Homogeneous PCR Clinical Services Agreement - Roche Molecular Systems Inc. and Specialty Laboratories inc.


CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS
ENCLOSED BY BRACKETS AND UNDERLINED. THE CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


                   HOMOGENEOUS PCR CLINICAL SERVICES AGREEMENT

This Agreement is made by and between Roche Molecular Systems, Inc. ("RMS"),
having an office at 4300 Hacienda Drive, Pleasanton, California 94588 and
Specialty Laboratories, Inc. ("SLI"), Santa Monica, California, hereafter
collectively referred to as "The Parties".

                                   BACKGROUND

         A. RMS owns and has the right to grant immunities from suit to practice
under certain United States Patents describing and claiming, INTER ALIA, nucleic
acid amplification processes referred to as "homogeneous PCR."

         B. SLI has attained substantial expertise in validating, documenting
and performing sophisticated diagnostic procedures.

         C. SLI desires to obtain an immunity from suit from RMS to practice
LICENSED TECHNOLOGY to perform certain homogeneous PCR-based human IN-VITRO
clinical laboratory services in order to augment and extend SLI's PCR Technology
license, entered into previously or on even date herewith, and RMS is willing to
grant such an immunity, on the terms and subject to the conditions provided
exclusively in this Agreement.

         NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, RMS and SLI agree as follows:

1.       DEFINITIONS:

         For the purpose of this Agreement, and solely for that purpose, the
terms set forth hereinafter shall be defined as follows:

         1.1      "5' NUCLEASE TECHNOLOGY" shall mean only the processes defined
by the method claims of RMS's United States Patent Nos. 5,210,015 and 5,487,972,
and any reissue or reexamination patents thereof, and reaction mixture claims
1-12 of United States Patent No. 5,804,375.

         1.2      The term "AFFILIATE" of a designated Party to this Agreement 
shall mean:

                  a)       an organization of which fifty percent (50%) or more
                           of the voting stock is controlled or owned directly
                           or indirectly by either Party to this Agreement;

                  b)       an organization which directly or indirectly owns or
                           controls fifty percent (50%) or more of the voting
                           stock of either Party to this Agreement;

                  c)       an organization, the majority ownership of which is
                           directly or indirectly common to the majority
                           ownership of either Party to this Agreement; and


                  d)       an organization under (a), (b), or (c) above in which
                           the amount of said ownership is less than fifty
                           percent (50%) and that amount is the maximum amount
                           permitted pursuant to the law governing the ownership
                           of said organization.

         It is understood and agreed, however, that the term "AFFILIATE" shall
not include Genentech Inc., a Delaware Corporation.

         1.3      "EFFECTIVE DATE" shall mean the date on which the last
signatory to this Agreement signs the Agreement.

         1.4      "HOMOGENEOUS PCR TECHNOLOGY" shall mean 5' NUCLEASE TECHNOLOGY
and only the processes defined by the method claims of RMS's United States
Patent Application Serial No. 07/695, 201, and any issue, reissue or
reexamination patents thereof.

         1.5      "LICENSED CLINICAL SERVICE" shall mean the performance by SLI
of an IN VITRO diagnostic procedure utilizing LICENSED TECHNOLOGY on a sample of
material obtained from a human being solely to detect the presence, absence or
quantity of a nucleic acid associated with a human disease or condition within
the LICENSED FIELD. LICENSED CLINICAL SERVICES include but are not limited to,
any combination of the steps of collecting a sample for analysis, isolating
nucleic acid sequences therein, amplifying one or more desired sequences,
analyzing the amplified material and reporting the results.

         1.6      "LICENSED FIELD" shall mean the field of human IN VITRO
diagnostics solely for the detection of genetic diseases, genetic
pre-disposition to disease, agents associated with infectious diseases, cancer;
and for tissue transplant typing, including testing performed on [***]* disease
management; and clinical trials.

         1.7      "LICENSED TECHNOLOGY" shall mean the HOMOGENEOUS PCR
TECHNOLOGY and only so much of RT AND RT-PCR TECHNOLOGY and OTHER TECHNOLOGY as
is necessary for SLI to practice the HOMOGENEOUS PCR TECHNOLOGY in conjunction
with SLI's separately licensed PCR Technology. With the exception of the
reaction mixture claims of United States Patent No. 5,804,375 and United States
Patent No. 5,476,774, and the plasmid claims of the `774 patent, no rights under
any substance and/or kit claims are included in this definition or this
Agreement.

