintenance and repairs, elevator service, wages of employees who work customarily in and about the building and whose duties are connected with its operation, maintenance or repair (including social security taxes, unemployment insurance costs, cost of providing disability benefits, and cost of pension, hospitalization or retirement plan), costs of general commercial replacement and liability insurance, water and sewer rents (to the extent not included in taxes in Section 3.2.1 hereof), professional and consulting fees consistent with those reasonably incurred in the management or operation of office buildings in the Winston-Salem area, management fees (charges for which shall clearly reflect Landlord’s actual management efforts and expenses with respect to the Building), charges or fees for governmental permits, and other expenses, dissimilar or similar, incurred in the operation, repair, and maintenance of the Building, its systems and components, and the Land on which it stands.

3.2.2.3 

On or before May 15, 2004, and on or before each May 15 thereafter, Landlord will notify Tenant of Tenant’s share of the increase in Building Operating Costs for the previous 12-month period ending March 31 over the Building Operating Costs for the Operating Base Year. Tenant will pay such increase along with the Rent due on the first day of the following month. Commencing with the 12-month period following the Operating Base Year, Controllable Building Operating Costs will not increase by more than 5% during any 12-month period for which Building Operating Costs are calculated in accordance with this section. “Controllable Building Operating Costs” means costs which are incurred regularly and which are subject to Landlord’s reasonable control. Landlord will maintain records to support expenditures for Building Operating Costs. If Tenant disputes the amount of Building Operating Costs set forth in Tenant’s annual statement of actual Building Operating Costs, Tenant will notify Landlord and Landlord will make its records available to Tenant. Tenant shall have the right to audit or cause to be audited Landlord’s records, the cost of which shall be borne by Tenant unless it is demonstrated that Landlord has overcharged Tenant by more than 5%, in which case Landlord shall bear the cost of the audit (which cost shall not be included as a Building Operating Cost).

4.

PARKING.

4.1

Tenant shall have the right, subject to the Landlord’s obligations to existing tenants, to the exclusive use (without payment of any additional rent) of a pro rata

share of the underground parking available for the Building based on Tenant’s rentable square footage; such spaces shall be designated for use by Tenant and are as shown on attached Exhibit A-2. Landlord shall designate (in accordance with Landlord’s reasonably approved method for such) the spaces to be used exclusively by Tenant. Tenant has converted five (5) parking spaces in the Building for a chemical storage facility and mechanical equipment room, with Landlord’s approval, including two (2) spaces previously designated as handicapped parking. Landlord has redesignated three (3) of the remaining Tenant spaces as two (2) handicapped spaces in order to effect compliance with applicable laws regarding handicapped parking, so that Tenant has converted a total of six (6) spaces. Such conversion of such spaces for the chemical storage facility and mechanical equipment room which exclusively benefits the Tenant or the Demised Premises will be counted in the pro rata share of parking allocated to Tenant. Additional parking for Tenant’s employees, invitees, visitors, etc., as required by the protective covenants of Piedmont Triad Research Park or otherwise, shall be obtained by Tenant at no cost or expense to Landlord.

4.2

Tenant agrees to comply with all reasonable rules and regulations promulgated or implemented by Landlord with respect to parking facilities owned by Landlord.

5.

BROKERAGE.

6.

UPFITTING/CONDITION OF DEMISED PREMISES.

7.

COMMON AREA.

7.1.

The Common Area is defined to be those areas within the area designated as such on Exhibit A attached; and the term Common Area also includes those common access areas which are for the non-exclusive use of tenants (including the Tenant) of the Building of which the Demised Premises are a part, as more particularly described on Exhibit A-2. The term Common Area excludes any areas constructed or allocated for the exclusive use of Tenant or for the exclusive use of Landlord or any other tenant of the Building of which the Demised Premises are a part.

7.2.

Landlord grants to Tenant, its licensees, invitees, customers, employees, successors and permitted assigns, during the term of this Lease and any renewal term, the non-exclusive right to use the Common Area in common with Landlord and other tenants of the Building of which the Demised Premises are a part and their respective licensees, invitees, customers, employees, successors and assigns, subject to the provisions of this Lease, and subject to all applicable Piedmont Triad Research Park protective covenants and to those reasonable rules and regulations which may be promulgated by Landlord with respect to such Common Area.

7.3.