         1.8      "NET SERVICE REVENUES" shall mean gross invoice price for the
LICENSED CLINICAL SERVICES performed by SLI (or the fair market value for any
non-monetary consideration which SLI agrees to receive in exchange for LICENSED
CLINICAL SERVICES), less the following deductions where they are factually
applicable and are not already reflected in the gross invoice price:

                  a)       discounts allowed and taken, in amounts customary in
                           the trade (which shall include the difference between
                           the dollar amount charged by SLI for a LICENSED
                           CLINICAL SERVICE and the Medicare and/or Medicaid
                           Limits of 

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                           Allowance and/or reimbursement limitations of a 
                           THIRD PARTY insurance program); and

                  b)       government imposed sales taxes and other taxes to the
                           extent they are separately identified on the invoice;
                           and

                  c)       actual bad debt, up to 2% of gross invoice price for
                           LICENSED CLINICAL SERVICES, which bad debt SLI can
                           prove and document that it was reasonable and
                           diligent in its efforts to collect payment.

         No allowance or deduction shall be made for commissions or collections,
by whatever name known.

         The NET SERVICE REVENUES of the LICENSED CLINICAL SERVICES that are
performed by SLI for any person, firm or corporation controlling, controlled by,
or under common control with SLI, or enjoying a special course of dealing with
SLI, shall be determined by reference to the NET SERVICE REVENUES which would be
applicable under this Section in an arm's length transaction by SLI to a THIRD
PARTY other than such person, firm or corporation.

         1.9      "OTHER TECHNOLOGY" shall mean the method claims of United
States Patent Nos. 5,389,512, and claims 1-4 and 15-18 of United States Patent
No. 5,476,774, and any reissue or reexamination patents thereof.

         1.10     [***]* shall mean analysis of human genetic material to 
ascertain [***]*.

         1.11     "RT AND RT-PCR TECHNOLOGY" shall mean the reverse
transcription process covered by the method claims of United States Patent Nos.
5,407,800, 5,322,770 and 5,310,652, and any reissue or reexamination patents
thereof.

         1.12     "THIRD PARTY" shall mean a party other than an AFFILIATE of
The Parties to this Agreement.

         1.13     "VALID CLAIM" shall mean an unexpired claim of any of the
patents within LICENSED TECHNOLOGY which has not been held invalid or
unenforceable by decision of a court or other governmental agency of competent
jurisdiction, such decision being unappealable or unappealed within the time
allowed for appeal.

         1.14     "TERRITORY" shall mean the United States and its possessions 
and the Commonwealth of Puerto Rico.

2.       GRANT:

         2.1      Upon the terms and subject to the conditions of this
Agreement, RMS hereby grants to SLI, and SLI hereby accepts from RMS, a
royalty-bearing, non-exclusive, non-

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transferable immunity from suit under LICENSED TECHNOLOGY solely to perform
LICENSED CLINICAL SERVICES within the Territory. The Parties understand and
agree that to the extent that SLI is otherwise licensed by RMS under PCR
Technology to perform human IN VITRO diagnostic services (hereinafter referred
to as a "PCR Diagnostic Services License"), the present Homogeneous PCR Clinical
Services Agreement is independent of the PCR Diagnostic Services License and the
only royalties due to RMS for the performance of LICENSED CLINICAL SERVICES
pursuant to the present Agreement shall be in accordance with the present
Agreement and not the PCR Diagnostic Services License.

         The Parties understand and agree that no rights are hereby granted,
expressly or by implication, under United States Patent Nos. B1 4,683,195,
4,683,202 and 4,965,188, (the `195 and `202 patents covering the polymerase
chain reaction and the `188 patent, covering the performance of nucleic acid
amplification using a thermostable polymerase) hereinafter "PCR Technology." An
immunity from suit under the PCR Technology may be obtained by contacting the
Licensing Coordinator, Roche Molecular Systems, Inc., 1145 Atlantic Avenue,
Alameda, CA 94501, Telephone (510) 814-2984, Facsimile (510) 814-2977.

         2.2      The LICENSED TECHNOLOGY hereunder may be practiced solely for
the performance of LICENSED CLINICAL SERVICES by SLI and for no other purpose
whatsoever and no other right, immunity or license is granted expressly,
impliedly or by estoppel.

         2.3      SLI expressly acknowledges and agrees that the immunity from
suit pursuant to this Agreement is personal to SLI alone and SLI shall have no
right to sublicense, assign or otherwise transfer or share its rights under the
foregoing immunity from suit. SLI further agrees that LICENSED CLINICAL SERVICES
will be performed, offered, marketed and sold only by SLI except as provided, in
Article 2.3(a) and SLI shall not authorize any other party, including
AFFILIATES, to practice the LICENSED TECHNOLOGY, nor shall it practice the
LICENSED TECHNOLOGY in conjunction with any other party.

                  a)       SLI may offer, market and sell LICENSED CLINICAL
                           SERVICES that are performed by other laboratories
                           subject to the following conditions:

                           i)       Each laboratory performing LICENSED CLINICAL
                                    SERVICES for SLI must be separately licensed
                                    under RMS's Homogeneous PCR Clinical
                                    Services program.

                           ii)      SLI's report forms must list all LICENSED
                                    CLINICAL SERVICES marketed and sold by SLI
                                    which are performed by another laboratory
                                    even though SLI will not be obligated to pay
                                    royalties on those LICENSED CLINICAL
                                    SERVICES.

                           iii)     SLI must contact RMS to verify that a new
                                    laboratory to which it seeks to send samples
                                    for performance of LICENSED CLINICAL
                                    SERVICES is properly licensed by RMS before
                                    sending samples to that laboratory.


                           iv)      Each laboratory performing LICENSED CLINICAL
                                    SERVICES for SLI must report and pay
                                    royalties on LICENSED CLINICAL SERVICES
                                    performed for SLI.

         2.4      RMS hereby grants to SLI the right and SLI accepts and agrees
to credit RMS as the source of LICENSED TECHNOLOGY rights in SLI's, promotional
materials and any other materials intended for distribution to THIRD PARTIES as
follows:

                  "This test [or assay] is performed pursuant to a license 
                  agreement with Roche Molecular Systems, Inc."

3.       ACKNOWLEDGMENT AND AGREEMENT ON DIAGNOSTIC PRODUCTS:

         SLI acknowledges and agrees that the immunity from suit granted
hereunder is for the performance of LICENSED CLINICAL SERVICES only and does not
include any right to make, have made, import, offer or sell any products,
including but not limited to devices, PCR reagents, reaction mixtures, or kits.

4.       ROYALTIES, RECORDS AND REPORTS:

         4.1      ROYALTIES. For the rights and privileges granted under this
Agreement, SLI shall pay to RMS an amount equal to the total number of all
reportable tests (that is, tests the results of which are provided by SLI to any
party not a member to this Agreement, including tests the results of which are
provided to AFFILIATES of SLI, for diagnostic purposes) performed for each
LICENSED CLINICAL SERVICE, including tests performed in conjunction with a
clinical trial, multiplied by (1) [***]* of NET SERVICE REVENUES or (2) [***].*

         4.2      Licensed Services performed under SLI's separately licensed
PCR Technology and in conjunction with the performance of LICENSED CLINICAL
SERVICES, are not royalty bearing apart from the royalty due as set forth in
this Section 4.

         4.3      SLI shall keep full, true and accurate books of account
containing all particulars which may be necessary for the purpose of showing the
amount payable to RMS by way of royalty or by way of any other provision under
this Agreement. Such books and the supporting data shall be open at all
reasonable times, for three (3) years following the end of the calendar year to
which they pertain (and access shall not be denied thereafter, if reasonably
available), to the inspection of RMS or an independent certified public
accountant retained by RMS for the purpose of verifying SLI's royalty statements
or SLI's compliance in other respects with this Agreement. It is understood that
RMS's inspection of SLI's records does not require access to actual patient
results. If in dispute, such records shell be kept until the dispute is settled.
The inspection of records shall be at RMS's sole cost and expense, unless the
inspector concludes 

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that royalties reported by SLI for the period being audited are understated by
five percent (5%) or more from actual royalties, in which case the costs and
expenses of such inspection shall be paid by SLI.

         4.4      REPORTS

                  a)       SLI shall within sixty (60) days after the first day
                           of January and July of each year deliver to RMS a
                           true and accurate royalty report. Such report shall
                           cover the preceding six (6) calendar months; and
                           shall be submitted either (1) on the "Homogeneous PCR
                           Clinical Services Royalty Report," a copy of which is
                           attached hereto as Attachment I; or (2) on a form
                           generated by SLI which duplicates the format of the
                           Homogeneous PCR Clinical Services Royalty Report; and
                           shall include at least the following:

                           i)       the name of the LICENSED CLINICAL SERVICE
                                    and the total number of all reportable
                                    results obtained for each LICENSED CLINICAL
                                    SERVICE during the six (6) preceding
                                    calendar months;