In accordance with usual and customary services provided in connection with similar leased property, Landlord, at its sole cost and expense, will operate, manage, repair and maintain the Common Area and all improvements thereon in commercially acceptable first class condition and repair suitable for occupants of commercial office space, including making replacements where necessary, and in compliance with all applicable laws and governmental regulations. Landlord will, from time to time, promulgate rules and regulations governing the use of the Common Area. Except as specifically provided otherwise herein (including, without limitation, those Tenant obligations set forth in subparagraphs 3.2, 7.5, 12.1, and 12.3), Landlord will, with respect to the Common Area, pay and be responsible for: (a) supervision, management, inspection, security protection and traffic direction; (b) utilities, including but not limited to, lighting, heating and removing rubbish (excluding Tenant’s garbage and rubbish), dirt and debris; (c) removing snow and ice; (d) window cleaning and replacement, to include the regular washing of all exterior Building windows of the Demised Premises and elsewhere on the Building; (e) maintenance of HVAC, electrical and plumbing systems and elevators; (f) labor, payroll taxes, materials and supplies in connection with such maintenance and operation; (g) all costs and expenses of landscape maintenance and supplies incidental thereto, painting, and cleaning, sealing, replacing and remarking paved and unpaved surfaces, curbs, directional and other signs for access areas and driveways, landscaping, lighting facilities, drainage and other similar items, and all costs for tools, machinery and equipment used in connection with the above; (h) all premiums on workmen’s compensation, casualty, public liability, property damage and other insurance on the Common

Area; and (i) all taxes and other charges levied or assessed against the Common Area, the Land and the Building.

7.4.

Subject to the rules and regulations described in subparagraphs 4.2 and 7.2, the Common Area is reserved for the exclusive use of Landlord and the tenants of the Building (including Tenant), their employees and business guests.

7.5.

Landlord will provide limited security services during Normal Operating Hours as hereinafter defined. To the extent that Landlord or Tenant, and their agents or employees have acted with reasonable prudence with respect to security, neither party will have any liability to the other for loss or damage suffered by the other as a result of unauthorized entrances by persons into the Building or the Common Area or for any other security violation.

8.

ENTRANCE SIGNS AND OTHER SIGNAGE.

9.

INDEMNIFICATION AND LIABILITY INSURANCE.

9.1.

Tenant shall indemnify and save Landlord harmless from and against any and all damages, losses, expenses, costs, or liability, including attorney’s fees, as a result of Tenant’s breach of any covenant, term, or condition of this Lease. Tenant further agrees to defend and save harmless Landlord from and against any and all liability for bodily injury or for damage to property arising out of or in connection with use or occupancy of Tenant, its agents, servants, employees or invitees, of the Demised Premises or any Common Area to which Tenant has access under this Lease, provided that Tenant’s obligation hereunder shall not apply to the extent that any such liability is the result of the negligence or willful misconduct of the Landlord, its agents, servants, employees or invitees.

9.2.

Tenant and Landlord, at their own expense, each agree to maintain comprehensive general liability insurance covering the Demised Premises, the Building and the Land with a combined single limit of not less than Two Million Dollars ($2,000,000) per occurrence of bodily injury and property damage. Insurance coverage regarding the presence or use of animals in the Demised Premises must

be maintained by Tenant in a form and in amounts as are reasonably satisfactory to Landlord, with a certification of such amounts and coverages to be furnished to Landlord annually.

9.3.

Landlord must be named as an additional insured on Tenant’s policy, but only with respect to claims against Landlord arising out of Tenant’s use or occupancy of Demised Premises. Such insurance as afforded Landlord by Tenant’s policy will be primary as respects Landlord, and will not require contribution by any other similar insurance available to Landlord and Tenant agrees to have its policy so endorsed. Tenant’s policy shall provide that it may not be canceled or substantially modified without at least thirty (30) days’ prior written notice to Landlord. Tenant will provide Landlord a certificate evidencing such insurance coverage within thirty (30) days of execution of this Lease.

10.

PROPERTY INSURANCE.

11.

OTHER PAYMENTS.

12.

BUILDING OPERATIONS.

12.1.

Landlord will provide, at its expense, usual and customary services rendered in connection with similar leased commercial property with respect to building operations as set forth in this paragraph. Tenant will take appropriate and reasonable steps to conserve energy in the conduct of its business operations.

12.1.1

Landlord will furnish Tenant with reasonable heating and air conditioning in its office Premises from 7:00 a.m. until 7:00 pm. Monday through Friday during normal working hours and from 8:00 a.m. to 2:00 p.m. on Saturday (“Normal Operating Hours”). Holidays are excluded, and for purposes of this Lease include New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

12.1.2

Landlord will furnish Tenant with reasonable heating and air conditioning in its laboratory Premises 24 hours per day, 7 days per week, 365 da