                           ii)      compilation of billing thereon and the
                                    allowable deductions therefrom;

                           iii)     Net Service Revenues and the calculation of
                                    the total royalty thereon; and

                           iv)      the calculation of the total royalty due to
                                    RMS for all such reportable results. If no
                                    royalties are due, it shall be so reported.

                  b)       The correctness and completeness of each such report
                           shall be attested to in writing by the responsible
                           financial officer of SLI's organization or by SLI's
                           external auditor or by the chair or other head of
                           SLI's internal audit committee.

                  c)       Simultaneously with the delivery of each such report,
                           SLI shall pay to RMS the royalty and any other
                           payments due under this Agreement for the period
                           covered by such report. All payments due RMS
                           hereunder shall be paid in United States currency and
                           sent, by the due date, together with a copy of the
                           royalty report to the following address:

                                    Roche Molecular Systems, Inc.
                                    P.O. Box 18139
                                    Newark; New Jersey 07191

                           or to any address that RMS may advise in writing..


                  d)       If, during any reporting period, SLI performs tests,
                           all of which tests are LICENSED CLINICAL SERVICES
                           under the present Homogeneous PCR Clinical Services
                           Agreement, such Licensed Clinical Services shall be
                           reported in 



                           accordance with the reporting provisions contained 
                           herein, and a separate Summary Royalty Report 
                           pursuant to Section 4.3 of the underlying PCR 
                           Diagnostic Service License is not required.

                  e)       If, during any reporting period, SLI performs tests
                           which are Licensed Services, pursuant to their PCR
                           Diagnostic Services License, but are not LICENSED
                           CLINICAL SERVICES under the present Homogeneous PCR
                           Clinical Services Agreement, such Licensed Services
                           shall be reported in accordance with the underlying
                           PCR Diagnostic Services License. .

                  f)       In the event that, during any reporting period, SLI
                           performs no tests which are either Licensed Services
                           or LICENSED CLINICAL SERVICES, SLI shall so indicate
                           on SLI's Homogeneous PCR Clinical Services Royalty
                           Report, by checking the appropriate box regarding
                           both LICENSED CLINICAL SERVICES and Licensed
                           Services, with no obligation to provide a separate
                           Summary Royalty Report under the PCR Diagnostic
                           Service License.

                  g)       In any given reporting period, no single Licensed
                           Service or LICENSED CLINICAL SERVICE shall be
                           reported on more than one Royalty Report.

         4.5      LICENSED CLINICAL SERVICES performed by SLI prior to execution
of this Agreement shall be royalty bearing and reported to RMS together with the
first royalty report due hereunder.

         4.6      SLI's obligation to pay royalties pursuant to this Agreement
shall continue only for as long as SLI operates under the licenses granted
pursuant to Article 2 herein, and shall terminate when there are no longer any
VALID CLAIMS in any of patents identified in LICENSED TECHNOLOGY, Section 1.7,
SUPRA.

         4.7      If SLI shall fail to pay any amount specified under this
Agreement after the due date thereof, the amount owed shall bear interest of
1.5% per month from the due date until paid, provided, however, that if this
interest rate is held to be unenforceable for any reason, the interest rate
shall be the maximum rate allowed by law at the time the payment is due.

5.       TECHNOLOGY NOTIFICATION:

         5.1      With respect to any invention, improvement or discovery
(hereinafter referred to as "Discoveries" in this Article) of SLI made after
entering into this Agreement, resulting from work conducted under this Agreement
and being applicable to HOMOGENEOUS PCR TECHNOLOGY, RT AND RT-PCR TECHNOLOGY and
OTHER TECHNOLOGY, if SLI decides to license said Discoveries to THIRD PARTIES,
then SLI agrees to provide to RMS, unless not possible due to SLI's pre-existing
commitments to THIRD PARTIES relating to said Discoveries, a reasonable
opportunity to negotiate a license to use said Discoveries. Such Discoveries
include, but are not limited to, improvements of the homogeneous PCR processes
or in the performance of LICENSED CLINICAL SERVICES, modifications to or new
methods of performing the LICENSED CLINICAL 



SERVICES, including the automation of the homogeneous PCR processes or of the
LICENSED CLINICAL SERVICES.

         5.2      Any agreement reached between The Parries as a result of SLI
notification to RMS of a Discovery pursuant to Section 5.1 hereto shall be upon
the terms and conditions negotiated in good faith by The Parties.

6.       MOST FAVORED LICENSEE:

         If after the EFFECTIVE DATE of this Agreement, RMS grants to a THIRD
PARTY a license of substantially the same scope as is granted to SLI but having
more favorable royalties in the TERRITORY for LICENSED CLINICAL SERVICES than
those set forth herein, RMS shall promptly notify SLI of said more favorable
royalties, and SLI shall have the right and option to substitute such more
favorable royalties for the royalties contained herein. SLI's right to elect
said more favorable royalties shall extend only for the time period such more
favorable royalties shall be available to such other THIRD PARTY and shall be
conditioned on SLI's acceptance of all the same conditions, favorable or
unfavorable, under which such more favorable royalties are made available to
such other THIRD PARTY. Upon SLI's acceptance of all such terms of said THIRD
PARTY agreement, the more favorable royalties shall be effective as to SLI as of
the effective date of such other THIRD PARTY license agreement. Notwithstanding
the foregoing, in the event that RMS shall receive substantial other
non-monetary consideration, for example, such as intellectual property rights,
as a part of the consideration for its granting of such license to a THIRD
PARTY, then this Article 6 shall not apply. Furthermore if the "more favorable
royalty" granted to a THIRD PARTY applies only to LICENSED CLINICAL SERVICES
performed in conjunction with a clinical study or clinical trial, then SLI shall
be entitled to the same fee for the same tests)/services performed in
conjunction with a similar clinical study or trial. However, there shall be no
reduction in the fee for those LICENSED CLINICAL SERVICES, even if for the same
analyte, which are not performed in conjunction with a clinical study or trial.

7.       TERM AND TERMINATION:

         7.1      The immunity from suit granted to SLI herein shall commence on
the EFFECTIVE DATE and terminate on the earlier of (1) Dec. 31st of the year in
which the fifth anniversary of the EFFECTIVE DATE is observed or (2) the date of
expiration of the last to expire of the patents included within the LICENSED
TECHNOLOGY, which patent contains at least one VALID CLAIM covering the
performance of LICENSED CLINICAL SERVICES.

         7.2      Notwithstanding any other Section of this Agreement, SLI may 
terminate this Agreement for any reason on thirty (30) days' written notice to 
RMS.

         7.3      The immunity from suit granted hereunder to SLI shall
automatically terminate upon (a) an adjudication of SLI as bankrupt or
insolvent, or SLI's admission in writing of its inability to pay its obligations
as they mature; or (b) an assignment by SLI for the benefit of creditors; or (c)
SLI's applying for or consenting to the appointment of a receiver, trustee or
similar officer for any substantial part of its property; or such receiver,
trustee or 



similar officer's appointment without the application or consent of SLI, if such
appointment shall continue undischarged for a period of ninety (90) days; or (d)
SLI's instituting (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency arrangement, or similar proceeding relating to SLI under
the laws of any jurisdiction; or (e) the institution of any such proceeding (by
petition, application or otherwise) against SLI, if such proceeding shall remain
undismissed for a period of ninety (90) days or the issuance or levy of any
judgment, writ, warrant of attachment or execution or similar process against a
substantial part of the property of SLI; if such judgment, writ, or similar
process shall not be released, vacated or fully bonded within ninety (90) days
after its issue or levy; or (f) loss of SLI's federal or state licenses permits
or accreditation necessary for operation of SLI as a health care institution.

         7.4      RMS shall have the right to terminate this Agreement by
written notice to SLI upon any change in the ownership or control of SLI or of
its assets. Termination under this Section shall be effective immediately upon
receipt by SLI of RMS's notice of termination. For such purposes, a "change in
ownership or control" shall mean that 30% or more of the voting stock of SLI
become subject to the control of a person or entity, or any related group of
persons or entities acting in concert, which person(s) or entity(ies) did not
control such proportion of voting stock as of the EFFECTIVE DATE of the
Agreement. Analogously, RMS shall have the right to terminate this Agreement
upon any transfer or sale of 30% or more of the assets of SLI to another party.

         7.5      BREACH. Upon any breach of or default of a material term under
this Agreement by SLI, RMS may terminate this Agreement upon thirty (30) days'
written notice to SLI. Said notice shall become effective at the end of the
thirty-day period, unless during said period SLI fully cures such breach or
default and notifies RMS of such a cure.

         7.6      SLI's obligations to report to RMS and to pay royalties to RMS
as to the LICENSED CLINICAL SERVICES performed under the Agreement prior to 
termination or expiration of the Agreement shall survive such termination or 
expiration.

8.       CONFIDENTIALITY-PUBLICITY:

         8.1      SLI agrees to obtain RMS's approval before distributing any
written information, such as Press Releases, to THIRD PARTIES referring to RMS
or this Agreement. RMS's approval shall not be unreasonably withheld or delayed
and, in any event, RMS's decision shall be rendered within three (3) weeks of
receipt of the written information. Once approved, such materials, or abstracts
of such materials, which do not materially alter the context of the material
originally approved may be reprinted during the tern of the Agreement without
further approval by RMS unless RMS has notified SLI in writing of its decision
to withdraw permission for such use.

         8.2      Each Party agrees that any financial, legal or business
information or any technical information disclosed to it (the "Receiving Parry")
by the other (the "Disclosing Party") in connection with this Agreement shall be
considered confidential and proprietary and 



the Receiving Party shall not disclose same to any THIRD PARTY and shall hold it
in confidence for a period of five (5) years and will not use it other than as
permitted under this Agreement provided, however, that any information, know-how
or data which is orally disclosed to the Receiving Party shall not be considered
confidential and proprietary unless such oral disclosure is reduced to writing
and given to the Receiving Party in written form within thirty (30) days after
oral disclosure thereof. Such confidential and proprietary information shall
include, without limitation, marketing and sales information, commercialization
plans and strategies, research and development work plans, and technical
information such as patent applications, inventions, trade secrets, systems,
methods, apparatus, designs, tangible material, organisms and products and
derivatives thereof.

         8.3      The above obligations of confidentiality shall not be 
applicable to the extent:

                  a)       such information is general public knowledge or,
                           after disclosure hereunder, becomes general or public
                           knowledge through no fault of the Receiving Party; or

                  b)       such information can be shown by the Receiving Party
                           by its written records to have been in its possession
                           prior to receipt thereof hereunder; or

                  c)       such information is received by the Receiving Party
                           from any THIRD PARTY for use or disclosure by the
                           Receiving Party without any obligation to the
                           Disclosing Party provided, however, that information
                           received by the Receiving Party from any THIRD PARTY
                           funded by the Disclosing Party (e.g. consultants,
                           subcontractors, etc.) shall not be released from
                           confidentiality under this exception; or

                  d)       the disclosure of such information is required or
                           desirable to comply with or fulfill governmental
                           requirements, submissions to governmental bodies, or
                           the securing of regulatory approvals.

         8.4      Each Party shall, to the extent reasonably practicable,
maintain the confidentiality of the provisions of this Agreement and shall
refrain from making any public announcement or disclosure of the terms of this
Agreement without the prior consent of the other Party, except to the extent a
Party concludes in good faith that such disclosure is required under applicable
law or regulations, in which case the other Party shall be notified in advance.

9.       COMPLIANCE:

         In exercising any and all rights and in performing its obligations
hereunder, SLI shall comply fully with any and all applicable laws, regulations
and ordinances and shall obtain and keep in effect licenses, permits and other
governmental approvals, whether at the federal, state or local levels, necessary
or appropriate to carry on its activities hereunder. SLI further agrees to
refrain from any activities that would have an adverse effect on the business
reputation of RMS. RMS will advise SLI of any such activities and SLI will have
thirty (30) days to correct such activity.



10.      ASSIGNMENT:

         This Agreement shall not be assigned or transferred by SLI (including
without limitation any purported assignment or transfer that would arise from a
sale or transfer of SLI's business), without the express written consent of RMS.
RMS may assign all or any part of its rights and obligations under this
Agreement at any time without the consent of SLI. SLI agrees to execute such
further acknowledgments or other instruments as RMS may reasonably request in
connection with such assignment.

11.      NEGATION OF WARRANTIES AND INDEMNITY:

         11.1     Nothing in this Agreement shall be construed as:

                  a)       a warranty or representation by RMS as to the
                           validity or scope of any patent included within
                           LICENSED TECHNOLOGY;

                  b)       a warranty or representation that the practice of the
                           LICENSED TECHNOLOGY and/or the performance of
                           LICENSED CLINICAL SERVICES are or will be free from
                           infringement of patents of THIRD PARTIES;

                  c)       an obligation to bring or prosecute actions or suits
                           against THIRD PARTIES for infringement;

                  d)       except as expressly set forth herein, conferring the
                           right to use in advertising, publicity or otherwise
                           any trademark, trade name, or names, or any
                           contraction, abbreviation, simulation or adaptation
                           thereof, of RMS;

                  e)       conferring by implication, estoppel or otherwise any
                           license, right or immunity under any patents or
                           patent applications of RMS other than those specified
                           in LICENSED TECHNOLOGY, regardless of whether such
                           other patents and patent applications are dominant or
                           subordinate to those in LICENSED TECHNOLOGY;

                  f)       an obligation to furnish any know-how not provided in
                           LICENSED TECHNOLOGY; or

                  g)       creating any agency, partnership, joint venture or
                           similar relationship between RIM and SLI.

         11.2     RMS MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY 
OR FITNESS FOR A PARTICULAR PURPOSE.



         11.3     SLI shall assume full responsibility for its use of the
LICENSED TECHNOLOGY and shall defend, indemnify and hold RMS harmless from and
against all liability, demands, damages, expenses (including attorneys' fees)
and losses for death, personal injury, illness, property damage or any other
injury or damage, including any damages or expenses arising in connection with
state or federal regulatory action (collectively "Damages"), resulting from the
use by SLI, including its officers, directors, agents and employees, of the
LICENSED Technology except, and to the extent that such Damages are caused by
the negligence or willful misconduct of RMS.

12.      GENERAL:

         12.1     This Agreement constitutes the entire agreement between The
Parties as to the subject matter hereof, and all prior negotiations,
representations, agreements and understandings are merged into, extinguished by
and completely expressed by it. This Agreement may be modified or amended only
by a writing executed by authorized officers of each of The Parties.

         12.2     Any notice required or permitted to be given by this Agreement
shall be given by postpaid, first class, registered or certified mail, or by
courier, properly addressed to the other Party at the respective address as
shown below:

         If to RMS:             Roche Molecular Systems, Inc.
                                1145 Atlantic Avenue
                                Alameda, California 94501
                                Attn: General Counsel
         
         If to SLI:             Specialty Laboratories, Inc.
                                2211 Michigan Avenue
                                Santa Monica, CA 90404-3900 .
                                Attn: Richard Horan, Material Director

         Either Party may change its address by providing notice to the other
Party. Unless otherwise specified herein, any notice given in accordance with
the foregoing shall be deemed given within four (4) full business days after the
day of mailing, or one full day after the date of delivery to the courier, as
the case will be.

         12.3     GOVERNING LAW AND VENUE. This Agreement and its effect are
subject to and shall be construed and enforced in accordance with the law of the
State of California, U.S.A., except as to any issue which by the law of
California depends upon the validity, scope or enforceability of any patent
within the HOMOGENEOUS PCR TECHNOLOGY, RT and RT-PCR TECHNOLOGY or OTHER
TECHNOLOGY, which issue shall be determined in accordance with the applicable
patent laws of the United States. The Parties agree that the exclusive
jurisdiction and venue for any dispute or controversy arising from this
Agreement shall be in the United States District Court for the Northern District
of California if federal jurisdiction exists, and if no federal jurisdiction
exists, then in the Superior Court of the County of Alameda, California.



         12.4     ARBITRATION. Notwithstanding the provisions of Section 12.3
above, any dispute concerning solely the determination of facts such as, but not
limited to, (a) the value of a LICENSED CLINICAL SERVICE pursuant to Section
1.8; (b) a determination of royalty rate payments owed pursuant to Section 4.1;
or (c) good faith compliance with Article 6; and which dispute does not involve
a question of law, shall be settled by final and binding arbitration at a
mutually convenient location in the State of California pursuant to the
commercial arbitration rules of the American Arbitration Association, in
accordance with the following procedural process:

                           i)       The arbitration tribunal shall consist of
                                    three arbitrators. In the request for
                                    arbitration and the answer thereto, each
                                    Party shall nominate one arbitrator and the
                                    two arbitrators so named will then jointly
                                    appoint the third arbitrator as chairman of
                                    the arbitration tribunal.

                           ii)      The decision of the arbitration tribunal
                                    shall be final and judgment upon such
                                    decision may be entered in any competent
                                    court for juridical acceptance of such an
                                    award and order of enforcement. Each Party
                                    hereby submits itself to the jurisdiction of
                                    the courts of the place of arbitration, but
                                    only for the entry of judgment with respect
                                    to the decision of the arbitrators
                                    hereunder.

         12.5     Nothing in this Agreement shall be construed so as to require
the commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement or concerning the legal right of The
Parties to enter into this contract and any statute, law, ordinance or treaty,
the latter shall prevail, but in such event the affected provisions of the
Agreement shall be curtailed and limited only to the extent necessary to bring
it within the applicable legal requirements.

         12.6     If any provision of this Agreement is held to be unenforceable
for any reason, it shall be adjusted rather than voided, if possible, in order
to achieve the intent of The Parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
full extent possible.

         IN WITNESS WHEREOF, The Parties hereto have set their hands and seals
and duly executed this Agreement on the date(s) indicated below, to be effective
on Effective Date as defined herein.


ROCHE MOLECULAR SYSTEMS, INC           SPECIALTY LABORATORIES, INC.

By:    /s/                             By:    /s/
      -------------------------------        -------------------------------
       Thomas White, Ph.D.                     Bart Thielen
Title: Sr. Vice President, R&D         Title:  Vice President of Finance

Date:  Oct. 1, 1999                    Date:  10/5/99
      -------------------------------        -------------------------------



Apprv'd As To Form 
LAW DEPT.

By:  /s/





                 RIDER CONCERNING SUPPLEMENTAL PATENT RIGHTS TO
                   HOMOGENEOUS PCR CLINICAL SERVICES AGREEMENT

The purpose of this rider is to set forth the agreement of Specialty
Laboratories, Inc. ("SLI") and Roche Molecular Systems, Inc. ("RMS") concerning
the supplemental rights to additional patents relating to PCR technology which
RMS offers and The Parties agree to add to the rights granted to SLI by the
Agreement between The Parties, executed on even date herewith, (the "Homogeneous
PCR Clinical Services Agreement").

1.    It is understood by The Parties that RMS may, from time to time, come into
      possession or control of additional patents or claims of patents relating
      to PCR technology rights to which RMS may decide to offer to add to the
      Homogeneous PCR Clinical Services Agreement and which SLI may desire to
      accept. Accordingly, appended hereto as APPENDIX A is a list of such
      additional patents or claims of patents as RMS is currently offering to
      which SLI, by its authorized representative, has indicated its acceptance
      thereof in accordance with the rights of use and all other pertinent
      obligations, restrictions and limitations as set forth in the Homogeneous
      PCR Clinical Services Agreement.

2.    APPENDIX A may be amended by mutual agreement of The Parties in writing so
      as to add additional patent rights being offered by RMS. Accordingly, a
      new APPENDIX A signed and dated by both parties shall supersede any prior
      APPENDIX A and shall become a part of this rider.

3.    It is expressly understood and agreed by The Parties that the grant of
      additional patent rights herein does not in any way otherwise modify the
      Homogeneous PCR Clinical Services Agreement and that all provisions of
      that Agreement shall remain in full force and effect as originally set
      forth therein. The term of the Homogeneous PCR Clinical Services Agreement
      shall control the enjoyment of rights hereunder and is not extended by the
      rights granted hereby nor shall there be any additional royalty obligation
      to RMS beyond that set forth in said Agreement.

4.    In consideration of the further rights being granted it hereunder, SLI
      agrees to remain in good faith compliance with the applicable terms of the
      Homogeneous PCR Clinical Services Agreement, including reporting and
      payment of royalties and the limitation on use of PCR technology strictly
      for the performance of licensed services and not to make products.

5.    In the event that SLI's obligation to pay royalties under the Homogeneous
      PCR Clinical Services Agreement for its rights to use the PCR technology
      shall cease for any reason, whether by termination, expiry, invalidation
      or otherwise, then The Parties agree that this rider shall become null and
      void and the rights granted hereunder terminated without notice and The
      Parties shall be free to negotiate a new agreement with respect to the
      patent rights listed on APPENDIX A.


                                       Accepted and Agreed,
ROCHE MOLECULAR SYSTEMS, INC           SPECIALTY LABORATORIES, INC.

By:    /s/                             By:    /s/
      -------------------------------        -------------------------------
       Thomas White, Ph.D.                     Bart Thielen
Title: Sr. Vice President, R&D         Title:  Vice President of Finance

Date:  Oct. 1, 1999                    Date:  10/5/99
      -------------------------------        -------------------------------



APPENDIX A TO RIDER

Additional Patents

United States Patent No. 5,561,058

United States Patent No. 5,693,517

[ADVANCE \Y550]
ROCHE MOLECULAR SYSTEMS, INC           SPECIALTY LABORATORIES, INC.

By:    /s/                             By:    /s/
      -------------------------------        -------------------------------
       Thomas White, Ph.D.                     Bart Thielen
Title: Sr. Vice President, R&D         Title:  Vice President of Finance

Date:  Oct. 1, 1999                    Date:  10/5/99]
      -------------------------------        -------------------------------